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924 total articles
49 total articles
'Luck' may be in its name but Chinese carrier Lucky Air is not leaving its future entirely to fate. The Kunming-based carrier is expected to transition to the low-cost model, following the Chinese government's rapid rise in LCC interest.
With a southwestern base and route network concentrated on secondary cities, fare premiums are hard to attain. Lucky Air hopes to differentiate itself in China's often dated and monotonous airline branding, and so has introduced a new logo, becoming the latest HNA-affiliated airline to re-brand.
Lucky Air is one of two Chinese carriers granted international traffic rights at Kunming and there is the prospect for further international growth, mostly to South and Southeast Asia. If it is to be serious about addressing costs, Lucky Air will need to look at its fleet, a mix of 737s and A320s. Its 26 aircraft fleet could grow to 70 by 2020, including possibly widebody aircraft within three years, the carrier announced at the Routes Asia forum in Kunming.
Kunming in southwest China has been the country's traditional gateway to Southeast Asia, and flights to Southeast Asia account for 60% of Kunming's international seats, making Kunming an exception to most other Chinese airports mostly with larger international exposure to Northeast Asia. Kunming hopes to use its Southeast Asian network to be a transfer hub from North America and Europe, and in 2014 its regional government established a RMB200 million (USD32 million) fund for new international routes.
Such traffic, while plausible in the long-term, will be the icing on the cake. 93% of the airport's seats in Mar-2015 are domestic and Kunming carried 32m passengers in 2014. International will be a small but growing part of Kunming's story, with sixth-freedom Europe/North America-Southeast Asia traffic even smaller. Kunming's geography disadvantages it in having long-haul flights to North America.
While geography is more favourable to Europe, competition from Southeast Asian and Gulf carriers is strong and Kunming will be up against mighty networks. Point-to-point traffic volumes are not large enough to contemplate filler connecting traffic and Kunming cannot rely on connecting traffic the way Dubai can.
The China-US market continues to grow, as expected, but the segment is showing acceleration in the way that growth is occurring. China Eastern plans to launch Nanjing-Los Angeles service, its first trans-Pacific route from a city outside its Shanghai hub. Hainan will launch a new Beijing-San Jose service, consistent with its secondary city focus, but thicken Beijing-Boston and Beijing-Seattle services with flights to those US cities from Shanghai. Hainan Airlines becomes the first (by two weeks) Chinese carrier to serve a US point from multiple Chinese cities. US airlines already serve Chinese points from multiple US cities.
And Delta Air Lines, normally conservative with long-haul growth, has brought forward a Los Angeles-Shanghai service in its five-year plan to a Jul-2015 start date. Not only is Delta accelerating growth, it is doing so on the most competitive US-China route; it becomes the fourth airline on the city-pair after America, China Eastern and United. Delta attributes its growth to the visa liberalisation between China and the US, which Delta says was a surprise.
Xiamen Airlines will be China's sixth airline to fly long-haul when it commences Xiamen-Amsterdam service as early as Jul-2015 using its new fleet of 787 Dreamliners. By the end of 2015, Xiamen Airlines expects to launch a four times weekly Xiamen-Sydney service. There could be later expansion to the US, but the longer flight length will be challenging.
Meanwhile, Sichuan Airlines is China's other new airline to fly long-haul. Services to Vancouver, Melbourne and Sydney will be followed by four times a week charter service Chengdu-Moscow with an A330.
Long-haul is a much smaller component of traffic than domestic flights for China's airlines, and this is especially true at secondary airlines like Xiamen and Sichuan, which have limited long-haul plans. No other Chinese airline already has or publicly intends to have widebody aircraft, but another long-haul Chinese carrier cannot be far away.
United Airlines continues a trajectory of improved fundamentals as changes undertaken in 2014 to shore up revenue that include re-banking and seasonal adjustments reach a full scale in 2015.
The airline sustained profitability for 4Q2014 and CY2014, and plans to keep its capacity growth at rates less than GDP despite the sharp decline in oil prices that has continued into 2015. Similar to rival Delta, United plans to use any extra cash generated from lower energy costs to accelerate balance sheet delivery and increase shareholder returns.
After enjoying a solid performance in its domestic entity throughout much of 2014, United observed some softness in the US domestic market near the end of 4Q2014 that is lingering into the beginning of 2015. The slowing US demand and several other factors are driving projected flat unit revenue growth for United in 1Q2015, but capacity discipline along with a favourable cost performance should help blunt some of the anticipated revenue pressure.
United Airlines has made solid progress in 2H2014 in closing the gap in certain financial metrics with its peers, driven in part by several network changes that, in theory, should continue to lift the airline’s revenue performance in 2015.
The big unknown for United as 2014 comes to a close is if 2015 will be the year that its performance rises to the level of its peers on a sustained basis. After failing to meet similar declarations in the past United has understandably shied away from declaring 2015 as the target year for its turnaround.
But as the company continues to improve network utility, keep costs in check and cut debt while improving its balance sheet, United should look back on 2015 as a year of progress as it works to finally achieve the long awaited full merger benefits with Continental.