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Norwegian Air Shuttle's 2Q and 1H operating loss as 41% capacity increase pressures yields

18-Jul-2014 10:00 AM

Norwegian Air Shuttle slumped to an operating loss in 2Q2013, after having previously established 2Q as a profitable quarter. This followed a record loss in 1Q2014. It will need to do a lot of making up to achieve a profit for the full year. Norwegian said it suffered from one-off costs related to the delay in Dreamliner deliveries and its first ever strike, in addition to negative currency movements. Nevertheless, while its CASK target for 2014 has slipped a little, it has a strong cost focus and remains broadly on course to achieve its medium term unit cost goal.

As in 1Q, the real problem was that unit revenue, RASK, fell more rapidly than CASK. This was the result of strong capacity growth in Norwegian's intra-Europe markets, its new bases in London, Barcelona and Madrid and its new long-haul routes. It has modestly trimmed its 2014 capacity growth plans, but it still has a very large number of aircraft on order until 2022.

It has established an Irish leasing vehicle through which it plans to lease out any excess aircraft, perhaps mindful of the fact that aircraft lessors are typically more profitable than aircraft operators. Meanwhile, 2014 looks set to deliver a poor result.

Lufthansa's new long-haul low-cost plans show new CEO Carsten Spohr's eagerness to move forward

11-Jul-2014 4:00 PM

Presenting a strategy update to analysts in London after 70 days in the job, Lufthansa Group CEO Carsten Spohr said that he could not wait the 100 days usually afforded to a new CEO before their first progress report. This sense of urgency should serve him well in the rapidly changing airline industry. After all, he has worked for Lufthansa his entire career and had been running its largest business unit, the passenger airline, since 2011. He does not need time to settle into the job.

In addition to lots of analysis of the airline industry backdrop and the changes affecting it, Mr Spohr's presentation included one significant new plan. Lufthansa is to launch a new low(er) cost long-haul airline, possibly as a joint venture with Turkish Airlines.

The low-cost long-haul concept is well established in Asia and is being pioneered in Europe by Norwegian Air Shuttle. It would be Lufthansa's most radical attempt so far to combat competition from hubs in the Middle East. But bolder steps are probably needed to catch up to the fast moving game, even if its unions feel more comfortable with the status quo.

European air transport competitiveness. CAPA contributes to the debate at ECAC/EU Dialogue

11-Jul-2014 12:00 PM

On 3 & 4-Jul-2014, many of Europe's senior national and Commission-level aviation civil servants and regulators joined representatives of airports, ANSPs, airlines and labour organisations at a luxury hotel in Vienna. Billed as a Dialogue between the European Civil Aviation Conference (ECAC) and the European Union (EU), the purpose was to discuss European air transport competitiveness and to seek a way forward in a global environment.

The European aviation industry, its regulators and policy makers acknowledged that the continent is falling behind other major world regions in connectivity and airline profitability and needs to think about how to do better. By the end of the two days, while there were one or two protectionist noises, there was a near consensus view that market forces should be allowed to work. In addition, 'levelling the playing field' with other regions should focus on reducing aviation taxes and easing the processes for infrastructure development.

In this report, we summarise CAPA's analysis of the state of Europe's air transport sector, which was presented at the conference, and the other main themes that emerged from the Dialogue.

Jet2.com. Good & bad news. Parent Dart Group announces FY2014 profit growth & FY2015 profit warning

27-Jun-2014 5:00 PM

Jet2.com reported healthy growth in traffic, revenues and operating profit in FY2014. The leisure LCC's parent company Dart Group PLC achieved even better results thanks to the expansion of the package holiday business Jet2holidays. Jet2.com operates among the highest load factors in the European airline sector and has been steadily profitable for the past six years.

However, the growing seasonality of the business has increased its dependence on a strong summer, while winter losses continue to grow. The company flagged this with its 1H results in Dec-2013 and even hinted that winter losses could have wiped out full year profit growth. FY2014 did achieve profit growth, but current weakness in demand in its markets has led Dart Group to issue a profit warning for FY2015, the latest in a series of downward revisions to the earnings outlook for European airline businesses.

LOT Polish Airlines starts to look beyond restructuring to improve its lot

26-Jun-2014 4:00 PM

LOT Polish Airlines CEO Sebastian Mikosz said recently that profitability must be developed through passenger retention, expansion of its customer base and the introduction of new options for travel, services and comfort (Future Travel Experience, 20-Jun-2014). Its recent focus has been on the restructuring plan submitted last year to the European Union, involving cuts to capacity and costs.

LOT awaits final approval from the EU for its restructuring plan, which was required in connection with state aid provided by the Polish government in Dec-2012. The airline has said that it will not consider a second tranche of state aid before Sep-2014. It needs EU approval before it can decide its longer term future, including the possibility of seeking new investors, although it has reportedly started to develop a new five year strategic plan. Meanwhile, the privatisation process has gone very quiet.

Mr Mikosz is right to plan for the post restructuring world, but is faced with the need also to continue to make LOT's cost base more competitive against the LCCs that operate the majority of seats in the Polish market.

CAPA Awards for Excellence in Asia Pacific Aviation 2014: Invitation to submit proposals

24-Jun-2014 12:53 PM

CAPA is pleased to announce the return of its highly regarded Awards for Excellence for airlines and airports based in the Asia Pacific region.

The Awards ceremony will be held at a Gala Dinner on 14 October 2014 at CAPA’s Asia Aviation Summit and LCC Congress, to be staged at the spectacular Capella Hotel in Sentosa, Singapore on 13-15 October.

“Asia has been at the vanguard of strategic change and rapid expansion in aviation over the past decade – and we look forward to crowning the region’s best-in-class for 2014 at one of the region’s most spectacular venues, Capella Singapore, on 14 October”, said CAPA Executive Chairman, Peter Harbison.

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