Leading Edge

Peach reports strong first month of LCC operations, but at expense of declining ANA traffic

Tue, 15 May 2012 00:48:00 GMT

Peach Aviation, the first of a new wave of low-cost carriers to enter Japan, has reported a solid first month of operations, carrying in Mar-2012 approximately 67,000 passengers across three routes with a load factor of 83%, above initial projections.

This traffic, however, has come at the expense of parent company All Nippon Airways (ANA), which saw year-on-year traffic and load factor declines above the system average. The negative story at the mainline operation is the same when measured against traffic in Mar-2010. While Peach is young and ANA's other LCC, AirAsia Japan, is yet to launch, the presence of traffic cannibalisation is evident. While this is not unexpected and ANA has planned for it, the level of cannibalisation appears to be above ANA's projections. It is a sign of the changing North Asia market, and a worry for ANA, which holds by far the largest share of domestic Japanese capacity – and plans domestic growth in coming years.

British Airways resumes Seoul service with more Asian destinations to come as BA integrates bmi

Thu, 03 May 2012 11:28:00 GMT

British Airways is making one of its first significant network changes following the acquisition of bmi (by parent company International Consolidated Airlines Group) with the Dec-2012 resumption of services to South Korea's Seoul, which BA last served in 1998. BA will operate six weekly Boeing 777-200 flights on the route. "British Airways is delivering on its promise to increase long haul flying to Asia following IAG’s purchase of bmi," the carrier said in a statement.

Following the bmi acquisition IAG CEO Willie Walsh spoke of a number of routes BA would look to launch with the London Heathrow slots bmi would bring to IAG. Mr Walsh named South Korea, as well as Indonesia and Malaysia, as specific examples.

Frontier encouraged by its strategy of dodging Southwest in Denver, but looks for new bases

Tue, 01 May 2012 07:08:00 GMT

Frontier Airlines believes its tactic to target markets from its main Denver base not served by rival Southwest Airlines remains the best method in fortifying its major hub. But at the same time Frontier is looking to lessen its reliance on a single hub and is exploring new bases, two of which are opening this summer supported by a single aircraft.

Southwest returned to the Denver market dominated by United and Frontier in 2006, and since that time has built its presence at the airport to 159 daily departures to 51 destinations. Based on US Department of Transportation (DoT) data, Southwest had a 22.5% market share at the airport from Feb-2011 to Jan-2012.

Olympic Games, despite conventional wisdom, present no large benefit to airlines

Tue, 01 May 2012 00:20:00 GMT

Some members of the public were incredulous last year after Qantas announced it would cut its London capacity by over a third in Mar-2012, months before the summer 2012 Olympic Games being held in London. They saw the Games presenting a large traffic opportunity and thought Qantas should wait for the Olympics to pass before reducing London capacity. But in fact the Olympic Games or any sporting event when held in a large city present little uplift. While leisure demand increases, corporate traffic tends to whittle.

British Airways and Virgin Atlantic, some of the most exposed to London, expect no notable uplift from the Olympics. During the 2008 Olympic Games in Beijing, airlines recorded traffic – and financial – losses as security measures stunted growth.

Luxembourg opening to LCC competition with the entry of easyJet

Mon, 30 Apr 2012 00:15:00 GMT

The tiny Luxembourg market has been thrust into the spotlight by easyJet’s announcement that it plans to launch the first low-cost carrier service into the small European nation. With no domestic market in Luxembourg, national carrier Luxair relies on a short/medium-haul international network serving Europe and Africa. The arrival of LCC competition will place pressure on the flag carrier, which may find it difficult to compete with budget rivals.

Luxair, which is the only Luxembourg-based passenger carrier, currently offers 36,285 seats per week, according to data from Innovata. Western Europe accounts for about 90% of the carrier’s total capacity (seats) and all 10 of the carrier’s largest routes.

Japan LCC era yet to enter full swing, but route cannibalisation starts

Fri, 27 Apr 2012 03:15:00 GMT

Japan's forthcoming boom in low-cost carriers has yet to enter full swing with AirAsia Japan and Jetstar Japan still to launch, but signs are now emerging of an early and direct affect LCCs will have on legacy carriers.

Japan Airlines (JAL) will suspend its Tokyo Narita-Osaka Kansai service in Jul-2012, the same month JAL-Qantas joint-venture Jetstar Japan will commence operations, including with a daily Tokyo Narita-Osaka Kansai service, increasing to double daily in Aug-2012.

US Airways now turns to analysts and creditors to back merger wish with American Airlines

Thu, 26 Apr 2012 05:17:00 GMT

Having gained support from three of American Airline’s unions representing roughly 55,000 employees, US Airways is now moving to convince Wall Street analysts that a merger with American would produce far more favourable results than American’s standalone plan.

US Airways on 20-Apr-2012 won public endorsement from three of American’s unions for its plan to create a "new American” through the combination of the two companies.

Etihad and Ethiopian plan services to Sao Paulo as Latin America-Asia market prepares to grow

Wed, 25 Apr 2012 09:30:00 GMT

Etihad Airways and Ethiopian Airlines intend to launch services to Sao Paulo, the economic heart of the rapidly growing Latin American market. While Sao Paulo is seeing increased capacity from a number of carriers, services from Etihad and Ethiopian are notable for the considerable transfer traffic they will have, including from Asia. Linking the high-growth economies of Asia with their Latin American counterparts has been alluring for many carriers, but distances and aircraft range limitations necessitate all services be one-stop.

