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The national carrier of Portugal, TAP Portugal, operates a domestic and regional network of services within Portugal and Europe, as well as international services to North America, South America and Africa from its hub and base at Lisbon Portela Airport – the major international gateway to Portugal. Aeroportos de Portugal is the national airport authority of Portugal and operator of seven major airports in the country, namely Lisbon, Porto, Faro, Santa Maria, Ponta Delgada, Horta and Flores.
The National Institute of Civil Aviation is the regulatory authority for the Portuguese aviation sector, while air navigation services are provided by NAV Portugal.
Airports in Portugal
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Emirates Airline carried 15% additional passengers in the first half of 2013/2014 compared to a year ago. The growth in volume has been led by Europe and the Middle East while Australia has seen the highest percentage growth. Saudi Arabia, the UK and Thailand have received some of the largest capacity injections. India and the UK remain Emirates' two largest markets based on seat capacity, but Saudi Arabia has overtaken Germany as the third-largest while Australia overtook the US, and Thailand overtook South Africa.
In terms of the rate of growth, the standouts were Portugal, Vietnam and Zambia – all with 100%-plus growth, albeit from a low base. But Emirates saw 40-50% growth in seven other countries, including Australia, Saudi Arabia and France.
Overall, 15% passenger growth and 16% capacity growth for an airline the size of Emirates is a considerable achievement. Full year capacity growth, however, is likely to be closer to 12%, making 2013/2014 one of the slower years at Emirates in recent times. Asia will be the largest market for growth, followed by Europe and the Middle East.
US Airways believes it can recoup lost revenue triggered by a 16 day US Government shut-down after recording reasonably solid 3Q2013 results, including higher than expected unit revenues for the three months ending 30-Sept-2013.
As the outcome of the US Department of Justice (DoJ) challenge to block the merger of American Airlines and US Airways is tough to predict, both carriers are moving forward in network expansion on a stand-alone basis. For US Airways it means international expansion from its Charlotte hub as a means to close the gap in a variable financial performance from 2Q to 3Q, while American appears to be crafting a Pacific strategy that entails a build-up in Dallas/Fort Worth to strengthen its position in the trans-Pacific against United and Delta.
Air Canada’s low-cost carrier Rouge is ratcheting up service to leisure destinations in Europe during the 2014 summer high season, which should prove a definitive test for the carrier’s theory that a low cost operation on routes producing softer yields is the correct equation to turn profits.
The growth and operation of Air Canada Rouge to a possible fleet of 50 aircraft is a strategic pillar of the company’s efforts to cut its unit costs by 15% – quite a formidable goal. Similar to Rouge’s initial roll-out of service from Toronto to Athens, Edinburgh and Venice and from Montreal to Athens, most of Rouge’s planned route expansion during 2014 is into markets that have been served by Air Transat during the high season. With just a few months of operations under its belt, no clear-cut conclusions can be made about Rouge’s future or the total effects on Air Transat, but Air Canada appears to be throwing down the competitive gauntlet, noting that it is now in a much better position to compete on those routes.
TAP Portugal’s 2012 annual report, published at the end of Jul-2013, gives food for thought to anyone interested in bidding for Portugal’s national airline.
The bad news is that the group made another net loss, its balance sheet was woefully under-capitalised, with high debt levels and negative equity, and labour productivity was mediocre versus European peers. The Portuguese Government has reiterated its intention to re-launch the privatisation process in 2013.
So how should the Government tell the story to prospective buyers? The good news is that losses narrowed, cash flow improved and net debt fell. Moreover, RASK increased, ex fuel CASK remained under control and labour productivity improved.
Further gains could be made, for example through higher load factors and more headcount reductions and, perhaps, by focusing the long-haul network even more sharply on its Latin American niche. In addition, heavily loss-making non-core businesses should be sold or closed. More time may be necessary to demonstrate progress is being made.
Frequent flyer programmes (FFPs) can be an emotive subject. For many frequent flyers, their status in these schemes and their ability to redeem hard-earned points are important quality-of-life factors. A recently published survey reveals significant differences in customer satisfaction with the award redemption process of different airlines.
This highlights the importance of FFPs to airline brands through their contribution to the passenger experience. FFPs have evolved from simple mechanisms to reward an airline’s frequent flyers with free flights on that carrier. They now embrace partner airlines and partner companies in other consumer sectors and can offer awards other than air travel. Awards are not even always restricted to humans: Virgin Australia has just announced a FFP for pets.
FFPs are also increasingly emerging as a profitable source of additional revenues for airlines. Although visibility of their financial contribution is mixed, there are growing examples of autonomous FFPs and third party investment and ownership.
As American and US Airways move to close their merger in Jul-2013 and set out on a complex integration process, speculation over the status of the nine hubs comprising the backbone of the combined network was revived after a report from a US government watchdog questioned Philadelphia’s role in the combined network. Similar queries have also arisen over the status of Phoenix once integration is complete.
The network optimisation that occurs during a merger integration inevitably results in some service cuts and eliminations as unprofitable flights are culled. Southwest has been weeding out AirTran’s unviable routes for the last year (notably, without a huge amount of criticism) as it attempts to complete integration of the two carriers.
While it is natural to assume some hubs might lose prominence in the combined American-US Airways network, the reality is that during the last few years all the major American carriers have undergone network overhauls that resulted in concentrating flying at their hub strongholds, leveraging strength where they have a commanding presence. US Airways and American have notably embraced that strategy, evidenced by US Airways placing 99% of its flying at its Charlotte, Philadelphia, Phoenix and Washington National hubs while American continually touts its cornerstone strategy that entails building its network around Dallas/Fort Worth, Chicago, Los Angeles, Miami and New York.