Virgin Atlantic Airways

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

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. 

British Airways plans two phases to bring bmi, and its London Heathrow slots, to profitability

International Airlines Group (IAG) is targeting winter 2012/13 as its first opportunity to fully incorporate the 42 daily London Heathrow slots it will acquire as part of its purchase of bmi from Lufthansa, now approved by regulators with only minor concessions. The initial integration will look to bring the predominantly short-haul bmi operation to breakeven by increasing seat capacity on each slot pair, making network changes and leveraging IAG's marketing and distribution power on the inherited bmi network. The medium-term integration will see the short-haul bmi slots allocated for services on IAG carrier British Airways' (BA) long-haul operation, which is smaller than its major European rivals. BA will target emerging markets including Asia, Africa and Latin America.

This new and large increase in Heathrow capacity will require significant fleet adjustments, and already BA plans to delay retirement of Boeing 747 aircraft as well as to re-examine its purchase options, which it holds on 787 and Airbus A380 aircraft. It will also seek clarity from Boeing on its 777 successor programme.

Hong Kong Airlines swaps Qantas for Virgin Atlantic as Australian partner

Hong Kong Airlines in Jan-2012 signed a deal with Qantas allowing Hong Kong Airlines to sell its new all-premium A330 Hong Kong-London flights to Australia with Qantas covering the Hong Kong-Australia sector. Hong Kong Airlines is pitching its all-premium service, which offers business class and premium economy seats, as offering a high quality product at a lower fare level. Not too long after the Hong Kong Airlines-Qantas deal was completed more senior managers at the Australian carrier became fully aware of the contract and realised giving traffic to a competitor was not in its best interest.

Hong Kong Airlines has now done a deal with Virgin Atlantic, which operates between Hong Kong and Sydney. Australia-London tickets offer Hong Kong Airlines segments in either premium economy or business between Hong Kong and London with a Virgin Atlantic economy sector between Hong Kong and Sydney. While the Qantas deal included business class, Virgin Atlantic is not offering its business class or premium economy product, and Virgin Atlantic's flights are only available from Sydney whereas the Qantas agreement also brought Brisbane, Melbourne and Perth destinations online.

Air New Zealand hones in on long-haul restructure as first half profit falls

Air New Zealand is nearing a conclusion of a restructure of its loss-making long-haul network. At the peak of losses in the six months to 30-Jun-2011, the operation lost in excess of NZD1 million (USD833,700) a week. While the losses were exacerbated by high fuel prices and weakened demand from the Feb-2011 Christchurch earthquake and the Mar-2011 Japanese earthquake and tsunami, ANZ has seen the entrance of price-aggressive long-haul carriers that give reason to strategically enhance its position across all markets.

CEO Rob Fyfe has said no long-haul market has been significantly positive or negative, unlike with Qantas’ Aug-2011 restructure in which losses had been heavy in Europe and Asia. Adjustments to the long-haul network, some already implemented with others to be announced in coming weeks, comprise adjusting frequency and capacity to existing and new routes, working with partners, bolstering ancillary revenue and evaluating aircraft capacity as well as fare and product structure.

British Airways/IAG with bmi looks to re-establish world leadership – and long term survival

It can be a fine line between survival and success, just as the blowtorch of a threatened existence provides a powerful motive to pursue ambitious goals.

Last month’s International Airlines Group (IAG)/British Airways move on bmi is only one more piece in the strategic kaleidoscope opening out in front of the Group Chairman, Willie Walsh. The world is his oyster at present. Answering a question following the bmi purchase announcement, Mr Walsh said that despite the uncertain economic environment that Europe’s politicians have created, this was a time of opportunity. His airline is well placed now to capitalise and, as bad news for others spells bargains in the marketplace, the time could well be ripe. In the process, London Heathrow Airport is firmly in the spotlight as Virgin Atlantic also remains a sale possibility. Yet for BA and all of its major rivals, the elephant in the room remains how to service shorthaul network connections profitably.

IAG acquisition of British Midland would give British Airways 20-40% capacity increase at Heathrow

The in principle agreement between British Airways and Iberia owner International Airlines Group (IAG) to acquire British Midland from Lufthansa would allow British Airways to increase its number of seats out of prized and slot-restricted London Heathrow airport by 20% to 40% under a range of scenarios. Oneworld's share of traffic at London Heathrow could potentially increase from 47% to 60%.

With such dominating control of capacity from British Airways and oneworld, it is little wonder Virgin Atlantic is trying to secure a deal with Lufthansa for British Midland and its valuable 9% share of Heathrow slots. A Virgin Atlantic acquisition of British Midland, even if British Airways is close to signing the deal, would add to Virgin's bargaining power as it seeks to form or join an alliance to remain competitive.

A short statement from IAG on 4-Nov-2011 about the in principle agreement it hopes to finalise in coming weeks ends Lufthansa's long quest to shed itself of under-performing acquisition British Midland.