See below the list of current and pending members of the Global Alliances.
Royal Air Maroc is weighing whether global alliance membership will help attract more premium travellers and provide connectivity to other parts of the world. An alliance would benefit from RAM's position in Morocco but also central/west Africa, RAM's largest international market after Europe.
RAM could use a premium push as incoming 787s prompt an increase in business class seats while RAM's long-haul markets prepare for growth. Sao Paulo will increase a little, while RAM expects to increase Montreal and New York JFK service to double daily over the peak summer 2015, although only New York is so far benefitting from this. Frequency and up-gauging will mean RAM achieves 53% higher growth at its peak in New York than in 2014.
This expansion may prove too ambitious, as might a prospective Casablanca-Beijing service, RAM's first to Asia. Morocco is eager to receive Chinese tourists, but this may not be the way to tap the market. RAM planned to resume service to Dubai, but cancelled it – coincidentally or not – after Emirates increased capacity to Morocco.
This is the second of a two part report on Royal Air Maroc.
China's aviation authorities have long pressured its airlines to serve Africa, where China has growing commercial and government ties with many resource-rich countries across various regions. African airlines, especially Ethiopian Airlines, have been growing in China and the government is eager to see its own airlines represented there. However, there have been limited African routes operated by Chinese airlines: Hainan Airlines has withdrawn from Luanda while China Southern is serving Mauritius to carry Chinese tourists on holiday.
Air China, as the flag carrier, may be pressured finally into entering Africa as it, according to a Chinese report, is considering service in 2015 to Addis Ababa and Johannesburg. Air China would presumably need to work with Star Alliance partners Ethiopian Airlines and South African Airways on such a service. Ethiopian has been receptive to partnerships while SAA desperately needs a solution to its Beijing route that is heavily loss-making but which the South African government wants maintained. Air China's possible entry comes as Asian airlines are declining in Africa; but both possible routes would be commercially difficult for Air China.
Air Canada during the last couple of years has worked diligently to repair its balance sheet, improve its leverage and reduce costs; as a result it is now beginning to enjoy some of the fruits of its labour by meeting its return targets and sustaining liquidity well above its minimum threshold.
The Canadian flag carrier has also undertaken a network revamp that includes the creation of its low cost subsidiary rouge and a push into long-haul international markets, leveraging its position as Canada’s leading global airline.
But Air Canada faces challenges as it works to sustain profitability from its familiar foe WestJet, as well as potential new entrants eager to execute the ULCC model within Canada. The airline will no doubt have focussed on these threats, and be aware there is still much to prove as its efforts to transform its business continue.
This CAPA analysis of Air Canada's strengths, weaknesses, opportunities and threats continues a series on global airlines.
China's three main airlines are all state-owned but the flagship is Air China, which is based in the capital of Beijing and whose Chinese name confers it the title of international carrier. Air China has been the most internationally-focused of the three, including China Eastern and China Southern. Air China has pursued rapid growth in Europe and the United States before its peers did, partially to reflect the opportunity of its Beijing base to be a hub, but also for Air China to represent the country in overseas markets. Being given commercial preference come with the trade-off of political responsibilities.
Air China faces is maximising its short-term opportunities in Europe and the US, so needs to find new markets. A list of planned new routes for 2015 is only rumoured, and includes long-haul flights to Addis Ababa, Johannesburg and Montreal-Havana. (Auckland has already been announced.) The list is logical and at the very least shows gaps in Air China's network the carrier has spoken of and could be expected to eventually close. The challenge will be in finding a balance between where passengers want to go and where Beijing wants the airline to go.
Taiwan’s EVA Air is looking to bolster transit traffic from Southeast Asia to help support further growth in the North American market. A newly expanded codeshare agreement with Singapore Airlines (SIA) covering all six of EVA’s North American routes along with a significant expansion of its trans-Pacific operation should generate an increase in the Taiwanese carrier’s share of the highly competitive Southeast Asia-North America market.
EVA is planning to increase capacity to North America by 15% in 2015 at it takes four additional 777-300ERs. Similar growth is expected in 2016.
Expansion of EVA’s Southeast Asian operation is not expected as the airline is focusing regional growth on the mainland China and Japanese markets. But EVA needs a change in its traffic mix on Southeast Asian routes to include more connecting passengers as competition in the local Taiwan-Southeast Asia market intensifies following the launch of Taiwan’s first LCCs, although they are for now small.
A new government in New Delhi since May-2014 has brought heightened expectations of faster GDP growth, industry reforms and enhanced transparency. But with an entirely new team leading the Ministry and most of the government agencies involved in aviation, there is a lack of experience at the top. It will therefore take some time for the key decision-makers to grasp the complexity of the situation.
A clear roadmap is yet to emerge on the Indian government’s proposed institutional framework, a strategy for Air India and the Airports Authority of India, and the intended policy settings on critical issues such as bilaterals, economic regulation and route dispersal guidelines. However, indications are that the government will push ahead and abolish the five year/20 aircraft threshold for international operations, airport privatisation, construction of low-cost airports and corporatisation of air navigation services.
The Aviation Minister has also been encouraging state governments to reduce the onerous sales tax on aviation turbine fuel which currently averages 24%. This would be the single greatest benefit that the government could deliver to the industry.
Once rejected by global alliances, Etihad Airways has turned around and established its own partnership platform, "Etihad Airways Partners". Partners has familiarity to existing alliances: commercial relations are emphasised, there are frequent flyer benefits and aircraft will have the Partners logo.
