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VivaAerobus starts 2016 with positive momentum. Profitable growth is the key to its future

13-Apr-2016 1:00 AM

Mexican low cost airline VivaAerobus ended 2015 on a positive note, reversing its losses from the year prior and charting solid EBIDTAR margins. The airline is in the final stretch of a fleet revamp; this entails shedding Boeing 737 Classics operated since its 2006 launch and transitioning to a much younger fleet of Airbus narrowbodies.

Among the new crop of Mexican low cost airlines that formed in the mid-2000s (VivaAerobus, Interjet and Volaris), VivaAerobus remains the smallest measured by market share. Aeromexico, Interjet, Volaris and VivaAerobus are Mexico’s dominant airlines, but VivaAerobus’ 12% in 2015 share was a distant fourth. That could change as VivaAerobus expands its fleet with larger-gauge aircraft, taking steps to broaden the expanse of its network.

VivaAerobus suspended a number of short-lived transborder routes in 2015, and it appears to be focused on rounding out its domestic network in 2016, before resuming international expansion in 2017. During the next few years VivaAerobus could elevate its position in the Mexican market if there is enough demand to sustain the growth plans of the country’s largest airlines.

US airlines deploy widebody aircraft on long haul services, reclaiming their global roles

29-Mar-2016 8:05 PM

The big three US airlines – American, Delta and United – are redefining their role as global operators. Since the glory days of PanAm Clippers circling the world, for US airlines "global" has recently meant meant occasional forays beyond Europe to the east, Japan to the west, and Latin America to the south. This is changing. United Airlines will open nonstop San Francisco-Singapore service, which will become the world's third longest flight. American Airlines will add a second ultra-long haul flight to Hong Kong while Delta – which currently operates the longest flight of a US airline (Atlanta-Johannesburg) – has the strategy of leveraging a global portfolio of airlines it has invested in.

With more of a global reach, US airlines are flying their long haul aircraft further. Delta's average sector length for its A330 fleet has increased 19% since 2006, while American's 777-300ER sector length is growing 9% over just one year. United's 787s will fly to three secondary Chinese cities. Strategic reasons for the longer flying can be as important as, or more important than financial. Some routes had been aspired to for years, but pre-bankruptcy costs and labour contracts precluded sustainability.

Spirit Airlines fleet changes reflect a potential shift to smaller markets, still growing at 15-20%

28-Mar-2016 7:00 PM

The US ULCC Spirit Airlines is making adjustments to its fleet, moving to seize on opportunities created by owning aircraft versus renting, and retaining some smaller gauge Airbus A319s by purchasing those aircraft as their leases are up for renewal. The airline is also in discussions with Airbus about possibly switching some later delivery A321s to smaller gauge A320s. To a degree this is in reversal of a trend sweeping much of the US market, where most airlines are seeking to add seats to existing aircraft and are placing orders for larger gauge jets.

Spirit’s fleet changes and evaluations appear to be meeting two objectives. Firstly, enlarging its base of owned aircraft should allow the airline to maintain its superior cost advantage, and secondly, creating some flexibility with aircraft size allows Spirit to add smaller, less competitive markets to its network.

In early 2016 Spirit’s new CEO alluded to some small market opportunities, and indications are that the company is working to adjust its fleet in order to diversify its network composition.

LATAM works to withstand tough conditions through capacity cuts and balance sheet fortification

24-Mar-2016 11:47 PM

LATAM Airlines Group is working to maintain adequate liquidity levels during 2016 to withstand the still challenging economic situation in much of Latin America. Although its ratios ticked up at YE2015, those metrics have actually remained relatively stable during the last couple of years.  

Brazil’s recession remains a drag on the region, and as a result LATAM has decided to expand its planned capacity decreases, both in the country’s domestic market and also on routes between Brazil and North America. Although currency devaluation remains a drag in LATAM’s Spanish-speaking markets, demand in those countries continues to be relatively healthy, with Argentina in particular showing signs of strength.

LATAM has also reduced its fleet commitments for the 2016 to 2018 time period and has financing for the USD2 billion in aircraft that it plans to spend for 2016. The company is taking necessary steps to weather some of the toughest conditions it has experienced in decades – against a backdrop of a slow and uncertain recovery.

Economic weakness in Latin America pauses the expansion of venerable Copa Airlines

7-Mar-2016 8:13 AM

Panama's Copa Airlines managed to remain profitable in 2015 in what was the most challenging year that the airline had faced in decades. A contracting economy in Latin America, driven by Brazil’s crippling economic weakness, created significant challenges for all airlines operating in the region. Copa posted double digit declines in yields and passenger unit revenues for the year, which helped to erode the benefits of lower fuel costs on the airline’s profitability. Its net income plummeted nearly 49% year-on-year.

Throughout 2015 and into 2016 Copa is making capacity and fleet adjustments to combat the economic realities in Latin America. But the airline is not taking an optimistic view with its passenger unit revenue guidance for 2016, which is lower than 2015’s performance even though Copa anticipates some faint signs of stability emerging in 2H2016.

For now, it seems that all that any Latin American airline can do is attempt to reset their networks in order to diminish their exposure to the weakest areas in the region. Copa is making all the necessary moves to withstand the economic pressure, but in the short term its margins and profits will continue to fall below historical highs.

Canada's ULCCs need a clear path to launch if they are to establish market place credibility

6-Mar-2016 7:47 PM

The beginning of 2016 held much promise for aspiring ULCCs in Canada as NewLeaf Travel unveiled its routes for a Feb-2016 debut. But the company postponed its launch while Canadian regulators review certain licensing procedures. The ULCC movement in Canada began with much fanfare in late 2013, but then quietened down until a third new entrant – Enerjet– outlined its plans to adopt the model in Canada, in mid-2015.

After NewLeaf delayed its debut, the first company to emerge as a ULCC contender in Canada, Jetlines, firmed a deal to engage in a second reverse takeover with a company listed on the Toronto Stock Exchange. The proposed transaction is designed to raise the necessary funds for launch. Jetlines’ first attempt at a similar transaction resulted in litigation that was later settled out of court.

All the fits and starts among the pool of upstart Canadian ULCCs are creating some scepticism about their tenure in the country’s duopolistic airline industry, and they will need customer confidence. In parallel, the current Canadian economic environment may not prove to be the most fertile ground for new entrant airlines.

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This content is exclusively for CAPA Membership Subscribers

CAPA Membership gives you the latest aviation news and alerts, access to CAPA articles, reports, and our leading aviation data with optional premium add-ons.

This content is exclusively for CAPA Membership Subscribers

CAPA Membership gives you the latest aviation news and alerts, access to CAPA articles, reports, and our leading aviation data with optional premium add-ons.

This content is exclusively for CAPA Membership Subscribers

CAPA Membership gives you the latest aviation news and alerts, access to CAPA articles, reports, and our leading aviation data with optional premium add-ons.

This content is exclusively for CAPA Membership Subscribers

CAPA Membership gives you the latest aviation news and alerts, access to CAPA articles, reports, and our leading aviation data with optional premium add-ons.

This content is exclusively for CAPA Membership Subscribers

CAPA Membership gives you the latest aviation news and alerts, access to CAPA articles, reports, and our leading aviation data with optional premium add-ons.

This content is exclusively for CAPA Membership Subscribers

CAPA Membership gives you the latest aviation news and alerts, access to CAPA articles, reports, and our leading aviation data with optional premium add-ons.

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