Virgin Group chairman Sir Richard Branson stated (15-Apr-2013) "size doesn't equate to quality". He lamented "the competition authorities, in their wisdom, have allowed the six biggest airlines in America to become three giant airlines - and among the biggest in the world". He noted: "The real advantage these big airlines have is their sheer market dominance, and they often use it to get rid of their smaller rivals using questionable tactics. Virgin America is the only airline started since JetBlue in February 2000 that is still in business. They have all been driven to the wall. What's more, no other new startup airlines are in the pipeline because of the lack of investors willing to enter the current anti-competitive environment". He noted challenges with access for smaller operators, using access to Newark Airport an an example. He explained: "For five years we were told there were no slots available for us to get into the airport and operate. In fact, the incumbent airlines managed to “squat” on capacity to keep competition out of Newark alone. The Newark-San Francisco flights were only operated by one carrier - a monopoly route that had some of the highest fares in the US as a result. When American Airlines went into Chapter 11 a few slots became available. Virgin America entered the market and fares from Newark to California dropped by 40% and suddenly consumers had better options with new planes, in-flight WiFi and exemplary service. But instead of competing based on quality, United then conjured up a whole batch of previously "non-existent" slots to double their capacity on San Francisco-New York and Los Angeles-New York flights to try to squeeze Virgin America out. They have been playing this game against Virgin America by putting on extra capacity on our other routes at a massive loss to themselves. My estimate is that the extra capacity out of Newark will cost them USD130 million per year - just to try to drive us out of the marketplace". He also requested the Department of Transportation to "consider looking into what United has been up to these past couple of years and consider taking appropriate action". [more - original PR]
Sir Richard Branson laments outcome of consolidation in US aviation sector
You may also be interested in the following articles...
European airline seat capacity growth accelerates - perhaps too quickly: Outlook for winter 2016/17
The summer 2016 season came to an end on 29-Oct-2016. Adjusting for an extra week relative to the previous summer, it produced seat growth of 6% for capacity to/from/within Europe, matching the rate of growth in summer 2015, but higher than the 10-year average rate of 4% and higher than any other summer since 2010.
Current indications from data filed with OAG are that Europe will also experience accelerating capacity growth in the winter 2016/2017 season, which runs from 30-Oct-2016 to 25-Mar-2017. Adjusting for the season being shorter by one week relative to last winter, total seat growth in Europe is set to reach 7%, compared with 6% growth in winter 2015/2016 (and 6% growth in summer 2016). This is higher than the 10-year average rate for winter of 3% and the highest winter growth since 2007/2008.
On routes to all but one region from Europe, seat growth this winter will both be faster than last winter and higher than its 10-year average. The one exception is Europe to Middle East, the fastest-growing region, where capacity growth will remain at 10%. This report presents analysis of this winter's seat growth for Europe by region and by airline group.
Logic dictates approval of Alaska-Virgin America merger; anti-trust hawks loom large
A pushback in the closing date of the merger of Alaska Air Group and Virgin America – to allow the US government more time for its review of the transaction – created some jitters among investors about the eventual approval of the tie-up, evidenced by a drop in Virgin America’s stock price, which had soared after the deal was tabled in Apr-2016.
Despite the extra time regulators are taking to review the merger, a full-blown rejection of the deal is unlikely given the drastically smaller scope created by Alaska and Virgin America. Indeed, the combined airline creates a more viable entity to compete with the mega-carriers created by previous mergers; not a threat to consumer choice.
Close scrutiny by US regulators was always expected, as are some form of concessions in order for the agreement to ultimately gain the government’s approval. The form those concessions could take has spurred significant speculation from slot divestitures to the relinquishment of gates. Perhaps the key for Alaska is ensuring that the composition of those concessions does not compromise the economics of the transaction.