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WestJet’s 767 operational problems cloud a significant low cost long haul revenue opportunity

22-Jul-2016 5:41 AM

The operational challenges Canadian low cost airline WestJet has encountered in its launch of widebody flights to London has done little to quell investor concern about the carrier’s ability to execute low cost long haul flights successfully. Mechanical problems with the Boeing 767s have triggered cancellations and operational challenges, which has created passenger frustration, and resulted in reaccommodation and other expenses that are not insignificant.

WestJet has been working to smooth out the operational teething pains of the twin aisle jets, and is assuring that the hiccups are temporary. However, the less than ideal launch could call into question WestJet’s ability to spread the low cost model and stimulate traffic from Canada in the North Atlantic market. The company is attracting a higher level of scrutiny since it is the first LCC based in North America to attempt to spread the model on long haul flights.

Despite the shaky launch of its long haul flights with widebodies, WestJet cannot ignore long-term opportunities presented by the long haul market from Canada – with a value in the billions. WestJet can ill-afford to cede all the revenue to rival Air Canada and non-Canadian airlines operating on trans-Atlantic routes. In the short term the airline finds itself in a position of now attempting to engender passenger confidence that its operational snafus are temporary, and its product proposition remains intact.

Norwegian Air: A321neo LR gives short long haul options; 2Q margin grows on lower fuel

19-Jul-2016 3:23 PM

Norwegian Air continued its trend of improving profitability in 2Q2016, when it marked its sixth successive quarter of year-on-year increases in its operating margin. It achieved a further gain in load factor, in spite of double-digit capacity growth. The biggest sources of its growth were its US widebody routes and its operations in Spain, where it has recently opened a seventh base at Palma de Mallorca.

To a large extent its recent positive trend of growing profits has been the result of lower fuel prices. Ex fuel unit costs have been rising for several quarters, outpacing increases in unit revenue. Norwegian has only managed to achieve margin gains because of lower fuel CASK.

Norwegian's operations should become more efficient if it received US foreign airline permits for its Irish and UK subsidiaries, although there is currently little sign that this is about to happen. A new order for 30 A321LRs (part of the A320neo family) should also help Norwegian's unit cost performance and give it more choice over aircraft deployment on shorter long haul routes.

AirAsia up-gauges with a 100 A321neo order; outlook improves and China in its sights

14-Jul-2016 9:55 PM

AirAsia has joined other leading LCC groups in Southeast Asia by deciding to add higher density narrowbody aircraft. The 100 A321neos ordered by AirAsia at the 2016 Farnborough Air Show will enable the group to maximise slots at infrastructure constrained airports and further reduce unit costs.

The new order also enables the AirAsia Group to meet a requirement for additional aircraft that has surfaced due to the establishment of a leasing subsidiary which is looking at potentially placing some of the group’s future aircraft with third party customers. AirAsia joins rival Lion Group and VietJet Air in pursuing potential opportunities to lease out some of 1,150 aircraft the three Southeast Asian groups have on order – a staggering number of aircraft that likely cannot be absorbed entirely by their own airline subsidiaries or affiliates - but which they need to have available in case high forecasts materialise.

The new deal lifts AirAsia’s narrowbody order book to 404 aircraft, including 304 A320neos to be delivered from 2H2016 through 2028 and 100 A321neos slated for delivery from 2019 to 2028. The group took its last A320ceo in 2Q2015 and currently operates 171 of the type from bases in five countries.

Spirit Airlines makes some progress in operations, but still lags its peers in key metrics

25-Jun-2016 6:50 PM

Operational improvement is a top priority for Spirit Airlines' new CEO, who has held the position for just six months. Data from the US government show that Spirit is making progress in some areas of operations, but still lags behind other US airlines. As the busy summer season kicks into full force, Spirit’s commitment to improving operations could be put to the test.

As Spirit’s rivals hone their product segmentation strategies to match Spirit’s low fares, operational improvement takes on a whole new level of importance for the ultra-low cost airline and its particular business model. Spirit’s ULCC rival Frontier is outperforming Spirit in some operational metrics.

Spirit is in undergoing other changes, including a change in its fleet mix to smaller-gauge Airbus narrowbodies. The company has intimated that it would examine smaller markets in the future to decrease competition with larger airlines. Many of the new routes that Spirit has introduced in 2016 feature Southwest and Delta as competitors and it appears that Spirit now has the largest network overlap with Southwest, rather than with American Airlines.

Garuda Indonesia Part 4: revised fleet plan leads to new narrowbody and widebody orders

25-Jun-2016 10:00 AM

Garuda Indonesia is close to completing a new 10-year fleet plan outlining narrowbody and widebody growth. An overdue order for new generation widebody aircraft, along with a top-up order for 737 MAX narrowbodies, is expected by the end of 2016, potentially at the upcoming Farnborough Airshow.

The new fleet plan supports an ambitious plan to expand Garuda’s international network – both regionally and in the long haul sector. Garuda is also striving to strengthen its domestic position further with narrowbody growth.

According to CEO Arif Wibowo, the group's new overall strategy is: “To dominate the domestic market, expand regional where the opportunities are and subsidise long haul growth.” This is the fourth and final part of a comprehensive series of analysis reports published by CAPA on the Garuda Indonesia Group.

Alaska Air Group and Virgin: Running two brands is a growing trend. Working them is the hard bit

23-Jun-2016 11:11 PM

One of the most discussed aspects of the pending merger between Alaska Air Group and Virgin America is how Alaska would navigate the sensitivities of dissolving the Virgin America brand, given the fierce brand loyalty that Virgin America engenders among higher-yielding passengers. Now it appears that Alaska is giving serious consideration to retaining the Virgin America brand.

Although sustaining two brands post-merger is rare in the US industry, the combination of Alaska and Virgin America is unique in many aspects – most notable is that both brands generate strong positive sentiment among customers. That has not been the case for some US airline mergers, where in some cases a less popular or less prominent brand was retired.

Despite the complexities inherent in running separate brands, there are valid business reasons for Alaska to seriously evaluate the pros and cons of adopting that strategy. One important factor is preserving the levels of revenue that made the deal attractive in the first place.

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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.

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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