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London-New York: JV share stabilises 5 years after Norwegian Air entry

British Airways' service between London Heathrow (LHR) and New York John F Kennedy (JFK) is the world's most lucrative airline revenue route. In the year to Mar-2019, it generated USD1.2 billion – the only route with revenue of more than USD1 billion, according to OAG.

More broadly, the London-New York city pair is the world's largest international route by ASKs and the largest intercontinental route by seats (and second largest of all international routes by seats). LHR-JFK (London Heathrow-New York JFK) is the largest international airport pair by ASKs and the largest intercontinental airport pair by seats.

London-New York is dominated by two antitrust-immune joint ventures.

British Airways/American's share is 48.7% and Virgin Atlantic/Delta's share is 28.4%, according to data from OAG. Norwegian's share has grown to 10.0% from a standing start in 2014. The JVs, particularly Virgin/Delta's, have lost share since Norwegian entered, but this is now stabilising. Moreover, Virgin and Delta plan to upgauge on LHR-JFK and to add a JFK service from London Gatwick (LGW), operated by Virgin, in 2020.

This report presents CAPA's analysis of OAG capacity data on the London-New York market, examining growth and seat share by airport pair, airline, and joint venture.

Summary

  • London-New York (LON-NYC) is the #1 intercontinental city pair by seats and #1 international city pair by ASKs.
  • LHR-JFK is the #1 airport pair by international ASKs.
  • LHR-JFK is the biggest of the four airport pairs between London and New York. LGW-JFK has driven all the growth since 2013.
  • BA and Virgin Atlantic are the two biggest LON-NYC airlines. Norwegian has been the leading growth driver since 2013.
  • JV seat count and share have fallen since 2013, but have stabilised.

London-New York is the world's #1 intercontinental city pair by seats…

Based on OAG data for the week of 2-Sep-2019, London-New York is the world's number two international city pair by seats, after first placed Hong Kong-Taipei.

It is the number one city pair by seats between two different continents (the next biggest intercontinental city pair by seats is London-Dubai, ranked 14th largest by international seats.

Top 10 international city pairs by seats, week of 2-Sep-2019

Rank

Origin

Destination

Seats

1

Hong Kong

Taipei

141,222

2

New York

London

119,132

3

Seoul

Tokyo

119,080

4

London

Dublin

115,180

5

Singapore

Kuala Lumpur

112,752

6

Singapore

Jakarta

107,630

7

London

Amsterdam

105,760

8

Hong Kong

Bangkok

102,116

9

Hong Kong

Shanghai

99,636

10

Taipei

Tokyo

99,560

…and #1 international city pair by ASKs

Ranked by ASKs, London-New York is the world's largest international city pair.

Top 10 international city pairs by ASKs, week of 2-Sep-2019

Rank

Origin

Destination

ASKs

1

New York

London

660,557,992

2

Dubai

London

475,840,724

3

Singapore

London

396,495,456

4

Bangkok

Tokyo

388,850,130

5

Hong Kong

London

376,911,430

6

London

Los Angeles

362,306,713

7

New York

Paris

332,599,347

8

Tokyo

Honolulu

329,225,112

9

Los Angeles

Tokyo

292,185,124

10

Singapore

Tokyo

286,858,144

LHR-JFK is #1 airport pair by international ASKs

Focusing on airport pairs, LHR-JFK is the world's number six by international seats and the largest by intercontinental seats. It is number one by international ASKs.

Top 10 international airport pairs by ASKs, week of 2-Sep-2019

Rank

Origin

Destination

ASKs

1

New York John F Kennedy 

London Heathrow

436,048,576

2

Singapore Changi

London Heathrow

396,495,456

3

Hong Kong 

London Heathrow

339,165,750

4

Los Angeles 

London Heathrow

320,627,208

5

Dubai 

London Heathrow

299,566,248

6

Honolulu Daniel K Inouye 

Tokyo Narita

269,999,192

7

Paris Charles de Gaulle

Los Angeles 

259,547,744

8

Hong Kong 

San Francisco 

244,750,248

9

Singapore Changi

Sydney Kingsford Smith

243,755,351

10

Taiwan Taoyuan 

San Francisco 

240,666,790

LHR-JFK is the biggest of the four airport pairs between London and New York

In 2019 the London-New York city pair comprises four airport routes: LHR-JFK, LHR-EWR, LGW-JFK and LCY-JFK.

LHR-JFK accounts for almost two thirds (64.9%) of seats between the two cities. LHR to New York Newark (EWR) has 21.6% of seats, LGW-JFK has 13.2% and London City (LCY) to JFK has just 0.3%.

In summer 2018 Primera Air operated London Stansted to EWR, but this terminated when the Nordic LCC went out of business.

In 2015 and 2016 La Compagnie operated between London Luton and EWR. No other London-New York airport pairs have been flown in recent years.

London to New York: airport pairs by seat share in 2019

Airport pair

2019 seat share

LHR-JFK

64.9%

LHR-EWR

21.6%

LGW-JFK

13.2%

LCY-JFK

0.3%

LGW-JFK has driven all the growth since 2013

The London-New York market will have increased its annual seat numbers by 8.3% in 2019 compared with 2013, which was the last full year before Norwegian's entry. This is a compound average growth rate of only 1.3% pa (source: CAPA calculations from OAG data).

The growth has been driven by LGW-JFK, the route operated by Norwegian since Jun-2014 and on which BA has also operated since Apr-2016.

LHR-JFK annual seat numbers are flat in 2019 versus 2013, while LHR-EWR has fallen by 18.9% and LCY-JFK has fallen by 60.3%.

