Aeromexico

Aeromexico plans more capacity growth in 2013 as delayed 787s are deployed to Europe and New York

Aeromexico saw its profits drop for the second consecutive year in 2012 as it was only able to grow passenger traffic by 3% despite double-digit growth for the overall Mexican market. But Mexico’s only surviving legacy airline group remains in the black and its outlook remains relatively bright given its strong position in the Mexican market and the resurgence of the country’s economy.

Grupo Aeromexico is planning to grow capacity (ASKs) by a further 6% in 2013, matching the 6% capacity increase from 2012. But the group is targeting higher RPK growth and load factors, which it hopes will allow it to regain the share of the domestic market it lost in 2012.

Internationally, Aeromexico is planning to grow capacity by up-gauging routes, including replacing 767-200s with new 787-8s to London and Paris. Aeromexico also plans to deploy its first batch of 787s to New York, which it currently only serves with 737s. Aeromexico now expects it will receive three 787-8s in 4Q2013, representing a delay of about three months due to the current grounding of the global 787 fleet.

Mexico returns to double-digit domestic growth in 2012, boosting outlook for Aeromexico and LCCs

Mexico’s domestic market recorded double-digit growth in 2012 for the first time in five years and only the second time this century. The Mexican aviation industry has reached its healthiest point since deregulation led to the launch of five low-cost carriers seven years ago. The market now features a strong legacy airline group and three LCCs which are seeking to cash in on their relatively strong positions by holding initial public offerings.

Mexican carriers flew 28.1 million domestic and 5.9 million international passengers in 2012, according to newly released statistics from Mexico’s DGAC. Domestically the market grew by 10% while the much smaller international market grew by 23%. Foreign carriers serving Mexico recorded much more modest growth of 3%, but still dominate Mexico’s international market with 21.2 million passengers carried in 2012.

Delta remains bullish on foreign investments strengthening its bottom line but cost creep is a worry

Delta Air Lines in 2013 aims to narrow competitive network gaps with its US legacy rivals through the maturation of its cross-border investments in Aeromexico and Gol while laying the groundwork to strengthen its dominance in the strategic New York market. This after unveiling plans in Dec-2012 to bolster its position at London Heathrow through an equity stake in Virgin Atlantic.

As its major competitor United embarks on 2013 still in the throes of merger integration, and with a strong likelihood that American and US Airways will begin the complex process of combining their respective networks this year, Delta will continue to enjoy the revenue benefits of its long-ago completed merger with Northwest.

But Delta also has its own set of challenges to overcome including a spillover from 2012 of unit cost creep and proving to sceptics that its recently purchased oil refinery will live up to expectations. At the same time Delta’s stock price continues to underperform its peers, which could mean the airline still has to convince investors that its three-year profit streak has staying power.

Allegiant makes push from Phoenix-Mesa as ultra-LCC rivals Frontier and Spririt move in

Allegiant Air is planning rapid expansion from one of its largest bases during the final weeks of 2012 and into early 2013 as it introduces flights from Phoenix-Mesa Gateway Airport in Arizona to four new markets. The push is occurring as two of Allegiant’s closest rivals – Frontier Airlines and Spirit Airlines – are enlarging the airport’s scheduled service footprint. As it looks to maintain its leading position at Phoenix-Mesa, Allegiant is also looking at potentially launching services to Mexico in 2013, using its recently acquired fleet of A319s.

Five years ago, in Oct-2007, Allegiant introduced scheduled service at Phoenix-Mesa, and selected the airport as its third base, joining Las Vegas and Orlando. At that time it launched service to 13 markets from Phoenix-Mesa. Allegiant has since steadily expanded its operation at Phoenix-Mesa and by Feb-2013 the carrier will offer flights to 35 destinations, including Honolulu. In the Phoenix-Honolulu market, Allegiant will compete against US Airways and Hawaiian Airlines, which operate from nearby Phoenix Sky Harbor International Airport.

Allegiant’s addition of A319s offers both network expansion opportunities and fleet flexibility

Underpinning the economics behind Allegiant Air’s decision to introduce 156-seat Airbus A319 narrowbodies into its fleet during 4Q2012 are the network expansion opportunities the aircraft provide and a new level of fleet flexibility to ground nearly depreciated aircraft if market conditions take a change for the worse. At the same time the carrier’s third fleet type comes online, Allegiant is adding new Boeing 757 service to Hawaii, giving the small US domestic markets of Boise, Idaho and Spokane, Washington direct access Honolulu.

The Boeing MD-80 was the foundation of Allegiant’s fleet from the early 2000s until the carrier began operating 757s in 2011 as it worked to gain requisite approvals to operate those aircraft on their original mission to Hawaii. Allegiant inaugurated flights from its Las Vegas base and Fresno, California to Honolulu in late Jun-2012, and during 4Q2012 and 1Q2013 the carrier plans to add more service to Hawaii, expanding its strategy of connecting small cities to large leisure destinations beyond the US mainland.

Aeromexico sees domestic slowdown as it places landmark aircraft order

Aeromexico has concluded the dynamism of the Mexican domestic market has slowed, and plans to focus the remainder of its growth in 2H2012 primarily on international expansion in the hopes that soft domestic yields will improve.

But even as the Mexican domestic market appears to be leveling off, Aeromexico believes the country’s economic growth overall remains promising, and is taking steps to create crucial fleet flexibility to ensure it can weather swinging economic fortunes through a pledge to purchase up to 100 Boeing 737 Max and 787-9 jets that allows the carrier to size its fleet upwards or downwards to accommodate market conditions.