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Bombardier is a global transportation company, headquartered in Montréal, Canada. It is present in more than 60 countries on five continents and is active in the manufacture of products, systems and the provision of services for the aviation (commercial and business jets) and rail transportation sectors. The division responsible for the company's aircraft manufacturing and related services is Bombardier Aerospace. The division is headquartered in Dorval, Quebec and ranks as the world’s third largest civil aircraft manufacturer, employing of 37,700 people. Its aircraft range includes:
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The three large US global airlines are continuing their quest to shed inefficient 50-seat jets in favour of larger gauge aircraft, a trend sweeping the US industry with nearly every major airline undertaking some form of seat densification on existing aircraft or taking delivery of jets configured with a higher number of seats.
United and Delta are opting to replace their 50-seat jets with a mix of new and used aircraft, and American appears to be adding new jets to replace its 50-seat aircraft. Based on current fleet projections American is moving more slowly in culling its 50-seat regional jets while Delta has been the most vocal and aggressive in shedding the smaller aircraft.
Even with the big push to shrink the 50-seat jet fleet, some US majors are extending contracts with their regional partners covering a small number of those aircraft. Perhaps in a few markets lower fuel prices improve the economics of the jets; but overall airlines are marching ahead to rid themselves of aircraft that were a mainstay in regional operations a decade ago.
Canadian hybrid carrier WestJet has settled into another ambitious year during 2015 as it adds more service to Europe and introduces Boeing 767 widebodies into its fleet. That expansion accompanies further growth of its regional subsidiary Encore, which is growing in Canada’s eastern provinces.
But depreciation of the CAD against the USD and some economic pressure in Canada’s western provinces where WestJet has a large presence are posing challenges for the airline in 2015. At the same time WestJet is facing oversupply in the Caribbean and Mexico, which is creating pricing pressure in those regions.
With its underlying financial strength, WestJet should be able to withstand most of the challenges its faces in 2015 as the company continues to evolve from a traditional low-cost airline to a global competitor. This CAPA analysis of WestJet’s strengths, weaknesses, opportunities and threats continues a series of SWOT reports on global airlines.
Canadian airline Porter received a boost in early 2015 with the sale of its terminal at its largest base and headquarters Billy Bishop Toronto City Airport. The sale no doubt helped to shore up Porter's finances at it awaits a decision by the city on whether it can move forward with operating Bombardier CSeries narrowbody jets from the airport.
The city is not likely to render a decision until late in 2015 as studies of the proposal, that includes a runway extension, continue. But Porter’s rival Air Canada has recently raised staunch opposition to the operation of jets at the airport even as the airline in the past reportedly cited interest in using jets at the airport closest to Toronto’s city centre.
As Air Canada formally (and unsurprisingly) launches opposition to Porter’s plans, Porter is operating in a status quo scenario while likely facing some of the same challenges other Canadian airlines face in 2015 – primarily pressure from the decline of the CAD against the USD.
Thailand’s regional market is poised for rapid growth as Kan Air expands its newly acquired ATR 72 fleet. Kan Air is using the 66-seat turboprop to expand at its Chiang Mai base, launch several routes from U-Tapao airport near Pattaya and potentially serve a new airport it is constructing on the resort island of Koh Phagnan.
Thailand’s two largest LCCs, Nok Air and Thai AirAsia, are also expanding their regional operations. Nok is adding two turboprops to its fleet in 2015 while Thai AirAsia is using its expanding fleet of A320s to launch services to secondary destinations which traditionally have only been served with turboprops.
The regional expansion in Thailand is driven by potential opportunities in underserved markets as well as the overcapacity that is now plaguing domestic trunk routes. But there is a risk the regional market could also quickly become oversupplied, particularly if China’s Hainan Group follows through on plans to launch a new joint venture regional carrier in Thailand.
Canada’s WestJet Airlines delivered strong financial results for 4Q2014 and CY2014 driven by healthy revenue growth, and some benefit from falling fuel costs. Although the weaker CAD against the USD diminishes some of the benefit for Canadian airlines of lower fuel expense.
As it moves fully into 2015 WestJet admits to seeing some pressure in its southern markets, particularly the Caribbean and Mexico, from capacity increases that are outstripping what it characterises at still healthy demand in those regions.
Similar to some of its US peers, WestJet is projecting 1Q2015 unit revenue growth of flat to slightly negative, likely driven in part by some pricing pressure created from the capacity expansion in some winter destination markets. The airline is not offering guidance as to when unit revenues may start an upswing, but feels reasonably confident about overall demand, and has no plans to change its growth targets.
Alaska Air Group benefitted from a strong domestic environment in 2014 that helped the airline continue execute a solid financial performance and deliver an impressive 18.6% return on invested capital for 2014.
Even as Alaska believes the US economy remains strong, like to the country’s other airlines, it appears to be bracing for some revenue headwinds in 1Q2015 driven by what seems to be unique factors that should not linger throughout the year.
Alaska is also forecasting flat unit cost growth year-on-year in 2015, which is somewhat better than other large US airlines, but not as strong a performance as Alaska has delivered in the past.