But Partners is not simply a de facto fourth global airline alliance. Etihad is starting small with six members. This view requires Etihad's standard disclaimer that it seeks not to be the biggest but to have the highest quality.
Partners in some ways is a branding of what Etihad has already done, and plans to continue to do, in the loyalty space. Consolidating loyalty programmes reduces costs while providing scale.
United Airlines continues its efforts to close the gap with peers after posting solid 3Q2014 results
United Airlines admits there is still much work ahead to close the gap with its large network airline peers in key metrics such as margin performance. But efforts United has undertaken to improve its revenue performance showed promise in 3Q2014 as it out-performed its peers in passenger unit revenue growth.
Even as it faces some unit revenue headwinds in 4Q2014, United believes it will sustain profitability during the last quarter of 2014 as the US domestic market remains robust.
Similar to rival Delta, United could grow its capacity to upwards of 2% in 2015, which may cause some concern among investors. But United stresses that much of the growth stems from aircraft up-gauging, improved utilisation and increasing density of certain aircraft.
Delta Air Lines has slightly adjusted its passenger unit revenue targets for 3Q2014 triggered by oversupply in some of its markets, unrest in the Middle East and the Ebola outbreak in Africa.
The airline has previously warned of tougher year-on-year comparisons in 3Q2014 after recording 7% unit revenue growth in 3Q2013. But despite the challenges that have cropped up during the last few months, Delta still predicts a strong performance in the quarter with double digit operating margin expansion and solid cost containment as demand in the US domestic market remains strong.
As it prepares to make trans-Atlantic capacity adjustments for the US winter time period in conjunction with its SkyTeam alliance partners, Delta is also making changes in it Pacific network by down-gauging Boeing 747s it operates to Tokyo and replacing them with smaller and more efficient aircraft.
It is not often that a lick of paint is so momentous. When China Eastern Airlines – China’s second largest carrier and the world’s eighth largest by seats – unveiled its new livery, it marked an important step. The details of the branding are the minor part; the major fact is that in China’s slow-moving legacy environment of national carriers where the state has a heavy hand, China Eastern was able to implement change. Competitors, still wearing their old coats, are jealous. This is China Eastern's first re-branding since its establishment over 20 years ago, and the first major one among China's airlines.
The branding itself is the visible signal of strategic change. A more material one is due to arrive with the 24-Sep-2014 delivery of the first of China Eastern’s 20 777s for long-haul growth, mainly to North America. China Eastern’s lagging performance has made its Shanghai hub vulnerable, albeit one of China's most important. Further, China Eastern is the first – and so far only – state carrier to launch an LCC. Even more disruptive, in its low key way, is China Eastern’s discussion of finding a strategic investor.
The strategy may be relatively fresh but it needs time (perhaps years) to incubate. China Eastern has some way to go before becoming fully commercial; for example, its 1H2014 financial results included domestic load factor gains at the expense of yield - while operating profit was boosted by state subsidies.
Malaysia Airlines (MAS) plans to increase focus on regional operations as it starts to implement capacity and job cuts as part of a new recovery plan. Cuts to the long-haul network are expected as the group’s new strategy aims to leverage partnership and its membership in oneworld.
The changes could create a void In Malaysia’s long-haul market and persuade AirAsia X to reconsider services to Europe. But it could also lead to an opening for oneworld partners such as British Airways and Finnair to enter the market, possibly as part of a joint venture with MAS.
The new strategy, which also includes a focus on premium services and improving yields, is not actually new. MAS tried to implement a similar strategy as it entered oneworld in early 2013. Then it became distracted over the last year and started pursuing ambitious growth at the expense of yields. A second attempt at the same strategy has a better chance of succeeding as this time it comes with the job cuts that MAS has needed for years. But there will still be challenges.
Etihad & Alitalia agree and affirm their partnership vision. Protectionist voices will become louder
Alitalia is finally set to become the eighth airline in Etihad Airways' Equity Alliance, as the two airlines on 08-Aug-2014 announced a transaction implementation agreement under which Etihad will invest EUR560 million in Alitalia for a 49% stake. That investment, together with injections from other investors and additional financing and loans will create a EUR1.8 billion investment deal for troubled Alitalia. "The future is secure," Etihad CEO James Hogan said in Rome. Its competitors must now prepare for a more competitive Italian market.
Although Mr Hogan warned "there's no quick fix", his quick three-year re-structuring plan projects Alitalia to post a EUR100 million profit by the end of 2017. Alitalia will re-brand as early as 1Q2015 and will exit loss-making short-haul markets and introduce long-haul growth from multiple Italian cities to Abu Dhabi as well as global destinations. China can be expected to be a focus, with some services routed via Abu Dhabi. Mr Hogan affirmed the value of SkyTeam to Alitalia and expects the alliance membership to continue.
Etihad's Alitalia investment has hallmarks of past deals, with Etihad buying into Alitalia's frequent flyer programme and conducting a sale-and-leaseback agreement for its London Heathrow slots. Both Alitalia and Etihad avoided being drawn on details of sticky matters like redundancies, mounting European opposition, "effective control" and if Alitalia really can be saved. Some matters will become clear in the short term and others will take longer, but Mr Hogan is unambiguous: "Our entry into Alitalia has no exit strategy."