Toronto Pearson International Airport

Hainan Airlines' first 787s go to Chicago, Seattle & Toronto but Air China gets Beijing's key routes

Originally due to arrive in China in time for the country's 2008 Beijing Olympics, the 787 even missed the 2012 London Olympics. Once the aircraft were finally ready in 2012, Chinese certification lagged and then the 787's battery-induced grounding put a further hold on delivery. But now in sight is an end to the saga and start of commercial service of the 787 in China.

Three operators hold 35 orders: China Southern for 10 787-8s, Hainan Airlines for 10 787-8s as well and Air China for 15 787-9s. Xiamen Airlines has a pending order for six 787-8s. China Southern is due to be the first carrier to take delivery and Hainan the second, but Hainan was first to announce deployment plans, which include domestic services and long-haul flights to Chicago, Seattle and Toronto.

But, as a less privileged, private airline, Hainan Airlines could be constrained by its own government on which routes it can use the full 787 fleet, as the airline faces route restrictions out of Beijing, its main long-haul base – as China Southern painfully experienced when it sought to fly from the capital with its A380.

Portugal’s SATA seeks partners as it considers trans-Atlantic expansion, short-haul transformation

SATA, the ambitious and successful airline based in the Azores chain of islands west of Portugal in the Atlantic Ocean, is seeking a role amongst Europe’s establishment of smaller, niche carriers. Driving this, the airline’s entry into IATA’s billing settlement plan is a further step towards an expanded presence. SATA has built up a number of interlines and is looking to expand those and increase two-way codeshares.

Its focus is bringing tourists to the Azores and is therefore a niche long-haul operator but it still faces competition from European LCCs. It is hoping that a product unbundling will help it compete more effectively in short-haul markets while codeshares will increase long-haul traffic, which it may grow with additional widebodies or next-generation narrowbodies that can cross the Atlantic. It has favourable geography for connecting traffic in some markets and would like to increase this incremental revenue.

WestJet’s solid 1Q2013 performance is dampened by concerns over capacity expansion

WestJet’s significant 33% growth in profits year-over-year during 1Q2013 is being overshadowed by the airline’s planned 9% to 10% capacity growth during 2Q2103 amidst a softer yield environment that shows no immediate signs of retrenchment. The carrier is repeatedly stressing that its decision to expand capacity is sound, highlighting passenger spill it experienced during 2012 when it achieved record load factors of nearly 83%.

While the bulk of WestJet’s planned 6%-7% domestic capacity expansion during 2Q2013 will be dedicated to transcontinental routes, the carrier’s launch of its new regional carrier Encore is occurring as demand patterns are somewhat unpredictable given a slight uptick in the Canadian unemployment rate in Mar-2013 and more profitable close-in bookings showing some signs of weakness.

Air Canada plagued by soft yields in 2Q after helping to trigger a 1Q2013 loss

Air Canada’s achievement of profitability during 2012 was dampened by a 1Q2013 loss driven by a weak yield environment in some of its most competitive markets as premium travel softened. While the carrier concludes booking trends during 2Q2013 are on the upswing, yields are still under pressure as Air Canada continues work on its cost base to withstand pricing actions by its competitors.

A key tenet of the carrier’s strategy going forward is leveraging its international network through a widebody fleet upgrade encompassing Boeing 777s and 787s as it works to shed six older Airbus A340 aircraft during 2013. But in order to execute strengthening its international offerings Air Canada needs to ensure it has enough domestic and transborder feed to support long-haul service, which means it needs to ensure its domestic product remains competitive with WestJet and Porter, which have ambitious expansion plans for the Canadian domestic market.

A recent agreement between Air Canada and the Canadian Government to extend the current pension funding structure until YE2020 was significant in that it helps the carrier stave off increasing funding requirements, but the deal comes with stipulations that essentially prohibit any rewards to shareholders.

WestJet continues its hybrid evolution, watching costs as it weighs a potential widebody operation

Canada’s second largest carrier WestJet is adopting the strategy of many low-cost carriers worldwide through the creation of a hybrid model to bolster its share of the lucrative travel market. While in the short-term all the carrier’s efforts are focused on the launch of its new regional carrier Encore in 2H2013, WestJet is examining several options beyond its five year plan, including the possible deployment of widebody aircraft.

If WestJet opts to seriously consider deploying aircraft into long-haul markets beyond its current transborder offerings, the carrier will unleash competition against rival Air Canada in one of its last protected business segments.

WestJet joins many low-cost carriers including its North American counterpart JetBlue that are transforming their business models from a pure low-cost structure to a hybrid model in order to expand their passenger base to capture lucrative corporate travellers.