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The allure of big boys' toys appears likely to cost Japan's low-cost Skymark Airlines its reputation, a lot of money and most importantly management focus at the very time when Skymark needed to respond to a raft of new LCC competition in its domestic heartland. Skymark is putting a bold face on the planned delay – or even cancellation – of six A380s it has had on order since 2010, taking the position that the best defence is a strong offence. A statement talked of Airbus imposing "an exorbitant penalty that evades common sense" if the order is cancelled. It appears from the statement that Airbus has sought to find a way out for Skymark, "to enter under the umbrella of a major airline."
Negotiations to delay delivery or cancel have, according to Skymark, been under way since Apr-2014. Skymark gives the reason for its move as a "business environment [that] has become severe due to increased competition and the depreciation of the yen in recent years".
Its international route plans had shortcomings for Skymark's first international excursion. Airbus has already begun trial flights with the first new aircraft, complete with Skymark's logo and partial interior. Two A380s were due for delivery in 2014, with another two in each of 2015 and 2016. The order – valued at USD1.3 billion at rack rates – was always a strange one that few in the industry considered a safe one.
There will be much to come out in the wash but Skymark can recover and emerge stronger. A cancellation of Skymark Airlines' six A380s would enable – and force – Skymark to hone the strengths it created in Japan's domestic market before it overly-ambitiously leaps from operating only domestically to long-haul all-premium A380 services.
Garuda Indonesia will slow its international growth following a lacklustre performance on international routes in 1H2014, which drove a net loss of USD212 million. Garuda recorded an average international load factor of only 63% in 1H2014 as RPKs dropped by 3% despite a 15% surge in ASKs.
Competition in the Indonesian international and broader Southeast Asian market has intensified, making life extremely tough for Garuda just as the carrier attempts to make a bigger international push following its ascension into SkyTeam. The introduction of five 777-300ERs over the last year has contributed to overcapacity, just as its long-haul strategy has had to be revised.
Garuda has responded to the unfavourable market conditions by deferring plans to launch services to India and the Philippines. The carrier is also now planning to cut unprofitable routes and reduce capacity growth by deferring aircraft deliveries.
Leasing companies stepped into centre stage on the second day of the 2014 Farnborough Airshow, with a flurry of high value orders.
Since the beginning of the airshow, eight aircraft lessors announced a wide range of orders, totalling more than 400 aircraft, valued at over USD35 billion at list prices.
In particular, lessors have jumped on the chance for early orders for Airbus’ new A330neo. 65 of the 105 firm orders and commitments for the aircraft, launched on 14-Jul-2014, came from leasing companies.
AirAsia X is reinforcing its leading position in the fast growing medium/long-haul low-cost segment with a commitment for 50 A330-900neo aircraft for delivery from 2018. AirAsia X emerged at the Farnborough Airshow on 15-Jul-2014 as the launch airline for the new type, joining three leasing companies which have also signed up as launch customers with commitments for 55 aircraft. It is the first long-haul low-cost airline to become a launch customer.
The new commitment from AirAsia X, once converted into a firm order, will grow the group’s fleet to up to 117 aircraft by the middle of next decade compared to 22 currently and only 12 at the beginning of 2013. Malaysia-based AirAsia X is already the largest group in the long-haul low-cost segment, which now consists of six carriers including four in Asia-Pacific. AirAsia X is accelerating growth as it opens new bases in Thailand and Indonesia.
The group, however, will have the flexibility to adjust growth by phasing out existing A330-300s as well as potentially cancelling some of its A330-300 and A350-900 orders. Ultimately the AirAsia X fleet will likely expand over the next 10 years to 90-100 aircraft, providing capacity growth of about 20% per annum with the possibility of even faster growth should market conditions warrant.
Airbus and Boeing typically grab the headlines at the big airshows, but regional aircraft manufacturers had a particularly strong first day at the bi-annual Farnborough Airshow.
The smaller aircraft manufacturers – Embraer, Bombardier, Sukhoi, ATR, COMAC and Mitsubishi Aircraft Corporation – collectively announced firm and tentative orders for nearly 130 jets and turboprops, as well as options for another 120 aircraft.
With all orders and options included, the deals are valued at more than USD7.8 billion.
Boeing's 787 Dreamliner was billed as a "hub-buster", an aircraft that would open new routes and allow passengers to fly non-stop in thinner markets rather than transfer via a hub. With the 787 approaching three years of service, how have airlines used the aircraft? Looking at routes planned for the northern winter 2014/2015 schedule, 17% of 787 routes have been launched with the Dreamliner. The remaining 83% have had the 787 replace or supplement an existing aircraft.
The 787 has had a difficult entry into service, with airlines intending to launch routes with the 787 but having to use other aircraft types as an interim measure. If we include such known examples of routes launched with an interim aircraft and later switched – often mere days or weeks later – to the 787, the share of 787 routes opened with the Dreamliner increases to 20%.