Canada

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.

Airlines in Transition part 7: What keeps CEOs awake at night?

Have you ever wondered what it is like to run an airline? In the closing session of CAPA’s Airlines in Transition conference in Dublin, CNN’s Richard Quest grilled a panel of CEOs on their chief concerns. Conference delegates were treated to a thought-provoking, revealing and sometimes surprising discussion that provided a rare insight into the airline CEO’s brain.

Airline CEOs Christoph Mueller of Aer Lingus, Willie Walsh of IAG, Dave Barger of JetBlue and Montie Brewer (formerly) of Air Canada were joined by James Davidson of technology company Farelogix. Topics discussed included how to balance a wide range of issues, the impact of industry consolidation, the acceptance of return on capital as a key measure and why restructuring is enjoyable.

Etihad jolts the status quo again – Jet Airways and (wait for it) Air Canada are its newest partners

By purchasing a large minority share in Jet Airways, Etihad enormously entrenches its long term global position, as it secures intimate access to one of the world’s fastest growing markets. The deal is accompanied by expanded bilateral access and a new US pre-clearance facility at Abu Dhabi Airport. The near-billion dollar deal will not only radically shake up the Indian market – to the substantial disadvantage of now-marooned Air India – but the ramifications will be felt well beyond Indian borders.

And right on the heels of this announcement comes the remarkable news that staunch Gulf airline opponent Air Canada is to codeshare with….Etihad. For now the scope is limited – but it will expand, as Etihad’s virtuous circle spreads.

Airlines in Transition part 4: Bridging the gap between full service and low-cost or hybrid airlines

Our previous report on CAPA’s Airlines in Transition conference (Airlines in Transition part 3: How full service airlines are reshaping models to be more competitive) looked at how full service carriers are responding to the challenges of a weak global economy, high fuel prices and growing competition from LCCs on short-haul and Gulf carriers on long-haul. The low-cost sector is also going through a period of change, characterised by features summarised at the conference by Professor Rigas Doganis.

Like the FSCs, the LCC sector has seen concentration and consolidation and the two sectors have established a growing number of linkages. Moreover, the relaxation of the pure low-cost model of simplicity and the adoption by FSCs of LCC pricing strategies has narrowed the differences between them. Have the differences been eliminated? What are the challenges faced by LCCs/hybrids? What is the right number of fares to offer? We examine these questions and more in this fourth conference report.