Air Canada, American Airlines and Delta report double-digit rise in Asia Pacific traffic in May-2010
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Delta-Korean Air joint venture creates trans-Pacific's second largest bloc. Cathay, EVA under threat
The unprecedented aviation market growth between Asia and North America is forcing airlines to re-evaluate their core strategy and reassess who is a competitor and who could be a partner. It seems probable that Delta Air Lines and Korean Air will form a joint venture, potentially making them the second largest trans-Pacific bloc.
The next two largest airlines without a deep partnership, EVA Air and Cathay Pacific, are having to confront significant change, without the support of partners. Delta-Korean Air brings United-ANA its closest rival yet, while the American-JAL JV – already smaller – needs bulking up.
Korean Air brings Delta a wider network in Asia than ANA or JAL offer to their respective JV partners, United and American. A Korean Air-Delta JV could result in more destinations and flights being added once they are able to sell jointly.
North American airlines reduce CASK in 2015 thanks to lower fuel, but ominous labour cost trends
North America’s large major global network airlines enjoyed significant unit cost reductions for the full year 2015, according to CAPA's CASK Database, as average fuel cost per barrel remained at record lows for most of the calendar year. The decline in fuel costs in some instances helped to offset a challenging apparent trend in increasing salaries, wages and benefits, and profit-sharing expense.
Favourable fuel cost trends for those airlines should continue into 2016 as fuel costs per barrel for both WTI and Brent Crude are projected to fall year-on-year compared with 2015. For what forecasts are worth, fuel prices are projected to begin climbing in 2017; however, prices will remain far below 2014, when prices averaged over USD90 per barrel.
Falling full costs have helped lower the unit cost trend line year-on-year for global full service airlines, but, along with fuel cost inflation starting in 2017, some North American global network airlines will also face rising labour costs. Delta is in the process of pilot negotiations, United’s has agreed up to 31% increases for its flight attendants and is still in negotiations with its mechanics. Depending on the outcomes of the pilot negotiations and mechanics votes, Delta and United will face inflationary labour cost pressure during the next two years.