US Customs and Border Protection announced eight US airports have been cleared to offer passenger charter services to and from Cuba (Bloomberg/AP/The Baltimore Sun, 09-Mar-2011). Atlanta, Chicago O’Hare, Dallas-Fort Worth and Baltimore-Washington, New Orleans, Pittsburgh, Tampa and San Juan were recently granted permission to commence Cuba services. Previously, only Miami International, John F Kennedy Airport and Los Angeles were permitted. Regular services to Cuba were banned around 50 years ago during Fidel Castro’s rise to power.
Eight more airports can now operate services to Cuba
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US ULCC Frontier faces the same cost challenges from impending labour deals as other large airlines
A likely major focus for the US ULCC Frontier Airlines in 2017 is forging collective bargaining agreements with two of its largest employee groups – pilots and flight attendants. Although the airline’s transition to the ULCC business model is complete, Frontier’s employees weathered several challenges prior to the strategy change, including a bankruptcy during 2008 in which the company was sold. Now employees believe they should share in Frontier’s newfound profitability. When the company reaches new collective bargaining agreements with its pilots and flight attendants Frontier will face the challenge of offsetting the cost inflation generated by those new labour deals with higher revenue generation.
Frontier’s financial turnaround has spurred speculation during 2016 that the airline’s majority owner Indigo Partners was preparing the company for an initial public offering. Nothing has materialised in 2016 but Indigo has expressed interest in investing in other regions, so an IPO could become a more distinct possibility in the not too distant future.
As a privately held company Frontier does not offer forward-looking guidance on capacity growth or network plans, but it appears the airline should post double-digit increases in seat expansion for 2016, and with a steady stream of Airbus deliveries planned for 2017 Frontier’s growth for the year is likely to remain similar to 2016 levels.
United Airlines stresses that capacity adds are accretive as 2Q2017 unit revenues turn positive
United Airlines expects to attain a positive passenger unit revenue performance in 2Q2017, which would mark the first positive result for the airline in that metric since early 2015. The airline’s PRASM results in 1Q2017 were in line with its initial forecast, which was more conservative than those of its larger US rivals. American and Delta refined their 1Q2017 unit revenue forecast downward, while United kept its guidance intact, and its performance fell within its initial estimates.
The airline’s 2Q2017 positive unit revenue outlook is driven by many factors, including a shift in its management of close in bookings to reduce reliance on advance purchase discounts. Latin America and the US domestic market continue to be bright spots for United, while declines in Pacific unit revenue continue to moderate. United’s better than expected unit revenue performance in trans-Atlantic markets in 1Q2017 should moderate as point of sale tilts more toward Europe later in the year.
Markets seem still to be digesting United’s decision to increase its planned 2017 capacity growth by 1.5ppt. United is stressing that much of the growth is driven by increased gauge, and the growth is designed to restore United to its natural share in the US domestic market.