Embraer

bmi regional prepares to launch as an independent operator

In a couple of weeks bmi regional will cut the umbilical cord with parent bmi and start operating as an independent regional airline under a new ‘BM’ IATA designator and a softly revamped branding. The airline’s network will encompass four UK domestic routes and 11 European routes.

The decision to enter the market carefully and not with a dazzling big bang proves a responsible management that is fully aware of the prevailing challenges faced by regional airlines in Europe. Airline members of the European Regions Airline Association (ERA) recorded a 2.9% decline in scheduled passenger numbers and a 5.5% fall in scheduled RPKs for 1H2012, showing a drop in demand that reflects the current economic climate and uncertain outlook.

The formal split from bmi on 28-Oct-2012 follows the acquisition of the Aberdeen Airport-based regional airline by Sector Aviation Holdings Ltd (SAH) in May-2012 and the preceding purchase of bmi by British Airways’ parent company International Airlines Group (IAG).

SAS and Finnair celebrate restructuring progress but Norwegian intensifies competitive pressure

As in the rest of Europe, the airline industry in the continent’s Nordic region is undergoing a structural change characterised by bankruptcies and intense competition from low-cost carriers with full-service network airlines implementing cost reduction programmes aimed at securing long-term sustainability or just survival. The region saw yet another operator cease operations in 2Q2012, Air Finland, following on the bankruptcy of Cimber Sterling, Skyways and City Airline in the first three months of the year.

Finnair made outstanding progress in 2Q2012 to lower its cost base and heighten revenue although it could not attain profitability while SAS Group’s pre-tax earnings halved year-on-year to SEK371 million (EUR45.1 million ) despite a one-off SEK346 million (EUR42.1 million) capital gain attributable to property transactions. Norwegian Air Shuttle improved in all operating parameters in the three months ending 30-Jun-2012 and reported a consolidated net profit of NOK90.5 million (EUR12.4 million), up 69% over the year-ago period. The LCC’s operating profit expanded to NOK322.3 million (EUR44.3 million) from NOK72.8 million (EUR10 million) in the year-ago period, and 2Q2012 EBIT margin was a respectable 10.2%.

Farnborough International Airshow order highlights

Day 1:

Hebei Airlines order for five Embraer E190s to further the young carrier's regional China growth

The first day of the 2012 Farnborough International Airshow saw an order from Hebei Airlines for five Embraer E190s. While the order may not be a blockbuster for the show, it is a critical part of one of air transport's quickly rising themes: regional China. Beijing and Shanghai may hold the country's spotlight, but second and third tier cities are growing much faster, a result of Beijing and Shanghai being severely constrained as well as government policies supporting growth outside of coastal areas.

Hebei Airlines was relaunched in 2010, having previously been called Northeast Airlines with a base in Shenyang. Sichuan Airlines took a majority stake in Hebei, based at Shijiazhuang in Hebei province, southwest of Beijing. The partial ownership gave Sichuan, based in more central China, exposure to northeast China. The country's main carriers are increasingly looking for new partners and bases to capture growth as air travel further develops in what will be the world's second largest domestic market.

As CityJet finalises restructuring it might escape Air France’s short-haul overhaul

Air France is undertaking a significant shake-up of its short and medium-haul operations as part of its Transform 2015 plan, but the Irish regional unit CityJet appears to be spared from the cost-cutting brooms after it initiated a profound restructuring in Jan-2011. CityJet, which comprises the Irish airline CityJet and the Belgian regional carrier VLM, trimmed its workforce, cut costs, increased productivity and streamlined its network and is now in better shape than some of its French peers in the Air France Group. Air France’s short and medium-haul operations amassed EUR700 million losses in 2011. But its parent company Air France-KLM Group, which is looking to reduce its massive EUR6 billion debt, could also opt to divest the airline to generate cash. 

While CityJet’s bottom line has improved, it is not yet delivering strong profits and competition at its main hub in London City Airport is intensifying. British Airways has been growing strongly at the small airport in the London Docklands in recent years, expanding its range of routes to European destinations and adding an innovative service to New York JFK. And it could be planning to expand this.

With its eyes set on LOT and TAP, Turkish Airlines aims to become Europe’s most European airline

Turkish Airlines has steadily expanded its network in Europe over the past decade but now it intends to take its expansionistic conduct a step further with acquisitions in some of the continent’s medium-sized airlines. It is in negotiations with LOT Polish Airlines to purchase a shareholding and it has shown preliminary interest to participate in the planned privatisation of TAP Portugal. Turkish has already one of largest networks in Europe and its new strategy to complement its strong organic expansion with mergers and acquisitions spells more bad news for Europe’s legacy airlines that have not been able to match Turkish Airlines’ high growth in recent years. Turkish Airlines has openly stated it aims to be the world's largest carrier.

The Istanbul Ataturk-based airline has consistently outpaced the traffic growth of its European full service counterparts since 2003 and has posted growth rates well above the average of the Association of European Airlines (AEA) members.