See below the list of current and pending members of the Global Alliances.
Air France-KLM's 6M2015 passenger traffic figures indicate RPK growth of just 0.7% for the group, compared with 5.8% for IAG and 3.6% for the Lufthansa Group. With a passenger load factor of 84.2% for the period, Air France-KLM is filling more of its seats than IAG (79.3%) and the Lufthansa Group (78.3%). Its capacity discipline is welcome, but has been forced on it by successive losses.
Moreover, its poor financial track record highlights the challenges faced by Air France-KLM in making a profit from these seats - and cost cutting remains a priority. Key to this is labour productivity improvement. A recent agreement signed by KLM pilots is a positive step in this regard, by contrast with ongoing deadlock between Air France and its pilot union.
In this report, we consider Air France-KLM's main strengths, weaknesses, opportunities and threats.
We suggest that Air France-KLM should be more positive in developing commercial relationships with Etihad and Chinese partner airlines and more aggressive with the growth of its LCC subsidiary Transavia (if pilots allow it).
LOT Polish Airlines, completing a restructuring, is planning to double in size by 2020 and launch additional service to North America and Asia, where new routes to Bangkok, Seoul Incheon and Tokyo Narita have been announced. Two more long-haul routes will be announced in autumn 2015 and by 2020 LOT plans to have 10-12 long-haul routes as it becomes the hub for "the new Europe" across Eastern and Central Europe, where there is growth but no clear domination yet by Aeroflot, Air France-KLM, IAG or Lufthansa. Yet LOT's "new" world is actually an old, restrictive world where fellow Star Alliance carriers can veto even internal partnerships, which will hurt LOT's long-haul performance. LOT's position is reflective of other carriers feeling constrained from larger members across all of aviation's global alliances.
LOT prefers to remain in Star but provided it gains greater participation. It hosted the bi-annual board meeting in late Jun-2015 in hopes of gaining leverage. LOT needs a few years to prove its new strategy to potential strategic and equity partners but an alliance decision may be needed in the short-term: a change in alliance rules means Star carriers can leave by 31-Dec-2015 without paying exit fees, which can be very substantial.
Brazil’s fourth largest airline Avianca Brazil marks a milestone in Jul-2015 when it formally joins the Star Alliance. With Avianca Brazil finally entering Star the alliance will be able to fill some of the void left by TAM, which jumped to oneworld in 2014 as a result of its 2012 merger with LAN.
But Star has also been courting Brazil’s third largest airline Azul, whose chairman David Neeleman recently prevailed with his partners in acquiring TAP Portugal, a Star member which is also the largest carrier in the Brazil-Europe market. For now Azul does not seem interested in joining a global alliance and is instead focusing on concluding codeshare discussions with JetBlue and United. But eventually Azul could reconsider and give Star two Brazilian members.
Although Brazil is presently enduring economic weakness, Star’s pursuit of two airlines to fill the gap created by TAM’s exodus shows the long-term strategic value of the country, which is by the largest in Latin America. Star clearly sees a need for two Brazilians members in order to fully restore its presence in the Brazilian market.
A modest push by Delta Air Lines out of JetBlue’s fortress in Boston during 2014 raised questions about the mega airline’s intentions for Boston, and if its moves signalled heightened competition with the airport’s largest airline JetBlue.
Over a year later the two airlines appear to be coexisting peacefully in Boston, leveraging their respective strengths as the airport’s two largest airlines. JetBlue has roughly 125 daily departures from the airport, pushing forward to its goal of 150.
Delta, meanwhile, appears to be making minor changes in Boston, leveraging new markets where it has areas of strength and shedding routes that may not be working within the larger context of its network.
Taiwan’s EVA Air is entering a new phase as it launches Houston on 19-Jun-2015. Houston is EVA’s first new long-haul destination in five years and is part of a major push in the North American market that also includes the anticipated launch of services to Chicago in 2016.
