See below the list of current and pending members of the Global Alliances.
San Jose’s Norman Y Mineta International Airport is one of three in the San Francisco Bay Area that seek to attract custom not only from their own cities but also from neighbouring ones. San Jose itself is the leading city in what has come to be known globally as Silicon Valley, the location of thousands of businesses in the information technologies and digital industries, many of them start-ups, but also including major players such as Google and Facebook.
While it is situated in a dynamic commercial zone, passenger numbers are perhaps not as high as they might be, but local competition is tough. The airport has some direct international flights to North Asia and Mexico, but none to Europe just yet. However, it has invested in provision for general aviation functionality, even enabling the construction of what has become known as the ‘Google Terminal.’
This report examines present and future growth trends at the airport, local airport statistics, how it matches up to competing airports across a range of metrics, at any construction activities and at its ownership.
United Airlines is bolstering its presence in the Singapore market with the Jun-2016 launch of non-stop flights to San Francisco with 787-9s. It will be the longest route in United’s network and the longest route in the world for the 787, resulting in limited payload restrictions on the westbound leg.
The new San Francisco flight will give Singapore a non-stop option to the US for the first time since Singapore Airlines (SIA) dropped non-stops to Los Angeles and Newark in 2013. SIA is planning to resume Los Angeles and New York non-stops in 2018, and has also has been evaluating San Francisco non-stops, but United will beat SIA by two years with its own Singapore-US service. SIA and United are both members of the Star Alliance but have never codeshared, and have no intentions of partnering on Singapore-US non-stops.
United has a joint venture with Star member All Nippon Airways (ANA) that already includes one-stop services between Singapore and the US. The new Singapore-San Francisco non-stop route will be added to the JV (all three countries involved have open skies agreements). United is dropping Singapore-Tokyo while retaining Singapore-Hong Kong, but will be able to rely on ANA’s expanded presence in the Singapore-Tokyo market to feed its Tokyo-US flights.
The new joint business agreement between International Airlines Group (IAG) and LATAM Airlines Group (LATAM) on flights between Europe and South America was widely anticipated. However, LATAM has pulled off a coup in simultaneously signing similar agreements not only with IAG, but also with oneworld's biggest member - American Airlines. IAG/LATAM would together serve more than 100 destinations in South America and 87 in Europe.
IAG announced the revenue-sharing agreement between British Airways, Iberia and LATAM on 14-Jan-2016. It is another example of what is loosely referred to as a joint venture (JV), under which commercial cooperation on chosen routes moves beyond codesharing to a deeper level. The agreement also encompasses reciprocal FFP recognition.
As JVs typically involve the coordination of schedules and pricing, they require regulatory approval in order to avoid the charge of collusion, which would otherwise be illegal. IAG and LATAM expect this could take 12 to 18 months, so implementation of the JV may not take place until the winter 2017/2018 season. If approved (and if without too onerous regulatory concessions), the JV will strengthen the oneworld members on Europe-South America. Star Alliance and SkyTeam (capacity leader in this market) will need to find responses.
Mid-Jan-2016 was a banner period for the oneworld alliance. Latin American powerhouse LATAM Airlines Group tabled plans to forge immunised joint ventures with Europe’s IAG Group and American Airlines, upping the competitive stakes between Europe and Latin America, and the US and Latin America.
The tie-up between LATAM and American is not surprising, despite American’s relative silence on the issue until the formal announcement of the partnership was made. With an impending open skies agreement between the US and Brazil, American’s rival Delta has been trumpeting plans to form a joint venture with its Brazilian partner Gol, and in 2015 United took a stake in Brazil’s third largest airline Azul.
If all the requisite approvals are gained, LATAM and American will solidify their leading presence between the US and South America, drive important revenue synergies and, perhaps over the medium term, add new markets between the two regions. However, given the market concentration of American and LATAM, regulators may be expected to seek concessions for the agreement to move forward.
Although Latin America has suffered from challenging economic conditions throughout 2015 that are lingering into 2016, some interesting developments have occurred between Mexico and South and Central America. Mexican airline Volaris during 2015 has branched out its international offering beyond US transborder routes to Central America, and Aeromexico and Avianca have added routes between Mexico and South America.
Copa Airlines has also added two new destinations in Mexico as it redirects capacity from battered Brazil to routes whose revenue potential is more promising. Although it is facing currency weakness similar to other Latin American economies, Mexico’s economic climate is more healthy than most countries in South America.
LATAM Airlines Group is also strengthening its ties in Mexico with a new codesharing agreement with Interjet, which has a solid domestic network. The pact shows that Latin America’s second largest aviation market, Mexico, remains one of the region’s strategic areas going forward.
The spectacular growth of low cost airlines has meant their transition from niche players to carriers with sizeable networks. Networks that can be larger than those of full service rivals, having more frequency, and operating to under-served markets, or to points not flown at all by the full service carriers.
This has made them attractive to global alliances, especially when LCCs are strong in large markets. Some of these locations – Brazil, India – are where Star Alliance has a small presence and a stronger representation with other full service carriers is not possible. Star, in Dec-2015, formally launched its Connecting Partner Model (CPM), becoming the first global alliance to offer a way to work with LCCs. This is two years after Star mooted the programme, and three years since SkyTeam announced its consideration of one.