For 2019 versus 2018, total seat numbers are have dropped by 1.0%, although LGW-JFK is up by 17.9%. LHR-JFK is flat, LHR-EWR has dropped by 7.9% and LCY has dropped by 3.8% in 2019.

London to New York: weekly seat numbers (one way) by airport pair, Sep-2011 to Feb-2020

 

BA and Virgin Atlantic are the two largest LON-NYC airlines

In 2019 there are six airlines operating between New York and London.

The biggest by seats is British Airways, with a 2019 share of 35.5%, followed by Virgin Atlantic, with 22.6%. American Airlines has 13.2%, just ahead of United, which has 12.9% of seats in 2019. Norwegian has 10.0% and Delta has 5.8%.

The two antitrust-immune joint ventures have 77.1% of seats, with British Airways/American on 48.7% and Virgin Atlantic/Delta on 28.4%.

London to New York: weekly seat numbers (one way) by airline, Sep-2011 to Feb-2020

 

Norwegian has been the leading growth driver since 2013

Since 2013 the 8.3% market growth has been driven mainly by Norwegian. BA and United have also grown, but others have cut capacity during 2013 to 2019. Total capacity excluding Norwegian has fallen by 2.5% (an average annual rate of -0.4%).

Three of the six current operators have shrunk since 2013: American by 2.0%, Virgin by 3.7% and Delta by 32.5%. Fifth freedom operators Kuwait Airways and Air India have left the market, while niche operators La Compagnie, Primera Air and Jet2.com have been and gone.

BA has grown by 4.0% and United has grown by 14.1% in annual seat count since 2013. Norwegian's added capacity is more than the total market increase over the six-year period.

London to New York: rolling 52-week seat numbers (one way) by airline, Sep-2012 to Feb-2020

JV seat count and share has fallen since 2013 but has stabilised

BA/American's combined capacity has increased by 2.3% between 2013 and 2019, whereas Virgin/Delta have cut their aggregated seat numbers by 11.4%. Total seat count in the two JVs has been reduced by 3.2% since 2013.

However, this has stabilised in 2019, when JV seat numbers are virtually flat on 2018 (-0.3%), with BA/AA having reduced by 1.7% and Virgin/Delta growing at 2.2% (the second year of modest growth after shrinking between 2014 and 2017).

The BA/AA JV has lost 2.8ppts of seat share since 2013, the year before Norwegian entered, and the Virgin/Delta JV's share has dropped by 6.3ppts. The 9.1ppt drop in combined JV seat share almost matches Norwegian's 10.0ppt gain. The difference comes from United's 0.7ppt gain, weighed against a 1.5ppt loss by all other airlines.

In 2019 JV share has stabilised (it is up by 0.5ppts versus 2018). Norwegian's continued increase in seat share this year is taking share from others, in particular as the result of the exit of Air India and Primera Air, but also reflecting a small reduction in United's share.

London to New York: rolling 52 week seat share by airline, Sep-2012 to Feb-2020

 

Virgin/Delta to upgauge on LHR-JFK and launch LGW-JFK

Virgin/Delta's growth in 2019 has helped to bolster seat share in the JVs and this looks set to continue in 2020, when they will add capacity at both LHR and LGW.

From Apr-2020 Delta will increase its frequency from two to three times daily on LHR-JFK, whereas Virgin will reduce from six to three times daily.

This maintains an eight times a day combined schedule. Delta's additional frequency will be its first ever daylight flight on the airport pair.

From winter 2019/2020 Delta will divide its schedule between retrofitted 767-400 aircraft with 246 seats and the 234 seat A330-200s currently operating the route.

From Sep-2019 Virgin will operate 335 seat A350-1000 aircraft on the route on three daily frequencies (two on Tuesdays). According to OAG, Virgin currently operates 308 seat A340-600s and 265 seat A330-300s on the route.

Although their combined frequencies will be unchanged, their combined seat capacity on LHR-JFK will increase by 15% due to the equipment changes.

From May-2020 Virgin will operate a new service from LGW to JFK, deploying A330-200 aircraft, and Delta will return to LGW as an operator with a new 757 Boston service.

Delta launched its first UK service at Gatwick in the 1970s but has not used LGW for many years.

Norwegian has driven LON-NYC growth, but incumbents are content to sit on their money machine

The strength of the London to New York market is firmly built on LHR-JFK and the high yield premium market on this airport pair. The revenue generating capability of BA's LHR-JFK service is a huge asset to the UK's leading airline, while Virgin's number two position in this market helps to underpin its own sometimes fragile financial performance.

Both are strongly supported by their US joint venture partners.

Norwegian's entry into this market in 2014, via the more leisure oriented Gatwick, has changed the landscape and taken some market share away from the leading operators. BA's launch of LGW-JFK in 2016 and Virgin's plans to add this airport pair next year demonstrate its impact.

They may also be sensing Norwegian's increasing struggle for profitability and positioning for its demise if that comes. However, Heathrow's constrained capacity has helped to defend the JVs in their bigger and more profitable premium-led segment and this remains their main focus.

Indeed, after completing a new first class lounge in 2018, BA opened a new business class lounge at JFK earlier this year. In addition, BA and American are to invest USD344 million into JFK's Terminal 8, where they will move to from Terminal 7 in three years' time.

In addition, United, relegated to a bit part player in this market, is to introduce its reconfigured 767-300ER, with more premium seats, on its EWR-LHR service in Sep-2019.

Norwegian may have driven all the growth since 2013, but the incumbents have mostly been quite content to sit on their money machine. At the same time, Norwegian has demonstrated that the London-New York market can be stimulated with low fares.

If Norwegian were to leave the market, expect the leading players to replace it fairly soon, if not with their own operations then with other members of the same group (such as IAG's LEVEL or even Aer Lingus).

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