Brazil's Sindicato Nacional dos Aeroviarios (National Aviation Personnel's Union – SNA) announced (21-Mar-2019) Brazil's Lower House approved a bill opening 100% foreign direct investment (FDI) in domestic carriers. The proposal includes a device stating international operations must be handled by domestic Brazilian carriers, while respecting air services arrangements. The bill will now transit into the Brazil Senate. [more - original PR - Portuguese]
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Mexico City air services: tough conditions force US LCCs outThere has been flux in the Mexico City-US market during the past year as the low cost operators Southwest, Alaska and JetBlue have either entirely pulled out of Juarez International airport, or in the case of JetBlue, reallocated flights to points of strength in its network.
All of those airlines benefitted from slot divestitures required by regulators for SkyTeam partners Aeromexico and Delta to launch their transborder joint venture in 2017. Although Mexico City tilts more towards business passengers, overcapacity has been an overhang in the US-Mexico market for some time, and pricing on those routes has been pressured.
Given those conditions, it is no surprise that airlines are opting to pull capacity from Mexico City; but the result is a dwindling presence of US low cost airlines in Mexico’s capital.
The US domestic airline market is arguably the most mature in the world, which means traffic stimulation opportunities are more limited than in other emerging regions.
But ultra low cost airlines believe that market concentration in the US creates opportunities to lure the infrequent traveller into taking more trips, and they’ve grown rapidly in the market during the last decade.
US full service airlines have also opted to court the infrequent traveller through the introduction of segmented fares, featuring a basic economy option. Although segmented fares seemingly allow those airlines to compete more effectively with ULCCs, they’re really a way for American, Delta and United to drive customers into higher fare buckets, and ultimately grow their revenue.
At the same time, segmented fares are evolving as US major airlines seem to be moving towards deploying a higher number of premium seats in the US domestic market as fare segmentation spreads.
The country’s largest lower cost airline, Southwest, has also declared that it is preparing to launch new ways to drive revenue in 2020 as it regularly fields questions about its response to product segmentation in the market place.
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European airline group structures: Ryanair – cloning IAGOver the next 12 months, Ryanair plans to move to a group structure "not dissimilar to that of IAG". Under Ryanair Holdings PLC there are now four airlines, each with its own AOC. These are the Ireland-based Ryanair, Poland-based Ryanair Sun, Austria-based Laudamotion and the newly created Ryanair UK.
Under the new structure the four airline subsidiaries will each have its own CEO and management, reporting to a small senior management team led by group CEO Michael O'Leary. Ryanair Sun (to be rebranded as Buzz) and Laudamotion already have their own CEO, but the other two subsidiaries will need to appoint new heads. The holding company will focus on efficient capital allocation, cost reductions, aircraft acquisitions and small scale M&A opportunities.
This report compares Ryanair's proposed structure with that of IAG and also takes a quick look at the other two large airline groups in Europe: Lufthansa Group and Air France-KLM.
Ryanair's new group structure is yet to be implemented and no doubt it will evolve. Nevertheless, at first sight, it looks pragmatic and seems unlikely to match IAG in two key areas: competition among subsidiaries for capital investment and the consistent use of different brands for different markets.
21-Mar-2019
Turkish Airlines & Pegasus jointly rebound
In 2018 Turkey's aviation market confirmed its rebound from the setbacks of 2016, when geopolitical and terrorist events had weighed on demand, particularly in international markets. As in 2017, passenger growth outpaced seat growth in 2018, and this was led by the international market.
The healthy demand environment was positive for the unit revenues of the country's two leading airlines. Both the flag carrier Turkish Airlines and the ultra LCC Pegasus Airlines reported 2018 operating margins that were their best for some years and, again, very similar to one another.
For 2019, Turkey's airport authority DHMI forecasts that passenger traffic growth will be slower than in 2018, but still comfortably above the European average rate. With both the leading airlines apparently locked into the same profit cycle, it seems only the transfer of Turkish Airlines' hub from Atatürk to the new Istanbul Airport (again pushed back, now to 5/6-Apr-2019) could set them on radically separate margin trajectories.
That wild card aside, macroeconomic and geopolitical drivers are likely to determine whether or not Turkish Airlines and Pegasus Airlines can achieve further margin improvement this year.
Japan Airlines' (JAL) subsidiary Zipair will become the thirteenth widebody LCC in Asia Pacific in 1H2020 and the first in Japan. Zipair will initially operate two routes within Asia, from Tokyo to Bangkok and Seoul, before expanding into the long haul market in 2021.
JAL is taking a relatively conservative approach with a five-year business plan that includes only two additional aircraft per year, resulting in 10 787s by the end of 2024. Zipair’s first two 787s are -8s from JAL that will be converted in 2H2018 to a high density two class configuration.
Zipair and the AirAsia X Group will be the only all-widebody low cost operators in Asia Pacific. Feed is typically a crucial component of the long haul low cost market; AirAsia X relies on its sister short-haul airline group AirAsia and Zipair can use Jetstar Japan.
AirAsia X is now the largest airline group in Japan’s emerging medium/long haul market, operating 10 routes. AirAsia X has ambitious plans for Japan, including several routes to the continental US, which JAL will likely try to combat using Zipair.
