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The largest unserved trans-Pacific route by many accounts is between a well known city – New York – and one few have heard of: Fuzhou in China's Fujian province. The unexpected destination may have a low profile but is rich in history: Fujian people are known for their migratory habits and comprise large parts of the overseas Chinese diaspora, where they have created economic activity, from Chinese restaurants to bus services. Besides Chinatown, New York City even has a "Little Fuzhou". Ties remain strong, and in Mar-2013 there were an estimated 201 people travelling from Fuzhou to New York City each day, according to Amadeus Air Traffic.
All of this traffic moves via intermediate hubs, but in the near future Xiamen Airlines could consider deploying its forthcoming 787 Dreamliners on the Fuzhou-New York route. Xiamen would take some beyond traffic, but would make inroads in the point-to-point Fuzhou-New York market. That would be to the detriment of Cathay Pacific, the largest carrier between the two cities, as well as China Eastern and Air China, which are also the main operators on the market.
However, Xiamen Airlines may not find it as easy as that: Fuzhou-New York is a heavy VFR market that lacks premium yields to sustain the non-stop service. But Fuzhou-New York may be the most promising long-haul route for Xiamen Airlines' 787s. Xiamen Airlines is primarily a domestic carrier and China's most consistently profitable carrier. It is rightfully hesitant to embark on long-haul operations that are being encouraged and pushed by the government and it will not help that some members of Xiamen's recently-joined SkyTeam alliance are apparently giving the carrier a cool reception.
Allegiant Air’s strong top-line financial performance in FY2013 was belied by cost creep that is continuing into 2014 driven by maintenance expense and investments in yet-to-be revealed non-airline initiatives.
With Allegiant’s guidance of unit cost increases for FY2014, no US airline is escaping some level of cost escalation during the year. Similar to sentiments expressed by other carriers, Allegiant concludes it is making the necessary investments now to ensure a profitable future.
Even as Allegiant’s core business model – transporting cost-conscious travellers from small US markets to large leisure destinations – has essentially remained intact during the past couple of years, the carrier has also undertaken initiatives that are creating challenges in its cost performance in FY2014. While the company’s financial fundamentals still remain strong, wildcards in its cost structure remain, including negotiating labour deals amid increasing tension between management and employees.
CAPA – Centre for Aviation is pleased to announce 50 airline executives have already confirmed their participation at the CAPA Airline Fleet & Finance Summit at the Capella Singapore on 25/26 March.
CFOs/Finance/Treasury executives from some 20 airlines will be giving investor roadshow-style presentations on their fleet and financing plans and they will be joined by a similar number of carriers, represented by their Finance/Treasury and Fleet Management departments, in the Fleet Marketplace networking sessions throughout the Summit.
“This is an airline-centric air finance event. It's unique in the calendar for its focus on attracting airline finance heads to discuss their fleet plans and to test financial markets, particularly in the burgeoning Asia Pacific region, to meet the rising financing challenge facing the airline industry. This year we've attracted interest from US and European airlines keen to explore this new market, among them Allegiant and Lufthansa for example”, said CAPA Executive Chairman, Peter Harbison.
SilkAir 737 MAX fleet to open up network options while boosting Boeing’s narrowbody presence in Asia
While Singapore Airlines regional subsidiary SilkAir is now celebrating delivery of its first of 23 737-800s, it is the second part of its largest ever aircraft acquisition programme that could be a game changer. The Singapore Airlines (SIA) regional subsidiary plans to take the first of at least 31 737 MAX 8s in 2H2017, enabling efficiency improvements and new medium-haul routes.
SilkAir will have the opportunity to use the MAX’s improved range to open new destinations in North Asia, Central Asia and Australia. The improved economics of the aircraft also potentially opens up destinations in India and China which are not viable with current generation narrowbody aircraft.
SilkAir is only one of four Asian carriers that has so far committed to the 737 MAX, along with Thailand’s Nok Air, Virgin Australia and Indonesia’s Lion Air. Nok, which announced its order at the recent 2014 Singapore Airshow, also expects to be one of the first carriers to take the MAX when it enters service in 2H2017.
Singapore Airlines (SIA) regional subsidiary SilkAir began a new chapter on 20-Feb-2014 as its first Boeing 737-800 entered service, taking over from slightly smaller A320s on four short-haul sectors. The carrier has just completed a momentous week as 21-Feb-2014 marked its 25th anniversary while on 17-Feb-2014 it rolled out a new brand campaign emphasising its full-service offering.
SilkAir has been extremely successful over the past decade, with steady profits and growth despite low-cost carriers invading its home market. LCCs now account for one-third of total capacity in Singapore and about half of the short-haul market, compared to virtually zero 10 years ago.
SilkAir, however, faces some of its biggest ever challenges as it begins its 26th year. Singapore’s short-haul market is suffering from overcapacity, impacting yields and load factors across LCCs and full-service carriers. SilkAir is fighting back with product, network and brand improvements but the market will not likely be able to fully absorb the capacity it is adding in 2014 as it places into service eight 737-800s.
US airline majors to add capacity despite unit cost rises. Is "capacity discipline" history already?
Nothing remains stable in the airline industry; even dynamic equilbrium is an elusive goal.
Thus, despite having a bullish view of demand and a positive outlook for 2014, the major US airlines are expecting both cost creep and capacity increases – usually not a combination that pleases investors hoping for continued sustainability among the country’s airlines.
But the US major network carriers are repeatedly stressing the efficiency ("discipline") of their capacity growth since the bulk of the expansion is attributable to aircraft up-gauge or adding slimmer seats to increase density of existing aircraft, and stressing their actions are by no means a return to the days of introducing irrational supply into the market place. The hybrid carriers JetBlue and Alaska continue to grow in the mid-to-high single digit range in FY2014 while Southwest still aims for flat capacity growth.
Those carriers, along with American, Delta and United are projecting unit cost increases for FY2014, citing various reasons for the creep - including IT investment and wage increases. Perhaps with a gradually improving US economy, the airlines collectively feel that their capacity increases will be easily absorbed and revenue momentum can help offset some of the cost pressure. But then again....