Malaysia Airlines has forged an extensive codeshare partnership with Emirates as it further restructures its long haul network. The flag carrier is suspending services to Amsterdam and Paris, leaving it with only two destinations outside the Asia Pacific region (London Heathrow and Dubai), and will rely on Emirates to provide offline access to continental Europe, Africa, the Middle East and the Americas.
Malaysia Airlines is increasing its focus on regional operations. It will reschedule domestic, and some short haul international, flights to connect better with Emirates, its own restructured network and other partners. Under the revised regional operation the carrier plans to open seven bases in secondary cities throughout Malaysia, enabling it to reduce costs, improve utilisation of its 737 fleet and launch new point to point routes.
The new, still unfolding, strategy at Malaysia Airlines repositions the flag carrier to focus on the Asia Pacific region, where there is rapid growth, and there are opportunities to feed partners. Malaysia Airlines is right to recognise that it is unable to compete effectively against Gulf carriers on long haul routes to Europe, making a partnership with a former rival the only sensible option.
Air Canada is making a solid push in the US transborder market in 2016, as it works to leverage sixth freedom traffic from its growing international long haul operations. The expansion involves new routes, the re-launch of other markets, and also service to hubs of Air Canada’s Star Alliance partner United Airlines.
The airline’s sixth freedom strategy has been a mainstay of its business plan for a number of years, after Air Canada valued that traffic at several million dollars. It is working to position its hubs as attractive transit points from US destinations that do not have direct access to markets in Asia and Europe.
Air Canada believes that given the solid projections for the US economy, its latest transborder push should be successful. The airline is the lone operator in many of the new markets, providing an opportunity for Air Canada to continue to grow its annual sixth freedom traffic flows.
Delta Air Lines has opted to expand its stake in Aeromexico, following a similar move earlier in 2015 when it increased its investment in Brazilian airline Gol. Delta has also invested in China Eastern Airlines during 2015, and unsuccessfully pursued a stake in Japanese airline Skymark.
With low fuel costs propelling record profitability at US airlines, perhaps the time is right for Delta to solidify investment to build a competitive network for the long term. Its moves during the past year reflect an aggressive pursuit of strengthening its presence in Latin America and Asia.
By enlarging its stake in Aeromexico, Delta also grows its ability to exert influence over the airline, something that Delta believes could help Aeromexico improve its overall business strategy.
Brazil’s TAM is aiming to launch services in 2016 to Johannesburg, making it only the sixth airline with long haul or transoceanic flights solely within the Southern Hemisphere. TAM will compete with current codeshare partner South African Airways (SAA) on the Sao Paulo-Johannesburg route.
The new TAM service will be the first oneworld link between South America and Africa, plugging a hole in the alliance’s round the world offering. Qantas now links Australia with South Africa and South America while TAM sister carrier LAN also operates over the South Pacific.
Star will also be able to offer a round the world product completely in the Southern Hemisphere from Dec-2015, when Air New Zealand launches services to South America. Star member SAA is now the only carrier linking South Africa to South America, also serving Australia.
Royal Jordanian has completed a challenging turnaround and is on track to post a profit for 2015 after incurring steep losses in 2013 and 2014. A drastic network restructuring and efficiency improvements driven by the introduction of Boeing 787s has enabled the flag carrier to return to the black despite lingering unfavourable market conditions in the Levant region.
Royal Jordanian is starting to resume network growth – albeit modestly and with relatively low risk. Guangzhou and Jakarta are being added in early Dec-2015 while Kuala Lumpur is being upgraded to non-stop by improving utilisation of its widebody fleet.
The addition of Guangzhou and Jakarta expands Royal Jordanian’s long haul network from seven to nine destinations. Its short/medium haul network, which shrunk by over 10 destinations in 2014, is also starting to see modest growth.
Clouds loom over Cross-Strait airline market as Taiwan faces political change. Hong Kong may benefit
The ruling, and pro-Beijing, KMT party is expected to lose the Jan-2016 elections in Taiwan. Under the KMT's leadership Beijing and Taipei have forged closer ties, including the launch of charter and then scheduled Cross-Strait flights between mainland China and Taiwan, which had been prohibited for decades. There has been growth, with increase in overall frequency as well as destinations available to be served in the still tightly-regulated market.
An outstanding gripe from the Taiwanese side was that, for complex reasons, their airlines were not permitted to carry transfer traffic from mainland China to Taiwan and beyond to other markets – such as Australia and North America, two popular long haul markets from mainland China and for which Taiwan is well positioned to be a hub. Earlier in 2015 when relations were warmer, Taiwanese carriers were expected to receive transfer traffic rights by the end of the year. But as the Taiwanese political situation has turned unfavourable to Beijing, an Oct-2015 meeting did not grant transfer traffic rights. The bigger risk is that cooling relations would slow Cross-Strait liberalisation – or at an extreme, recede. One outcome could be that visitor growth would instead funnel through the Hong Kong hub.