US Department of State announced (24-Jun-2019) the US and UAE held their sixth economic policy dialogue on 20-Jun-2019, during which delegations from the countries discussed civil aviation matters. Both governments reaffirmed their support for the US-UAE air transport agreement (ATA) of 11-Mar-2012 and the understandings in the record of discussion between the governments of 11-May-2018. According to the Department of State, the record of discussion "reinforced the principle of a fair and equal opportunity to compete in providing international air transportation governed by the ATA" and the parties "underscored the shared and ongoing commitment of the United States and the United Arab Emirates to fully maintain all aspects of their Open Skies relationship". Emirates, in a statement to CAPA, commended the Trump Administration for reaffirming its commitment to the ATA and commented: "This should end an unfortunate chapter in the mutually beneficial US-UAE aviation relationship that provides the US with a significant trade surplus, and supports hundreds of thousands of US jobs". The airline added: "For over four years, the three largest US carriers have waged a fictitious, unrelenting and malicious multi-million dollar protectionist lobbying campaign against US Open Skies policy and consumer choice. Over this time, these US carriers have taken their eye off the ball wasting tens of millions of shareholder dollars that could have been better directed towards the historic opportunity to reform the US air traffic control system or spent on improving their customers' travel experience". [more - original PR]
Although Mexican airlines continue to battle currency fluctuation triggered in large part by ongoing tariff threats from the US, overall they remain comfortable with domestic demand, and transborder capacity is starting to rationalise. However, a huge cloud of uncertainty is hovering over the fate of Mexico City’s airport infrastructure.
After Mexico’s president Andres Manuel Lopez Obrador (AMLO) cancelled completion of a partially constructed new airport, he offered less than attractive alternatives that include bolstering Toluca airport and constructing two new runways at an air force base near Mexico City. But the runway construction has come under criticism, and the project is reportedly on hold.
Plans are under way for a third terminal at Mexico City Juarez, but it remains to be seen how much the expansion will alleviate congestion at an airport that is already operating well above its capacity. And ultimately, Mexico City’s potential to become a powerful global hub will be significantly diminished.
CAPA 12-Point Survival Plan for LCCs
Like any business, airline management is expected to manage the airline prudently through a downturn to minimise the impact on profitability and shareholder returns.
Given the inevitability of a downturn in the industry – whether it’s this year or next – that expectation becomes more telling.
Generally speaking, LCCs should be better placed in times of heightened price sensitivity, as their lower cost base should give them an edge. But that alone is not enough.
In this report, CAPA offers some key tactics that LCC management can deploy when things get tough. Many of them are common sense, but in tough times the sense may not be so common.
The full report is available for free download here. Topics in this report will be discussed at CAPA’s annual LCCs in North Asia Summit held in Cebu on 24/25-June-2019.
Philippine Airlines (PAL) will likely follow Garuda Indonesia in suspending services to London, highlighting the challenges smaller Southeast Asian flag carriers confront in sustaining European services.
PAL is now considering instead launching services to Paris and is trying to secure a European airline partner to offer connections to London and other European destinations.
The Philippine carrier is probably better off dropping its European ambitions entirely and reducing the size of its widebody fleet. PAL is looking at acquiring more A350s or ordering 777Xs to replace its older model 777-300ERs, but should instead use upcoming lease returns as an opportunity to cut long haul capacity and improve profitability.
PAL has been serving London since late 2013, but the route has been consistently unprofitable despite aircraft, schedule and frequency changes. Garuda followed PAL by launching London in 2014 and is suspending the service in Aug-2019, following several ultimately unsuccessful route adjustments.
Delta Air Lines has made interesting network moves during the last few years, seizing on opportunities from mid-sized airports. Raleigh Durham has become a focus city for the airline and is one of several non-hub markets featuring nonstop flights operated by Delta to Paris.
In 2018 Delta launched flights from Indianapolis to Paris, joining flights to its French hub from US non-hub airports in Raleigh, Cincinnati and Pittsburgh. After a decade of service, Delta has opted not to resume seasonal service from Pittsburgh to Paris, citing overcapacity in that particular trans Atlantic market.
Officials from Indianapolis appear bullish about Delta’s first year of service to Paris, and unlike its situation in Pittsburgh, Delta has a stronger position in Indianapolis, Raleigh and Cincinnati that should help to sustain long haul flights for now.