EVA is relying heavily on connections to Southeast Asia as it launches Houston and continues to add capacity to North America. EVA plans to boost feed to its growing North America operation by adding capacity to Southeast Asia through additional frequencies which will ultimately create a second bank of connection flights at Taipei for the Southeast Asia-US market.
To support growth in Southeast Asia, EVA is pursuing modest expansion of its A330 fleet that will provide interim capacity prior to the delivery of new-generation A350s or 787s. EVA plans to place orders for at least 20 A350s or 787s by the end of 2015.
Indonesian flag airline Garuda Indonesia is resuming international expansion as it takes its last batch of four 777-300ERs and acquires 30 787-9s along with 30 A350s. The expansion comes as Garuda's outlook improves after a challenging 2014, which led to a restructuring of its international network and a hiatus from international growth.
The additional 777-300ERs will support international capacity growth in the near-term, including more capacity to Saudi Arabia in 2H2015 and new services to Frankfurt and Paris in 2016. The 787-9s and A350s will partially be used to replace Garuda’s fleet of A330s from 2020 but will also enable further growth of the carrier’s medium and long-haul networks.
Meanwhile Garuda is adjusting its widebody fleet plan by opting not to include a first class cabin in its additional 777s, although at least for now it will maintain a first class product in its original fleet of six 777-300ERs. Garuda also plans to remove the business class cabin on six A330s, giving it an all-economy product similar to the A330s operated by low-cost rivals Indonesia AirAsia X and Lion Air.
The planned joint venture between Royal Air Maroc and Qatar Airways will be a relatively small but tidy affair. More importantly, it signals the future direction: each carrier will work more with partners. Qatar Airways plans more JVs, with a IAG one highly anticipated. Qatar has an existing JV with Cathay Pacific. RAM is planning a JV with Iberia, with the Iberia and Qatar partnerships likely to be followed by joining the oneworld alliance. RAM will give oneworld a long-sought expanded presence in Africa.
Under the JV, RAM will operate from Casablanca to Doha three times a week from 09-Sep-2015 with its 787-8, supplementing Qatar’s existing daily service. Qatar is expected to open a service to Marrakech. Qatar will gain access to RAM’s Africa network from Morocco while RAM beyond Doha is eyeing Asian connections. Accessing Qatar’s Asian network has smartly taken precedence over a risky plan for RAM to fly to Beijing.
There’s no shortage of heat and light in the US vs Gulf airlines battle. But not much to make it clear why the Gulf airlines’ relatively limited impact should attract so much focus.
Sri Lanka’s new government is pursuing strategic changes at SriLankan Airlines and sister low-cost carrier Mihin Lanka aimed at improving their financial position. The new government, which took over in Jan-2015, aims to merge the two state-owned airlines and has suspended all flights from the new international airport at Mattala.
SriLankan and Mihin Lanka have both been highly unprofitable in recent years, posting some of the lowest margins in all of Asia. The new government is not willing to maintain the status quo and seems eager to implement long overdue changes that should make the soon to be merged airline a viable entity.
SriLankan’s position has been improving, driven by fleet renewal and membership of oneworld. But the previous strategy still had the airline on a course that likely would have required continued financial support from the government over the long term.
Finnair's net loss for 2014 was its first since 2011, but its fifth in the seven years since 2008. Over the past decade or so, losses have been more common than profits. Its niche in connecting Europe with Asia via Helsinki has placed Finnair among Europe's top twenty airline groups, although Finland ranks outside the top twenty countries by population.
But converting this niche into sustainable profitability is proving a major challenge. Whenever Finnair makes progress with cost reduction (and it has made major strides with labour productivity), it seems that revenue pressures wipe out those benefits. In 2015, Finnair anticipates a further drop in unit revenue, reflecting the highly competitive nature of its markets.
This year will also present opportunities for Finnair to build a more solid base. It will be the first full year under new labour agreements and with a number of product improvements in place. It will also see its first A350 delivery. Lower fuel prices are a stroke of luck, but Finnair needs to ensure it can be profitable without relying on this good fortune.
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.