Kazakhstan-China airline market: rapid growth boosted by sixth freedom traffic and emerging tourism
Capacity in the Kazakhstan-China market reached record levels in 2017 following the launch of flights by Air China and additional flights from Air Astana. More expansion is expected in 2018, driven primarily by Air Astana.
Air Astana is planning to increase capacity to Hong Kong in 2018 and launch services to Chengdu in 2019. New services to Xian are also included in Air Astana's medium term business plan, boosting its mainland China network to four destinations and greater China network to five destinations.
Local traffic between Kazakhstan and China is growing as tourism expands from a low base and business ties increase. However, the fastest-growing segment is transit traffic, as Kazakhstan is well placed geographically to attract traffic between China and Europe, including Russia.
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Heathrow vs other European airports: much more expensive; airlines want terminal monopoly broken up
Virgin Atlantic has backed IAG's call for a breakup of London Heathrow Airport's monopoly on terminal operation. Willie Walsh, CEO of IAG (owner of Heathrow's biggest customer, British Airways), argues that there is a lack of benchmarking, transparency and recourse in the setting of airport charges, which have more than doubled over the past decade.
Mr Walsh has argued that third parties, including airlines, should be allowed to build and operate competing terminals - a view supported by Virgin Atlantic (Heathrow's number two airline). Virgin additionally believes that any expansion of Heathrow needs to ensure a significant increase in airline competition (IAG controls more than half of Heathrow's slots).
Heathrow is currently conducting a public consultation, lasting until late Mar-2018, over its GBP14 billion expansion plans. IAG has given its support to alternative, less costly, expansion plans at Heathrow. The UK government has suggested that airport charges should remain as close as possible to current levels. However, Mr Walsh has proposed that more passengers and internal competition could lead to lower charges.
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Norwegian Air: rapid expansion & strategic innovation hasn't led to profits yet. It needs to soon
Norwegian Air is a remarkable agent of change. It has broken new ground strategically as the only independent European LCC with both single aisle and twin aisle operations, as well as establishing operating subsidiaries in multiple jurisdictions. Norwegian's innovation has encouraged legacy groups such as Lufthansa and IAG to launch their own long haul low cost operations, and prompted local rival SAS to establish bases outside Scandinavia.
However, Norwegian slumped back into losses in 2017, when continued rapid expansion also further inflated its growing debt.
A loss when the world's airline industry is enjoying a sustained period of historically high profitability again raises questions about Norwegian's ability to convert pioneering expansion into sustainable profitability. Even in good years, its margins have been modest.
Norwegian expects better results in 2018, but low profit margin and high debt levels leave it exposed to any cyclical downturn or localised demand shock affecting its network, and to hikes in oil prices or interest rates. Little wonder that Norwegian Air Shuttle ASA has been the worst-performing share among bigger European airlines over the past year and the past five years.
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LCC hybrids Alaska and JetBlue adopt different approaches to attract corporate and premium customers
The US low cost hybrid airlines JetBlue and Alaska Air Group are at different stages in the evolution of their premium products. JetBlue's successful premium offering, Mint, is approaching is fourth anniversary, and the airline continues to expand Mint's scope beyond its original expectations.
It is not clear how many Mint-configured aircraft JetBlue plans to add in 2018. For now, the airline is keeping Mint deliveries for this year close to its chest.
Alaska Air Group remains entrenched in its merger with Virgin America and is in the process of reconfiguring Virgin America's aircraft with more seats, including a densification of first class. Similarly to large US airlines, Alaska intends to drive incremental revenue through product segmentation; however, if the company chooses to develop a basic economy product, it won't be a carbon copy of other bare bones offerings.
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Shanghai Pudong Airport's passenger traffic poised to overtake Hong Kong International Airport
The result of increasing activity and complex growth in the Pearl River Delta is that Hong Kong International Airport is often compared to nearby airports in Shenzhen and, further afield, Guangzhou.
But Hong Kong's rival for hub supremacy is Shanghai. China's eastern city is a financial capital that will shape and lift Shanghai's traffic to be similar to Hong Kong's, but although Shenzhen and Guangzhou are large volume markets, they will not be able to achieve that ranking.
A decade ago, Hong Kong International was 65% larger than Shanghai Pudong. In 2017, Pudong narrowed the gap and Hong Kong International was only 4% larger.
Shanghai Pudong is on course to overtake Hong Kong in passenger traffic in 2018 or, more conservatively, in 2019. Long term positioning is less clear as Hong Kong prepares growth for its singular airport, whereas Shanghai may shift growth to a number of all-new commercial airports.
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Boeing 787-10 fleet analysis: Singapore Airlines and Boeing bet on game changing efficiency
Singapore Airlines (SIA) will take delivery next month of the world's first 787-10. SIA is betting heavily on the 787-10, which will be used to increase capacity by approximately 20% on regional routes within Asia Pacific.
The highly efficient 787-10 will reduce SIA's unit costs significantly, but the resulting capacity increases could be challenging to manage. SIA the parent airline has not grown over the past decade and is betting that the 787-10 is the right platform to support a resumption of growth.
Boeing is betting that the 787-10 will attract more orders after it enters service with SIA, which is the largest customer, having made 49 commitments. Boeing has booked less than 200 orders since the 787-10 was launched in Jun-2013.
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Vietnam: Vietnam Airlines reviews regional jet purchases, CSeries or E-Jet perhaps replacing ATRs
Vietnam Airlines is studying the acquisition of regional jets, which would be used to replace ATR 72s on domestic routes and expand on short haul international routes. The group's evaluation of the Bombardier CSeries and Embraer E-Jet families - and potentially the Mitsubishi MRJ and Sukhoi Superjet - is significant, given the rarity of regional jet campaigns in Southeast Asia.
Southeast Asia is a large and fast-growing market that regional jet manufacturers have struggled to penetrate. Slot constraints and low average yields have been the main challenges. Vietnam shares these challenges, but there is a potential niche for a small jet at Vietnam Airlines given the need to replace ATR 72s in markets that cannot accommodate narrowbody aircraft, and the opportunity to right-size routes now served with A321s.
There has always been a role for regional aircraft in Vietnam, but in recent years the fleet has shrunk significantly. Regional aircraft manufacturers are keen to reverse the trend.
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