The three large US global network airlines are in the early innings of deploying their respective premium economy products on long haul routes, but there is no shortage of optimism at American, Delta and United about the revenue-generating potential of a dedicated product between first/business class and economy.
American is further along in the number of premium economy seats it has on offer after recently completing retrofits of nearly 124 widebodies with a dedicated premium economy section.
United and Delta are at varying stages of a premium economy deployment on long haul international routes, but all three airlines cite encouraging statistics about pricing power and load factors for their latest segmented product.
The roll-out of premium economy by those airlines is the latest development in their product segmentation strategies that are designed to drive upsales and to compete more effectively with lower cost competitors as those competitors enter and exit the market.
Premium economy is a way of ensuring that they cater to all passenger segments that are looking for value in long haul markets.
Travelport President And CEO Talks Privatisation, NDC And Innovation
Privatisation will help drive and speed up innovation for Travelport believes President & CEO, Gordon Wilson. The acquisition, which was completed on 30-May-2019, occurred just days after CAPA met with Mr Wilson to discuss future plans for the GDS, get an update on its NDC offering and discuss the value it provides to agents and airlines all over the world.
Upcoming Event
Perth: CAPA Perth Summit
CAPA’s Perth Aviation Summit explores key issues & opportunities facing the industry in this region. A separate Corporate Travel Summit is being held at this time for buyers and suppliers on how these issues & opportunities impact their travel programmes.
Upcoming Event
Sydney: CAPA Australia Pacific Aviation Summit
CAPA’s events attract the highest calibre of thought-leaders in the industry. This includes strong C-Level executive representation from all types of business models – from full service, LCCs and hybrid airlines.
T'way Air senior vice president Hyung Yi Kim, speaking at the CAPA LCCs in North Asia Summit, said (24-Jun-2019) competition in the Asia Pacific is becoming "super intensified right now" with restrictions in slot allocations and a large amount of capacity coming into the market.
Peach Aviation executive advisor Patrick Murphy, speaking at the CAPA LCCs in North Asia Summit, said (24-Jun-2019) the carrier will "grab the opportunity" with the A321LR, which will arrive at Peach in 2021. Mr Murphy said the A321LR is a "good airplane", but the "jury is still out" on the A321XLR and the carrier is "not interested in operating low cost long haul".
US FAA awards USD495m in grants to 327 airports under Airport Improvement Programme
US Department of Transportation Secretary Elaine Chao announced (24-Jun-2019) the US FAA will award USD495 million in airport infrastructure grants to 327 airports in the US under the Airport Improvement Programme (AIP). This is the second allotment of grants under the USD3.2 billion AIP. It includes funds for the following airports:
- Chicago O'Hare International Airport: USD65 million grant, to be utilised to cover costs associated with the development of runway 10C/28C and runway 9C/27C;
- Atqasuk Airport: USD20 million grant for runway, taxiway and apron rehabilitation works;
- San Diego International Airport: USD13 million grant to rehabilitate taxiways;
- Sarasota Bradenton International Airport: USD8.7 million grant for update to master plan, drainage improvement, taxiway rehabilitation works and aircraft rescue and firefighting facility works;
- Vail Eagle County Airport: USD4.7 million grant to develop deicing facility;
- Phoenix Deer Valley Airport: USD2.7 million grant for taxiway rehabilitation works. [more - original PR]
Brazil ANAC suspends Avianca Brazil concession and commences Congonhas slot redistribution process
Brazil ANAC suspended (24-Jun-2019) Avianca Brazil's operational concession and commenced Sao Paulo Congonhas Airport slot redistribution procedures. ANAC commenced immediate redistribution of slots at São Paulo Guarulhos International Airport, Rio de Janeiro Santos Dumont Airport and Recife Guararapes International Airport. The redistribution process for Sao Paulo Congonhas will take special consideration to "the critical level of [market] concentration and the very high level of infrastructure saturation". Due to the mentioned reasons, ANAC will "commence a consultation process this week to hear interested parties about the distribution of slots". [more - original PR - Portuguese]
Eastar Jet plans medium haul network expansion and 60 aircraft in fleet out to 2025
Eastar Jet chief executive officer/president Jong Gu Choi, speaking at the CAPA LCCs in North Asia Summit, said (24-Jun-2019) the carrier plans to introduce new medium haul routes as it expands its fleet. Eastar Jet plans to grow its fleet from 23 aircraft in 2019 to 60 by 2025 and expand its route network to 48 destinations over the same period.