Barcelona El Prat Airport

Vueling: a Spanish success story coveted by IAG

Vueling’s expansion continues apace, with a further double capacity addition planned in 2013 after a number of years of 20% plus growth rates in spite of a contracting Spanish market. A genuine low-cost carrier in unit cost terms, Vueling has contained its non-fuel costs in spite of moving to a more hybrid business model in recent years, including features such as transfer ticketing and VIP lounges. In 2012, it made a significant step towards pan-European status when its international passenger numbers equalled domestic passengers for the first time.

Profit margins have bounced around with changing fuel prices, but its solid net cash position has ensured its relative financial health while competitors have struggled (Iberia) or even disappeared (Spanair). Spanair’s demise allowed it to grow its passenger share at its Barcelona hub from 23% in 2011 to 30% in 2012 in spite of Ryanair’s expansion there, showing that it can live with its lower cost competitor.

The elephant in the room on the 2012 results conference call was the takeover bid from IAG for the 54% of Vueling that it does not already own.

Air Canada touts continuing transformation as 2Q2012 losses widen

Two major elements driving Air Canada’s 2Q2012 negative financial results – labour strife and pressure created by the sudden shutdown of its major maintenance provider Aveos – are the areas where the carrier sees prime opportunities in the future as new labour agreements allow for the creation of a new low cost carrier and negotiations with new suppliers ensure a substantial improvement in the costs of airframe maintenance.

Air Canada management during the last year has often cited the transformation that needs to occur at the carrier in order for the airline to compete in the new competitive environment ushered in by LCCs and spiking fuel prices. But in the short term the company still must deal with disgruntled employees and increasing competitive pressure that will not pause as Air Canada works to complete its transformation.

During 2Q2012 Air Canada widened its losses year-over-year by CAD50 million (USD50.2 million) to CAD96 million (USD96.4 million), while net losses for 1H2012 expanded by CAD241 million (USD242 million) to CAD306 million (USD307 million).

Delta's 4Q2012 international route cuts free up significant widebody capacity

Planned route cuts by Delta Air Lines being instituted in late 2012 as part of the carrier’s capacity management scheme to reduce trans-Atlantic supply by 5% and trans-Pacific capacity by 1%-2% will free up a number of widebody aircraft. As the carrier makes seasonal adjustments throughout its network it is not exactly clear where the widebodies exiting certain markets will be deployed.

The carrier’s planned 4Q2012 cuts in trans-Atlantic capacity will mostly be implemented in late Oct-2012, at the start of the IATA winter 2012 schedule and about one month after the peak travel season in the US ends. Most of the capacity will be restored at the start of the summer 2013 schedule in late Mar-2013. Nearly one-third of Delta’s international capacity (seats) is currently deployed on routes to Western Europe.

Europe loses four airlines in an unhappy start to 2012

As the economic noose tightens around European airlines, the industry's ranks look set to thin this year. Over late 2011 and the first month of 2012, the industry has witnessed the collapse of four small European carriers as well as the announcement of a merger between Wind Jet and Blue Panorama Airlines by Alitalia. For the time being, it is predominantly smaller, lower capitalised airlines that have failed. The four failed carriers deploy only around 217,000 weekly seats or 0.6% of total European system capacity.

However, the collapses, which follow more than 30 European airline failures over the 2008/09 economic crisis, could in the coming months foreshadow the demise of further carriers or further consolidation, with a number of financially weak carriers operating in the European market. While all but one of the airlines affected so far in 2012 have been based in Continental Europe, there are several weak carriers in Eastern Europe urgently seeking further funding and/or new investors in the near term. Three of the collapsed carriers have been privately owned, but last week's collapse of Spanair shows governments may be willing to let state-supported carriers dither away.

Emirates' Spanish expansion highlights Iberia's long-haul weakness to the east

Emirates' announcement to open a daily service to Barcelona and an additional daily flight to Madrid, after only entering the country in 2010, shows how Spain is unique for Emirates in being a major European market with no incumbent local competition since Iberia operates what it calls a "90 degree hub": its long-haul traffic, a successful operation, is almost entirely to the Americas, leaving Spain's demand for medium- and long-haul services east of Europe to be fulfilled by foreign carriers. Emirates does not target Iberia's Americas network from Spain but does focus on Africa, where Iberia has limited service, the Middle East, where Iberia only serves Cairo and Tel Aviv (the latter of which Emirates will not serve) and Asia-Pacific, where Iberia has no service to at all.

Where are the world's leading LCC airports?

LCCs now account for about a fifth of all flights globally, making it increasingly vital for airports and air traffic management providers to understand the sector and its drivers. Worldwide, of the top 20 airports for LCC aircraft movements, 12 are in the US, four are in Europe and the remainder are in the Asia Pacific region. (By seats, ten are in the US, and five each in Europe and Asia Pacific). As ever, though, the global LCC market is in flux. Airlines expand or contract their operations at airports in relation to their own growth trajectories and the changes in season.