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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.
Delta Air Lines appears to be attempting to take a chunk of JetBlue’s successful build-up at Boston Logan for itself as a round of new route launches Delta has planned beginning in Mar-2014 are in markets largely dominated by JetBlue. While it is not as aggressive as some of Delta’s latest moves including a full-blown assault on long-time partner Alaska Airlines at its hub in Seattle, the minor push from Boston does reflect Delta’s no holds barred approach in ensuring it has ample presence in strategic US domestic markets.
JetBlue is by no means unfamiliar with competition from Delta as the Atlanta-hubbed carrier holds a significant seat share from JetBlue’s JFK hub, and in late 2012 and early 2013 added pressure to JetBlue in markets from both JFK and New York LaGuardia.
The move to bolster competition with JetBlue in Boston is interesting, and Delta could be adding service to feed Virgin Atlantic’s Heathrow flights as its joint venture with Delta begins. Delta’s additions will do little to change JetBlue’s dominance in Boston, but it does send a message that the carrier will remain aggressive in leveraging its network as United, at some point, will presumably will reap the synergies of its merger and American and US Airways officially start combining their operations.
WestJet beat previous estimates of unit cost reductions in 3Q2013, but overall the quarter was paradoxical for the carrier as yields and unit revenues continued to be pressured by high capacity growth; however, at the same time the airline is pleased with one of the main drivers of the capacity increase, the launch of its regional carrier Encore.
After unit revenues fell nearly 5% in 2Q2013 and almost 4% in 3Q2013, WestJet foresees flat unit revenue growth during 4Q2013 and is declining to offer guidance for FY2014 even as unit costs could grow by 1% during that same time period.
The carrier has undertaken numerous significant projects during 2013 in addition to the launch of a new airline – most notably the introduction of a premium economy section on its Boeing 737 narrowbodies and fare bundling options. At the same time WestJet now believes it will deliver on a CAD100 million (USD96 million) cost-cutting scheme a year early, by the end of 2014. Presumably all of those initiatives will pay off in the long term, but in the short term WestJet may continue to face pressure in some key financial metrics.
United Airlines has entered into the growing competitive fray on the US west coast with a push from its hubs in the region into two of Delta’s hubs. Competition was ignited by Alaska Air Group and Delta with Delta increasing its service footprint from Seattle to drive feed for its burgeoning Pacific operation from the airport.
United’s decision to add service from San Francisco to Atlanta and between Los Angeles and Minneapolis occurs as Delta in early 2014 begins a push into Seattle from the airport’s heavily travelled domestic markets to bolster its growing international footprint from Seattle with a particular focus on Asia.
The decision by United to add service into its west coast hubs is occurring against a backdrop of weaker than expected revenue performance for 3Q2013 driven by lower yields in some trans-Atlantic markets and competitive capacity in China that contributed to lower than expected yields in the carrier’s Pacific entity.
After spending much of 2012 battling labour groups to forge contracts with more favourable terms, including the establishment of its new low-cost carrier Rouge, Air Canada is enjoying a more peaceful 2013, reflected most recently in its downward revision of cost guidance for the year. At the same time its stock has more than tripled during the past year as it intensifies its attempts to create a lasting business model.
After touting the highly anticipated launch of its new regional carrier Encore throughout 2012, Air Canada’s rival WestJet has encountered some headwinds in 2013 as its yields and unit revenues have come under pressure and its own capacity additions and an overall increase in domestic supply in Canada have pressured its yields and unit revenue.
As both carriers march towards reporting 3Q2013 earnings, Air Canada might be beginning to get some traction in its efforts to transform its legacy business model. WestJet, meanwhile, has warned of continued unit revenue degradation during 3Q2013 as it also works to beat back the inevitable cost creep associated with a certain level of maturity.
It may not attract the same sort of attention as Le Bourget or Farnborough, but the MAKS International Aerospace Salon is the venue where Russia’s airlines, leasing companies and aircraft manufacturers hammer out the final details of major orders. The bi-annual event, which wrapped up at the end of Aug-2013, saw more than USD21 billion in orders and commitments made, a record for the show and a qualified success for the Russian aerospace industry.
Russia’s state-owned United Aircraft Corporation (UAC) and its subsidiaries recorded orders and commitment for more than USD12 billion. Agreements signed by UAC at MAKS 2013 covered orders for 178 aircraft, comprising 96 Sukhoi Superjet 100s and 82 Irkut MS-21 aircraft. Including other agreements signed at the airshow – mostly military – the orders boosted the value of the company’s backlog by 30%. Including letters of intent and provisional purchase agreements, UAC’s total order portfolio is now close to RUB1.5 trillion (USD44.8 billion).
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