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Austrian Airlines is the national airline of Austria and is based at Vienna International Airport. Along with its charter arm, Lauda Air, the carrier operates both domestic and international networks, particularly to Eastern Europe and the Middle East. Austrian's regional carrier, Tyrolean Airways, merged with Austrian on 01-Apr-2015.
Location of Austrian Airlines main hub (Vienna International Airport)
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This is Part 2 of a report reviewing European airline comments filed in the US-Gulf airline dispute. This instalment examines AF-KLM and Lufthansa's supposed claims of damage from Gulf carriers: a long list of statistics about market share and closed destinations. Some imagination has been applied here. For example Lufthansa attributes its 1995 exit from the Sydney route on Gulf carriers- despite the first Gulf carrier not arriving in Australia until 1996; Lufthansa and Swiss cite closed destinations ranging from Busan to Monastir despite their not having service from the Gulf airlnes.
AF-KLM notes Gulf carriers have gained market share in Europe, but AF-KLM fails to note its own internal cost challenges, along with the impact of LCCs, that have seen it decline in parts of the world while IAG and Lufthansa grow. AF-KLM argues it suffered damage from two fewer Bangkok frequencies – despite KLM's up-gauging which produced 12% growth for the group. Lufthansa says "there is no evidence that the Gulf carriers meaningfully stimulate market growth". But Western European visitors to Bangkok are up 9.6% partially due to Gulf carriers, which are also stimulating growth from Africa and the Middle East.
US-Gulf airline dispute - Europe Part 1: IAG opposes "subsidy" of US airlines, AF-KLM on 5th freedom
Of the thousands of comments the US government has received about the US-Gulf carrier debate, those from Air France-KLM, Lufthansa and International Consolidated Airlines Group stand out. They are the JV immunised partners of US carriers, and while this may suggest shared interests, the three European carriers show nuances – and even contradictions – compared with the positions of their respective US partners.
Part 1 of this report examines two aspects: Air France-KLM boldly believes the US-Gulf dispute should embrace Europe since US-Gulf traffic has the potential alternative of hubbing over Europe. Further, AF-KLM fears greater Gulf fifth freedom trans-Atlantic flying.
By AF-KLM's logic, IAG should have an even greater say: IAG is the single largest group operating between the US and Western Europe with a 16% capacity share, more than Lufthansa Group's 13%, AF-KLM's 9% or Delta's 14%. Yet IAG denounces the US carrier White Paper, saying: "To shield US airlines from their competitors would be to grant them the biggest subsidy of all."
Gulf airlines continue Southeast Asia push. Should Lufthansa & Singapore Airlines respond with a JV?
Lufthansa and Singapore Airlines have steadily been losing market share to the Gulf carriers. The two carriers have tried to use product upgrades to improve their position in the Asia-Europe market but have enlisted little help from potential partners – for example, each other.
Despite their Star Alliance membership, partnership is hardly the core of their relationship. Should they – and more critically, can they? – set aside their differences to combat their greater enemy?
Lufthansa and SIA together account for about 27% of non-stop Southeast Asia-Western Europe seat capacity. But when also counting passengers flown through all connecting points their share of the market is only 13%, according to OAG Traffic Analyser data. Emirates alone has 12% of the market, and once Etihad and Qatar are added, 27% of passengers between Southeast Asia and Western Europe now transits with the three Gulf carriers.
The Lufthansa group grew its adjusted EBIT by 52% in 2Q2015, in spite of the negative impacts of pilot strikes and currency movements. Lower fuel costs were a significant factor in the improved result. The Passenger segment was the biggest contributor to the improvement and MRO also helped, but Lufthansa Cargo suffered a fall in its result in 2Q after an advance in 1Q. For FY2015, the group still aims for an adjusted EBIT of more than EUR1.5 billion and perhaps now has a little more headroom for this aim.
Meanwhile, the Lufthansa group is attempting to push forward with a number of important developments. It is expanding its Eurowings subsidiary, which will progressively take over from Germanwings on short haul point to point routes. In addition, Eurowings will launch low cost long haul leisure routes this winter, using wet lease capacity from SunExpress (jointly owned by Lufthansa and Turkish Airlines). This LCC initiative runs in parallel with ongoing attempts at improving mainline labour productivity. The group is also introducing a new commercial strategy, including charging a fee for GDS ticket sales.
IAG, Lufthansa & Air France-KLM: don't risk RASK. Lessons from 1Q2015 unit revenue & capacity growth
The 1Q2015 financial results of Europe's Big Three legacy airline groups again highlight their diverging pathways. Although all three recorded improved results versus last year, IAG underlined its superiority by posting a positive operating profit in what is seasonally the weakest quarter.
CAPA analysis often highlights the importance of cost discipline and much of IAG's success relative to Air France-KLM and Lufthansa is due to the head start it gave itself in pushing restructuring, particularly of labour costs. This remains crucial.
However, the focus of this report is to analyse the 1Q2015 unit revenue (RASK) performance of the Big Three and the relationship between RASK growth and ASK growth. Our analysis confirms that RASK performs better under conditions of tight capacity discipline, but also highlights some crucial differences between the Big Three and between their major route regions.
China Southern Airlines has become the sixth airline group in the world – and the first outside the United States or Europe – to transport over 100 million passengers a year. Founded only in 1988, China Southern reached this milestone in 2014 faster than the other groups carrying over 100m passengers: American Airlines, Delta Air Lines, Lufthansa Group, Southwest Airlines and United Airlines. Ryanair expects to carry 97m passengers in 2015, likely leading it to carry 100m shortly thereafter.
The Air China and China Eastern groups are expected also to cross the 100m mark. Fast growth at the HNA Group could also see it carry 100m passengers around the turn of the decade. This would be impressive given the group has limited public capital, but would also give China four groups with over 100m passengers, matching the US.
China Southern is big, but this fast growth, partly organic, partly through merger, has come at the expense of efficiency. It may have the highest growth prospects but it also has considerable work ahead to become agile. It could also have the most at risk as its core domestic market faces new competition while long-haul performance continues to lag.