Recorded at CAPA Global LCC Summit, 25-26 Feb 2019
AirAsia X Malaysia Postpones First A330-900neo Delivery Until 2Q2020
AirAsia X Malaysia CEO Benyamin Ismail talks about the airline’s decision to postpone delivery of its first A330-900neo to 2Q2020 and lingering concerns with the Trent 7000 engine. AirAsia X announced in Jul-2018 an increase to its A330-900neo from 66 to 100 aircraft and that deliveries would start in Oct-2019. However, AirAsia X is now planning to order around 75 aircraft. While the first aircraft from the order and for Malaysia has been delayed, the group’s Thai affiliate plans to take two leased A330-900neos in 2Q2019.
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US Bureau of Transportation Statistics (BTS) reported (21-Mar-2019) the following traffic highlights for the 12 months ended Dec-2018:
- Passengers: 1012 million, +4.8% year-on-year;
- Domestic: 777.9 million, +4.9%;
- International: 233.6 million, +4.4%;
- US airlines: 111.1 million, +3.1%;
- Foreign airlines: 122.5 million, +5.6%;
- Passenger load factor: 83.0%, +0.5ppt;
- Domestic: 84.5%, -0.1ppt;
- International: 81.7%, +1.0ppt. [more - original PR]
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22-Mar-2019 10:40 AM
Visitor arrivals to Thailand stable at 3.6m in Feb-2019, arrivals from China down 12%
Thailand's Ministry of Tourism and Sports reported (20-Mar-2019) visitor arrivals to Thailand for Feb-2019. Details include:
- Visitor arrivals: 3.6 million, +0.2% year-on-year;
- China: 1.1 million, -12.3%;
- Malaysia: 324,949, +17.3%;
- Russia: 191,527, -1.9%;
- South Korea: 184,362, +15.1%;
- India: 123,238, +14.2%
- Japan: 161,387, +11.4%;
- Laos: 131,656, +1.8%;
- US: 94,324, +3.8%;
- UK: 90,854, +1.7%;
- Germany: 99,157, -5.1%;
- France: 115,171, +6.4%;
- Singapore: 70,156, -2.5%;
- Australia: 50,566, -2.1%;
- Taiwan: 71,964, +19.7%;
- Hong Kong: 79,577, +20.8%;
- Tourism spending: THB191.9 billion (USD6.0 billion), -0.8%. [more - original PR]
Brazil's National Civil Aviation Agency (ANAC) reported (21-Mar-2019) the following traffic highlights for Feb-2019:
- Passengers:
- Domestic: 7.4 million, +7.8% year-on-year;
- Gol: 2.5 million, +11.0%;
- LATAM: 2.2 million, +2.4%;
- Azul: 1.9 million, +21.5%;
- Avianca Brazil: 814,189, -9.7%;
- Passaredo: 26,908, -23.6%;
- MAP Linhas Aereas: 9742, -0.8%;
- Total Linhas Aereas: 4951, +69.0%;
- International: 815,486, +3.1%;
- LATAM: 485,063, +3.5%;
- Gol: 181,697, -3.9%;
- Azul: 103,373, +11.3%;
- Avianca Brazil: 45,301, +11.6%;
- Domestic: 7.4 million, +7.8% year-on-year;
- Passenger load factor:
- Domestic: 82.5%, +2.2ppts;
- GOL: 82.4%, +4.3ppts;
- LATAM: 81.8%, +0.5ppt;
- Azul: 82.1%, +2.9ppts;
- Avianca Brazil: 85.9%, -0.6ppt;
- Passaredo: 57.9%, +2.6ppts;
- MAP Linhas Aereas: 66.2%, -0.2ppt;
- Total Linhas Aereas: 90.3%, +6.1ppts;
- International: 79.6%, +3.3ppts;
- LATAM: 81.6%, -3.1ppts;
- Azul: 78.0%, -4.7ppts;
- GOL: 74.3%, -3.9ppts;
- Avianca Brazil: 73.5%, -0.6ppt. [more - original PR - Portuguese]
- Domestic: 82.5%, +2.2ppts;
France's General Directorate for Civil Aviation reported (21-Mar-2019) the following traffic highlights for Feb-2019:
- Passengers: +6.1% year-on-year;
- Domestic: +5.9%;
- Within Metropolitan France: +7.4%;
- Metropolitan France to French overseas territories: +1.6%;
- Within French overseas territories: +2.0%;
- International: +6.2%;
- From Metropolitan France: +6.2%;
- EU28: +4.5%;
- Europe excluding EU28: +8.5%;
- America: +11.2%;
- Africa: +9.6%;
- Asia Pacific: +4.0%;
- From French overseas territories: +7.0%. [more - original PR - French]
- From Metropolitan France: +6.2%;
- Domestic: +5.9%;
Icelandair announced (21-Mar-2019) it will commence discussions with WOW air regarding Icelandair Group's involvement in its operations. The discussions will be based on the doctrine of competition law regarding the 'failing firm' defence. The parties will aim to conclude the discussions, which will occur with cooperation from Icelandic authorities, on 25-Mar-2019. [more - original PR]
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