VivaAerobus

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.

VivaAerobus and VivaColombia focus on domestic expansion as Irelandia ponders third Viva franchise

VivaAerobus and VivaColombia are planning further expansion in the Mexican and Colombian domestic markets in 2013 while they remain separate entities without any network or operating synergies. But the two low-cost carriers could start exploring a closer partnership in 2014 as VivaAerobus looks to potentially join VivaColombia as an A320 operator and launch services to other Latin American countries.

Meanwhile, Irish investment firm Irelandia Aviation, which owns stakes in VivaAerobus and VivaColombia, continues to study establishing a third Viva affiliate in a new Latin American market. With the Viva brand already established in Colombia and Mexico, and as the Brazilian market is currently over-saturated, smaller Latin American markets that lack any local LCCs are being studied. The Viva group could ultimately consist of several LCCs, with most of the carriers being small in size but enjoying economies of scale by being part of a pan-Latin American group.

Aeromexico predicts a rise in domestic market share as rivals continue to grow

Mexico’s largest carrier Aeromexico predicts a rebound in its domestic market share during 4Q2012 after watching its rivals grow in the market during the last year as they worked to seize on opportunities created by Mexicana ceasing operations in Aug-2010. Aeromexico’s management during the last three months of 2012 plans to focus more on building load factor instead of yield strength, which company executives believe will shore up its standing in the domestic market after the summer high season that was tilted more heavily towards leisure traffic. The carrier is also planning a trans-Atlantic push as it works towards the launch of new service to London Heathrow and forging a partnership with a Middle Eastern carrier to funnel traffic through its new European destination.

Aeromexico’s focus on improving yields was reflected in the nearly 7% growth the carrier recorded in that metric during 3Q2012, which helped to drive the carrier’s unit revenue growth up 3.6% year-over-year. While the yield strength reflects Aeromexico’s ability to garner favourable pricing, its 6% rise in capacity year-over-year in 3Q2012 outpaced the 2% traffic growth, driving the airline’s load factors down by 3.7ppt in 3Q2012 to 77%.

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.

Mexico's Interjet continues transborder push as its domestic market share shrinks

A subtle shift is occurring in the Mexican domestic market as market leader Interjet is opting to cede some domestic traffic to other airlines, most notably to fellow low-cost carrier Volaris. Interjet has been focusing on building up international traffic while Volaris has concentrated a significant portion of its growth in 2012 domestically, largely through a push from Guadalajara.

Interjet’s international push has centred mainly in US markets and has resulted in Volaris and Aeromexico ceding their international market share as Interjet moves to balance its network. Interjet now has an almost 10% share of Mexico's international market (excluding foreign carriers), compared to only a 1% share a year ago. Interjet now serves six international gateways, all of which have been launched over the last 15 months. A seventh international destination will be added in Oct-2012 when Orange County in California will become the carrier's four destination in the US after Miami, New York and San Antonio.

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.