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Russia’s Pobeda may face low cost airline competition
The head of Russia’s competition authority, the Federal Antimonopoly Service (FAS), has called for more competition in the country’s low cost airline segment. He has even suggested that Aeroflot launch another LCC to compete with its low cost subsidiary Pobeda.
Pobeda is the country’s only LCC, with 7.2 million passengers in 2018 giving it a 5.2% traffic share. It has 100% of domestic LCC capacity and approximately 40% of international LCC capacity to/from Russia, against fragmented foreign low cost competition.
Pobeda has grown rapidly since its Dec-2014 launch and the relative underpenetration of air travel in Russia suggests that it will be able to continue to channel latent demand through its low fares.
However, Pobeda’s load factor has peaked, and it slipped to an underlying operating loss in 1H2019.
More low cost competition would help to accelerate the growth in air travel’s penetration levels in Russia and might even focus Pobeda on an even more efficient cost structure. Aeroflot’s preference would be for others to launch competitor airlines.
The latest tranche of international slot allocations at Tokyo’s Haneda Airport will open up new route opportunities for Japan’s two major carriers, and will also likely mean a further shift of international service from Tokyo Narita Airport.
Japanese regulators have allocated the new Haneda slots to certain international markets, but the key decisions about specific routes are yet to be revealed by Japan’s airlines.
Haneda slots are highly coveted due to the airport’s capacity constraints, and its proximity to one of the world’s most valuable passenger markets in the Tokyo metropolitan area. All Nippon Airways (ANA) and Japan Airlines (JAL) use a dual-hub system in Tokyo, although Haneda is more desirable as it is much closer to central Tokyo than Narita.
Next year Air Europa and Air France-KLM are hoping to launch their new metal-neutral South Atlantic joint venture, announced in Aug-2018 and originally hoped to begin this summer. Negotiations have taken longer than expected, in spite of common SkyTeam membership and existing codeshare cooperation.
Based on OAG data for the week of 12-Aug-2019, Air France, Air Europa and KLM are respectively second, fourth and fifth by seats on Europe to Latin America excluding Caribbean.
The market leader Iberia combines with British Airways to make IAG the leading airline group in this market. However, the Air Europa/Air France-KLM JV would have a higher seat share than IAG and would be neck and neck with the planned IAG/LATAM Airlines JV.
Meanwhile, Air Europa has launched three new routes this summer (Panama City, Medellín and Iguazu). This gives it more destinations than any other operator between Europe and Central/South America, where its capacity is up by 20% year-on-year in Aug-2019.
Iberia’s 18% growth is focused on frequency increases, rather than new destinations. The Air Europa/Air France-KLM JV would have a significant lead over the IAG/LATAM Airlines JV in the number of destinations in Latin America excluding Caribbean.
It has been an eventful 2019 for Brazil’s aviation market since Avianca Brasil ceased operations and Brazil’s largest airlines began jostling for some of the defunct airline’s more attractive assets.
Azul joined other airlines in working to obtain Avianca Brasil’s slots (particularly at São Paulo Congonhas airport) and now, armed with new slots, the airline is launching flights on the key Rio de Janeiro business route. Its service on the route will pale in comparison to those of GOL and LATAM Airlines Brazil, but breaking into that market is key for Azul’s domestic evolution.
As the shakeout in Brazil’s domestic market after Avianca Brasil’s exit continues, Brazil’s economy is facing some headwinds after its growth forecast for 2019 has been cut, and general overall recession concerns are rising for countries worldwide.
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