San Jose Norman Y Mineta International

Delta presses forward to build a competitive network in a consolidated and mature US market

Delta Air Lines continues to leverage the competitive strength it holds over its US legacy peers to flesh out its network and build pockets of strength as United and Continental remain in the throes of their merger integration and American and US Airways lay the groundwork to begin the complex process of combining their respective organisations.

During the last couple of years Delta has used the nimbleness it enjoys versus its legacy domestic competitors to broker equity investments in foreign carriers to build a robust network ahead of the completion of US consolidation. Those investments have moved in tandem with Delta’s bolstering its presence in New York through its slot swap deal with US Airways and its investment in facilities at JFK and LaGuardia airports.

During 2013 Delta is attempting to strengthen its position in the fragmented but strategic Los Angeles market through a 12% boost in daily seats year-over-year from Jul-2012 to Jul-2013.

US-Japan airline alliances become lopsided as JAL, ANA expand while US to shift to other markets

The anti-trust immunity alliances between All Nippon Airways and United Airlines as well as Japan Airlines and American Airlines are past the honeymoon phase. Whereas the airlines a decade ago were bullish on linking the mighty US with Japan Inc., today the latter's economy is still underperforming.

Japanese airlines are now ramping up US capacity to existing and new destinations as they seek to woo markets with their premium products, efficient hubs and services to secondary US cities, reducing connections.

But US carriers are expanding less than their Japanese partners, which impacts the competitive potential of the JVs, as Japanese carriers have far higher CASKs. The US airlines are also looking to diversify what United calls its "non-Japan Asia" network, a reflection of the growing importance of China. United will resume services to Taipei while American will expand to Seoul, but the pot of gold is mainland China.

Expansion there will be steady as slots are difficult to secure and airlines are dependent on next-generation aircraft to make secondary cities profitable. China services would likely be excluded from the JVs with Japanese carriers due to the Chinese regulatory environment – possibly spearheading the formation of new JVs. But that will depend on the pace of liberalisation.

Despite new air routes, traffic between Japan and the US is down from last decade

All Nippon Airways (ANA) on 25-Jul-2012 is launching a Tokyo Narita-Seattle service, one of several new routes between Japan and the US to open this year. While these services will grow the market, US-Japan traffic is 25% below 2005 levels, the peak over the past decade.

Traffic has declined between Japan and the mainland US as airlines have reduced frequencies and downgauged services, typically from Boeing 747-400s to 777s, coinciding with a global gradual reduction of the 747. The US leisure markets of Guam, Hawaii and Saipan have also seen sharp decreases.

As ANA, Japan Airlines (JAL) and United Airlines launch new services this year, many to be operated with new 787s, Japan-mainland US traffic could recover to pre-global financial crisis levels. But a complete recovery in the full Japan-US market is unlikely to occur in the medium term.

Alaska, Delta and JetBlue zero in on managing seasonality in an attempt to preserve profitability

US carriers are fine-tuning their revenue management mechanisms to better manage seasonally weak periods and avoid climbing out of losses recorded during those times. By shifting their networks into higher revenue generating markets during slow travel periods they are starting to challenge the historical status quo of losing money during low demand periods. Both low cost and legacy carriers alike are changing their strategies for managing down periods to flatten out the peak and trough patterns that have wreaked havoc on their attempts to remain profitable during the more challenging off-peak times of the year.

Alaska Airlines, Delta Air Lines and JetBlue Airways are three such carriers making specific changes during off-peak periods to increase profitability. Alaska Airlines has shifted away from west coast routes to focus on Hawaii, Delta has bucked industry trends to decrease trans-Atlantic capacity while JetBlue has focussed on its Boston hub to drive corporate traffic.

Houston airport operator envisions Hobby offering international flights in 12 markets

Studies carried out on behalf of the Houston Airport System (HAS) to examine the viability of international flights from Houston Hobby airport contemplate a two-phased introduction of 12 markets to Mexico and Central America. Southwest Airlines is pushing for facilities at Hobby to support international flights, but research conducted shows that Mexican low cost carriers VivaAerobus and Volaris would also have an interest to operate international service from Hobby. It is not surprising United has mounted vehement opposition to Southwest’s campaign, as it enjoys majority carrier status in most of those markets with its service offerings from Houston Intercontinental Airport.

Earlier this year Southwest asked Houston Airport System (HAS) to conduct a feasibility study for the addition of a five-gate terminal at Houston Hobby Airport to support international flights. Houston is Southwest’s sixth largest city based on daily departures, and the city’s geographical location makes it an ideal destination for short-haul international flights to Mexico and Central and South America. Data in the study conducted on behalf of HAS show that Houston was the point of entry for 64% of Mexican visitors travelling by air to the US in 2010. Through its acquisition of AirTran, previously domestic-only Southwest is gaining knowledge of international operations now that it is managing AirTran’s network, which includes flights to the Caribbean and Central America.

Raleigh-Durham, San Jose and Portland airports: Colourful pasts and hope for the future

Pittsburgh, Cincinnati and St Louis airports were developed and then partly abandoned. In this review, we look at three smaller cities that had hopes raised and then dashed; but to quite different outcomes, and each with some hope for the future. The three are Raleigh-Durham, North Carolina (RDU), San Jose, California (SJC) and Portland, Oregon (PDX).