United States

New Cebu Pacific long-haul operation could push out Philippine Airlines but may require hybrid model

The new plan from leading low-cost Filipino carrier Cebu Pacific to offer long-haul services from 3Q2013 represents not just the fourth low-cost long-haul operation in Asia, but the first time such a carrier has potential to force a full-service rival – Philippine Airlines (PAL) – out of business.

Cebu Pacific will benefit from the Philippines’ extremely price sensitive market that has seen LCCs achieve a staggering 80% share of the domestic market and a fast-growing share of the regional international market. Demand for low-cost long-haul services will come primarily from the large visiting friends and relative (VFR) and migrant worker market. But Cebu’s new low-cost long-haul operation will also benefit from growing tourism and potentially the ability to transfer passengers over a geographically convenient hub if Cebu decides to stray from its original point-to-point model.

While PAL is the nation’s sole long-haul carrier, its lack of global alliance membership, relatively small domestic operation and higher cost base create low barriers for entry. National sentiment for Asia’s oldest airline may run high, but as seen in the Philippines’ domestic market, passengers vote with wallets.

Even in bankruptcy protection American Airlines continues to grow important Brazilian market

Although American Airlines is cutting capacity and aircraft as part of its bankruptcy protection proceedings, it is continuing to grow its important presence in Latin America with new routes and capacity upgrades. American is the largest carrier between North America and Latin America, achieving the highest yield in the market compared to any other US carrier. Latin America is also American's highest-yielding market.

American has announced 18 new frequencies to Latin America in its Southern Hemisphere winter schedule, including a new daily route between Miami and Manaus from Jun-2012. It is also plans to begin operating in June on a year-round basis five additional flights per week on Dallas-Sao Paulo, four additional flights on Miami-Belo Horizonte and two additional flights on Miami-Brasila – all of which were previously only operated during the peak Southern Hemisphere summer months.

Panama's Copa pursues more rapid expansion with Las Vegas, Curacao, Liberia and potentially Recife

Panama’s Copa Airlines is continuing its rapid expansion by opening at least three new routes in June, which will increase its hub of Americas operation at Panama City to a market leading 59 destinations. As is typically the case with Copa, the carrier is evenly distributing its network expansion in 2012 to different regions with Las Vegas in North America, Curacao in the Caribbean, Liberia in Central America and potentially Recife in South America being added. Again typical for Copa, all the routes are not currently served by any carrier and Copa will initially operate them with less than daily frequency.

Virgin America targets US Airways with launch of Philadelphia service in April

Virgin America will continue its strategy of targeting fortress hubs with service to Philadelphia commencing in Apr-2012 from Los Angeles and San Francisco. Virgin America will take approximately one-quarter market share on both routes at the main expense of Philadelphia's hub carrier, US Airways. Philadelphia is a key step in the development of Virgin America's network as it will give the carrier service to all five of the largest metropolitan areas in the US and eight of the top 10, with only Atlanta and Houston still missing from its network but likely to be added before the end of 2012.

Virgin America's first flights to Philadelphia, its 17th city, will arrive on 05-Apr-2012 with double daily service from Los Angeles on the carrier's 137-seat A320s. A third daily frequency will be added on 01-May-2012. Services from Virgin America's San Francisco hub commence 10-Apr-2012 with one daily frequency, increasing to double daily on 01-May-2012.

Non-stop US-India market continues to shrink with American Airlines ending Chicago-Delhi service

The number of carriers operating direct service between the US and India will decline to two – Air India and United – from 01-Mar-2012 when American Airlines ends its sole service to India, a daily service between Chicago O'Hare-New Delhi. The cancellation of the unprofitable routes comes as American rationalises its network as part of its bankruptcy filing. The carrier stated that the service is being cancelled due to the “historical financial performance of the route and its future outlook given the global economic climate and high oil prices.” The poor financial performance on the route, American's longest at 7484 miles, relates to the impact on yields of competitive pricing as American was able to consistently report high load factors on the route over the past 12 months.