Every week, CAPA – Centre for Aviation, produces informative, thought provoking and detailed market analysis of the aviation industry. With supporting data included in every analysis, CAPA provides unrivalled and unparalleled intelligence.
In this week’s edition, our global team of experts deliver you a wealth of insightful commentary on the latest news and trends affecting the commercial aviation industry, including:
- Southwest Airlines eyes expansion & codeshares for international growth: CAPA Latin America Summit
- Malaysia Airlines’ fleet strategy: still a work in progress following A330-200 and 787-9 deals
- Allegiant Air’s intriguing gamble on the resort business attracts scepticism, but execution is key
- Airberlin: Lufthansa’s Eurowings and easyJet to benefit as preferred bidders to carve up its assets
- Turkish Airlines’ intent to buy 40 Dreamliner 787-9s signals the end of its widebody order drought
- Monarch Airlines: rumours of imminent demise not exaggerated. Bankrupt, AOC suspended. Pax airlift
Southwest Airlines eyes expansion & codeshares for international growth: CAPA Latin America Summit
Southwest Airlines appears to be moving closer to forging interline and codesharing pacts with other airlines, now that it has the technology in place to foster those relationships, and has a framework to negotiate codeshare and interlining tie-ups with its pilots.
The airline believes the business case for creating new airline partnerships remains robust, and codeshares could provide Southwest with an additional revenue stream that could reach millions annually.
As Southwest evaluates potential airline partners, the airline continues its international expansion, capping off 2017 with the introduction of a new market, Turks and Caicos. For now, Southwest is obviously targeting point of sale US for its international network, but the airlines is examining expansion of its international services – at some point – deeper into South America, as new generation narrowbody aircraft open up new route possibilities.
Malaysia Airlines’ fleet strategy: still a work in progress following A330-200 and 787-9 deals
Malaysia Airlines has completed the first phase of its post restructuring fleet plan with the lease of six second hand A330-200s and the purchase of eight new 787-9s. Along with six A350-900s, 15 737 MAX 8s and 10 737 MAX 10s, the airline now has commitments for 45 aircraft, which will all be delivered over the next five years.
Most of the aircraft will be used as replacements as Malaysia Airlines phases out A380s, A330-300s and 737-800s. The six A330-200s will be delivered in 2018 and will replace six 737-800s, enabling the airline to upgauge several regional routes within Asia.
A resumption of European expansion is also in the pipeline, initially using two of the A350-900s in mid 2018, and then using the 787-9s in late 2019 or 2020. Malaysia Airlines still needs to acquire at least 20 more new generation widebody aircraft; it is considering additional 787-9s or A330-900neos and could potentially pursue an early phase-out of the A350 fleet, which would reduce the number of widebody types to a more sensible number.
Allegiant Air’s intriguing gamble on the resort business attracts scepticism, but execution is key
Every time an airline decides to diversify into an entirely new business, the decision is met with a healthy level of scepticism by the investment community, and Allegiant’s plan to build a resort in southwest Florida near its base in Punta Gorda is no different.
Although the company’s stock valuation has risen since it outlined plans to develop its Sunseeker resorts, Allegiant is still trading below its year-long highs.
Allegiant has always positioned itself differently in the airline/travel space, using older aircraft to operate a schedule of less than daily flights from small to mid size US cities to large tourist destinations, including Las Vegas and Orlando. A key component of Allegiant’s revenue has been sales income from selling hotel rooms, vacation packages and rental cars, so its resort/hotel concept is not a surprising move.
Of course, for Allegiant the execution is key. The company is spending a lot of time attempting to allay investor concerns about the risk it is undertaking with Sunseeker, taking a page from Delta’s playbook with its Trainer Refinery, and stressing that its capital outlay is essentially the cost of narrowbody aircraft.
But the decision to entrench itself deeper into the travel space carries a certain level of uncertainty about how Allegiant will prioritise managing its new resort alongside running the day to day operations of an airline.
