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31,551 total articles
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In CAPA’s report on Turkish Airlines’ 3Q2013 results, we highlighted that RASK growth failed to beat CASK growth for the first time this year and suggested management would want to demonstrate this was not the start of a new trend. The airline has now provided some reassurance on this.
Beyond this issue, CEO Temel Kotil used the recent Turkish Airlines’ investor day to reiterate his strategy of using the carrier’s Istanbul hub to attract global connecting traffic flows, leading to growth ahead of the market, albeit with an increased focus on frequencies rather than new destinations in future. This strategy has similarities with those of the Gulf carriers, but is also underpinned by the significant Turkish home market.
The Turkish market includes strong competition in the shape of LCC Pegasus, but the return to profitability of SunExpress, jointly owned by Turkish Airlines (THY) and Lufthansa, provides THY with another option for facing this competitive threat.
A beleaguered United Airlines has outlined ambitious goals for its investors that entails an annual cost cutting scheme of USD2 billion and a pledge to begin returning cash to shareholders by 2015.
After battling operational, revenue and cost challenges during the last couple of years, United has no choice but to crystallise a plan to improve its performance in the medium term. Its target of rewarding shareholders is likely to be a competitive response to Delta Air Lines, who recently outlined plans to return USD1 billion to its shareholders during the next three years.
Additionally, United believes it can increase pre-tax earnings by two to four times during the next four years. Taken together it is tall order for a company that is still trying to deliver on its merger synergy targets. Now that United has declared those goals, the challenge is to deliver a successful execution, something that sceptics might have a right to be weary of.
Air Astana plans more rapid growth in 2014 but Kazakhstan airline market shows signs of slowing down
Air Astana is planning another year of double-digit capacity growth in 2014 as the Kazakhstan flag carrier expands its 767, A320 and E190 fleets. The carrier will focus on further expansion in the CIS and Central Asia region, but new 767-300ERs will also enable some capacity growth across its long-haul network.
ASK growth of 15% is expected for 2014, following 16% growth in 2013. But Air Astana plans to slow down expansion in 2015, ending a period of five consecutive years of expansion at a pace of approximately 15% per annum.
Market conditions have become less favourable in 2013, impacting load factors and profit margins. The prospect of increased competition, including the possible opening of Kazakhstan’s domestic market to Russian carriers, clouds Air Astana’s medium to long term outlook.
Etihad's announcement that it was buying 33.3% of Switzerland-based Darwin Airline was made on the first day of the Dubai Airshow and was easily lost in the fury of orders announced that day.
Darwin only flies aircraft with 50 seats, less than the number of premium seats that will be on many of the 350-plus widebody aircraft Gulf carriers ordered at the airshow. But the announcement is significant, and three reasons stand out.
First, for Etihad the carrier will "connect the dots" in Europe for itself and partners, linking hubs but also tertiary cities, which have largely been passed over by Gulf carriers. Many of these cities are served by the Lufthansa Group. This gives rise to the second significant impact: on Europe's legacy carriers. Gulf carriers changed their long-haul business while European LCCs decimated short-haul. Regional traffic was always typically a burden, and will come under further pressure following Etihad's announcement. Third is that Darwin Airline will re-brand as "Etihad Regional", and Etihad openly states Darwin is only the first carrier to use this new brand. As the industry still digests Etihad's partnership and equity strategy, Etihad promises to change another component of aviation – and raise the stakes in the liberalisation of the industry, especially by stamping its name on a European carrier.
easyJet's FY2014 pre-tax profit increased by more than 50% to its highest ever level and its operating margin returned to double digits after more than a decade at less than 10%. Its pursuit of a more passenger-focused and business-serving LCC model has driven it to improve and innovate in terms of product, with features such as allocated seating and a user-friendly website now being copied by the likes of Ryanair.
This customer focus, together with what the company has called “a benign capacity environment”, as competitors were forced to reduce seat numbers, has led to impressive unit revenue growth, while management has not lost sight of cost control. Its confidence in the future was signalled by a dividend totalling GBP308 million.
Looking into FY2014, however, the outlook for unit revenues is less certain as capacity growth steps up a little, and profits are unlikely to grow as rapidly as they did in FY2013. Nevertheless, easyJet's business model remains robust and should deliver sustained healthy returns.
International Airlines Group: 2015 target raised thanks to BA & Vueling; Iberia still has work to do
As CAPA predicted, IAG increased its operating profit target for 2015 at its recent capital markets day. This reflects better progress than previously expected at British Airways, the integration of Vueling into the group and additional growth at both BA and Vueling.
The group’s target has been raised from EUR1.6 billion to EUR1.8 billion. British Airways’ own 2015 operating profit target has been raised from GBP1.1 billion to GBP1.3 billion. This would bring BA to an operating margin in the region of its best-ever level of 10%.
The increase in the BA target, translated into EUR, is more than the increase in the group target. The implicit reduction in the Iberia target increases the pressure on its restructuring programme to create a competitive cost base. Nevertheless, the group as a whole now faces the real prospect of generating a return on capital ahead of its cost of capital.