Asia-Latin America's traditional, if small time, transfer hubs in North America and Europe have increasingly seen competition from the Middle East. That will be complemented in the next few years with hubs from Africa, first from East Africa and potentially later from West Africa.

flydubai edging towards profitability, making it the fourth profitable carrier in the UAE

Mon, 23 Apr 2012 12:30:00 GMT

flydubai looks like it is set to join sister carrier Emirates in the black this year, according to CEO Ghaith al Ghaith. While it is too early for the carrier to provide an estimated figure, Mr Al Ghaith, talking to Gulf News, said flydubai expects to make a profit in what is just its third full year of operations. However, the CEO expects a "difficult year with the increase in oil prices".

Russian market remains strong as Aeroflot to start Moscow-Miami service

Fri, 20 Apr 2012 05:52:00 GMT

While western Europe remains in the doldrums, signs are more positive in the east and especially in Russia, where state-owned Aeroflot and competitor Transaero have in the past two years recorded growth rates in excess of 25%. The trend is continuing, and Aeroflot's latest long-haul destination – Miami – will see thrice-weekly A330-200 service commence 30-Oct-2012. Aeroflot competitor Transaero, which has a stronger leisure focus, already serves Miami, albeit with a twice weekly Boeing 777-200 service.

Yanking of Jazz Thomas Cook contract underscores ever-growing difficulty in regional airlines

Wed, 18 Apr 2012 05:45:00 GMT

A decision by travel package operator Thomas Cook to end a five-year charter agreement three years early with Canada’s Jazz Aviation reflects the stark realities regional carriers face in attempting to meaningfully diversify their core business of providing feed to network legacy airlines.

While Thomas Cook ended the deal due to souring demand, it leaves Jazz again with just one client, Air Canada. Tensions between Jazz and Air Canada have flared over a dispute on rates paid to Jazz that could result in the regional carrier having to pay its partner CAD26 million (USD26.2 million) if an arbitrator later this year rules in Air Canada’s favour.

Aeromexico continues to build partnerships outside SkyTeam

Wed, 18 Apr 2012 05:00:00 GMT

Aeromexico’s new codeshare agreement with Brazilian carrier TAM represents the second agreement Mexico’s largest carrier has signed with a non-SkyTeam carrier in the last two months. The partnerships reflect the need for both Star and SkyTeam carriers to access key markets in Latin and Central America that are not available through their respective alliance partners.

The Avianca-TACA relationship with Aeromexico, announced in Mar-2012, was surprising given that the Kriete family, which is a main shareholder in Avianca-TACA, is also a major holder in Aeromexico’s competitor Volaris. But Aeromexico has been pursuing a tie-up with Colombia’s largest carrier, Avianca, since it started Mexico City-Bogota flights in 2010. The chance was brushed aside once Avianca-TACA opted to join the Star Alliance, but now the agreement will include more connections than just Bogota as Avianca-TACA cited an ability to partner with Aeromexico on flights to Central and South America during the second half of this year.

Spirit Airlines marks milestone with Dallas-Toluca flights

Wed, 11 Apr 2012 05:13:00 GMT

Spirit Airlines will mark a milestone in Jun-2012 when it introduces flights from its growing base at Dallas Fort Worth International Airport to Toluca, Mexico. Currently most of Spirit’s international flying is operated from its Fort Lauderdale headquarters, as part of a strategy the carrier adopted during the middle of the last decade to build the airport as an alternative gateway to Miami for service to Latin America and the Caribbean.

Part of Spirit’s tactics included offering lower fares to those destinations than American Airlines, which remains the dominant carrier in Miami. Spirit for many years had a singular focus on penetrating central America, northern Latin America and the Caribbean to capture the significant volumes of visiting, friends and relatives traffic (VFR) that transited to southern Florida, and now offers flights to roughly 25 international destinations from Fort Lauderdale. It adopted a no-frills model that allowed it to offer appealing low fares to that passenger segment and co-exist with American in the Miami metropolitan market.

Allegiant Air to enter Hawaii market in June with Honolulu flights to Fresno and Las Vegas

Tue, 10 Apr 2012 09:15:00 GMT

Allegiant Air on 29-Jun-2012 will realise its ambition for Hawaii services with the launch of thrice-weekly services to Honolulu from its Las Vegas hub and then weekly Fresno-Honolulu service on 30-Jun-2012, both on 757-200s, according to schedules filed in global distribution systems. Allegiant first announced in 2010 its intentions to serve Hawaii, but has been involved in a protracted effort to acquire aircraft with the range to make the flight and also regulatory approval for ETOPS operations. Allegiant in Mar-2012 had reaffirmed its commitment to launch Hawaiian services in Jun-2012 and will just barely achieve that, launching a month into the popular northern hemisphere summer season.

Virgin Australia stake in Skywest supports long-term growth of regional and resource markets

Tue, 10 Apr 2012 04:00:00 GMT

Virgin Australia's planned AUD8 million (USD8.3 million) investment for a 10% stake in regional carrier Skywest will allow it to further capitalise on the country's strongly performing regional and resource markets. Virgin and Skywest had previously announced a partnership and then alliance, which received draft approval in Mar-2012.

The stake follows a number of similar arrangements undertaken by airlines in deep partnerships with each other: Etihad in airberlin and then Air Seychelles as well as Air New Zealand in Virgin Australia (a move largely seen to preempt Etihad from taking a stake in Virgin). Such partnerships allow the investing airline to further gain financially from the airline it is benefitting with increased network access. Virgin ended 1H2012 with AUD851 million (USD879 million) cash balance, AUD506 million (USD523 million) unrestricted, making the Skywest stake a relatively small expenditure.