Airberlin: Lufthansa’s Eurowings and easyJet to benefit as preferred bidders to carve up its assets
As buyers circle the ruins of the Monarch collapse, other assets of various kinds are almost flooding the European market. On 25-Sep-2017 airberlin’s Supervisory Board confirmed that early front runners Lufthansa and easyJet are the preferred bidders to acquire assets of the company, with negotiations continuing until 12-Oct-2017. The transactions will need EU approval, and airberlin’s administrators hope to complete by the end of 2017. Airberlin CEO Thomas Winkelmann said airberlin was “on the way to achieving good job prospects for around 80 % of our colleagues”.
The maintenance division, airberlin technik (ABT), which employs approximately 850 staff, is to be sold separately, once the destiny of the airline becomes clearer. Bids are required by 6-Oct-2017. Meanwhile, airberlin is to end its US services in Oct-2017, marking the total closure of its long haul network (Caribbean services have already ceased).
Lufthansa has bid for NIKI (airberlin’s Austrian leisure subsidiary, which operates 17 A321s), the regional subsidiary Luftverkehrsgesellschaft Walter (LGW), and “parts of airberlin” (mainly further A320 family aircraft). Lufthansa’s LCC Eurowings will be the main beneficiary. EasyJet has bid for some airberlin aircraft, reported to be 27-30 narrowbodies, and associated slots and crew, in particular at Berlin Tegel.
If finalised, the transactions could make easyJet number one in the Berlin airport system and give Eurowings’ German market share a major boost.
Turkish Airlines’ intent to buy 40 Dreamliner 787-9s signals the end of its widebody order drought
Turkish Airlines’ several years of caution over making a significant order of widebody aircraft are set to end. On 21-Sep-2017 the airline announced its intent to order 40 Boeing 787-9 Dreamliner aircraft, to be delivered between 2019 and 2023. Turkish Airlines (THY) said that negotiations are continuing with Boeing, while the airframer said that the order will be reflected on its Orders and Deliveries website once finalised.
THY, whose long haul fleet currently favours Airbus, considers the 787-9 will meet its needs at Istanbul’s new third airport. The order will allow the airline to add widebody capacity, mainly to replace A330s, and in the words of THY Chairman İlker Aycı, “to enhance passenger satisfaction”.
The majority of THY’s aircraft are narrowbodies, and this will remain the case. Its global connecting strategy is founded on its proximity to Europe, the Middle East, North Africa and much of central and western Asia, all of which are in narrowbody range of Istanbul.
However, analysis of its current fleet plan suggests that a 40 aircraft order will not meet all of its widebody needs into the longer term. This raises the prospect of further orders, with Airbus also likely to be included.
Monarch Airlines: rumours of imminent demise not exaggerated. Bankrupt, AOC suspended. Pax airlift
Monarch, one of the UK’s oldest operating airline brands, now has the unfortunate distinction of being its largest ever UK airline administration.
Government chartered aircraft will repatriate 110,000 passengers, future bookings have been cancelled and 1,858 employees have been made redundant. Nevertheless, Europe’s third airline bankruptcy this summer will not have a material impact on industry structure.
As recently as 30-Sep-2017, the UK Civil Aviation Authority said that it was still renewing Monarch’s ATOL licence, confirming that protection would remain available for eligible bookings made on 1-Oct-2017. Unlike last year, when there were fears that Monarch’s finances would prevent its ATOL renewal, the CAA had not started to position charter aircraft at Monarch destinations for the possible repatriation of its passengers. Moreover, Monarch had been seeking potential alternative owners, but its inability to secure a buyer quickly sealed its fate.
Monarch had been burning cash and flying on close to empty for years. A CAPA analysis report of 15-Sep-2017 had suggested that a cash injection of GBP168 million from its 90% shareholder Greybull Capital between Oct-2016 and Mar-2017 might see it through, for now.
However, Monarch was always likely to keep coming back for more, and it seems that Greybull’s pockets are now not in play.