United and Azul: JVs on Latin America and airlines make their move
Another piece of the partnership puzzle for airlines operating between the US and Brazil has come together now that United has doubled its stake in Brazil's largest airline, Azul. United has upped its stake to 8% just after Brazil's Senate approved the US-Brazil open skies agreement, which paves the way for LATAM Airlines Group and American to start the process of gaining necessary approvals for their proposed joint venture.
Azul has openly stated its desire to forge a joint venture with United. The two airlines currently have a codeshare covering Azul's domestic markets from São Paulo Guarulhos and several routes in the US. United also codeshares with its fellow Star Alliance member Avianca Brazil, reflecting a dual strategy by the US major airline in Latin America's largest aviation market.
United has also been in discussions to forge a joint venture with the Latin American aviation group Avianca, which operates separately from Avianca Brazil, but has expressed an interest in merging with Brazil's fourth largest airline. Both Avianca and Avianca Brazil are majority owned by the Synergy Group. With so many moving parts, it remains to be seen how United intends to navigate its relationships in Brazil and throughout South America.
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Japan's LCC markets: Jetstar and Peach expand internationally
Japan's inbound tourism continues to expand rapidly, and the government has further growth targets. This may appear to be ideal for Japan's growing LCC sector.
Japan's LCCs are expanding internationally, although in recent times they have been maintaining balance with domestic flying. Peach is Japan's largest international LCC and is nearly twice the size of the second largest, Vanilla Air, with which it will merge. Yet the largest LCC serving Japan is actually a foreign one: Jeju Air.
International flying represents growth for Japan's LCCs, but there are significant challenges. Even though Japanese LCCs are low cost, they are medium and high cost compared to airlines from other countries - even full service Chinese airlines. Foreign airlines hold a geographical advantage for serving Japan's large network of underexploited secondary cities.
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Alitalia's culture of losses continues. Partners are hard to find
Network economics are a natural force for greater scale, but restrictions on market access, ownership and control are an unnatural barrier. Alliances and partnerships have evolved as the airline industry's way around such barriers.
Alitalia makes an interesting case study. It has 39 codeshare partners, is a SkyTeam member and is part of SkyTeam's immunised North Atlantic JV. It has previously participated in JVs with Air France-KLM on Italy-France and Italy-Netherlands. It has also been the recipient of minority equity investments from Air France-KLM in 2009 and Etihad in late 2014.
A year after entering administration in May-2017, Alitalia is still flying thanks to government loans that are now the subject of an EU State aid investigation.
A search for a bidder has been extended (again) to Oct-2018. Lufthansa, easyJet and Wizz Air are reportedly interested, but will want Alitalia to restructure and will not want the whole airline. Following Italy's inconclusive Mar-2018 general election, a return to state ownership is also being considered.
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Air Italy leads Europe's national airline branding. What's in a name?
When the Sardinian airline Meridiana rebranded as Air Italy earlier this year it was a reminder that a brand that appeals to national pride is still tempting in aviation.
Air Italy and its minority shareholder Qatar Airways sensed an opportunity to fill the 'flag carrier' brand gap expected to open up upon Alitalia's demise. Alitalia has continued to operate in administration for longer than originally expected, but that does not change the point that a national brand is still perceived to have value in Italy.
Elsewhere in Europe, others are also looking to benefit from the adoption of a name that sounds like a good old fashioned 'flag carrier'. Air Belgium is a new long haul operator planning to launch from Brussels Charleroi, while other nationally branded start-ups include Air Albania, Blue Slovakia, FlyBosnia, Air Andorra and Italian Airways (founded by a former Meridiana/Air Italy CEO).
However, these look like throwbacks to a bygone era. For many years now, most of the growth in European aviation has come from airlines with non-national names (e.g. Ryanair, easyJet and Wizz Air) and when even the big legacy groups have chosen non-national names for new airlines (think of Hop, Level and Joon). Norwegian may be the exception that proves the rule.
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Singapore LCC sector: Scoot emerges as clear market leader
Scoot is pursuing rapid expansion over the next year, enabling the Singapore Airlines subsidiary to widen the gap further with other LCCs competing in its home market. Scoot is expanding its fleet by eight aircraft in the fiscal year starting Apr-2018 while the fleet at the only other Singapore-based LCC, Jetstar Asia, will be flat for the fifth consecutive year.
Scoot, which merged with Tigerair in 2017, now has a 41% share of LCC seat capacity in Singapore and a 13% share of total seat capacity. Scoot's narrowbody operation (previously Tigerair) recently resumed growth after a three year hiatus, while the widebody operation which was initially launched in 2012 continues to grow at a consistent pace.
Six years ago, prior to Scoot's initial launch as a long haul LCC, the AirAsia, Jetstar and Tigerair groups had virtually equal market shares in Singapore. Jetstar at the time was the only LCC operating long haul routes from Singapore. Capacity at Jetstar and AirAsia has since been relatively flat, or slightly down, whereas Scoot has expanded rapidly.
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ANA & JAL dominate Japan's domestic airline market: record traffic
Japan is aviation's fifth largest domestic market after the US, China, India and Indonesia. Unlike those four countries with sustained growth, Japan has an economy that has undergone deep highs and lows while addressing substantial questions about future existence.
Despite this, in Japan's domestic market in its most recent financial year (the 12 months to 31-Mar-2018) there is forecast to have been record traffic as the market conservatively handles 100 million passengers.
Although Japan has more airlines, including LCCs, competition is restricted as most operators belong to the dominating ANA and JAL. CAPA's LCCs in Northeast Asia Summit in Seoul in Jun-2018 will gather industry leaders, including from Japan's airlines, to discuss domestic, regional and long haul markets.
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Europe's airlines: Who's growing fastest? Look at fleet orders
According to the CAPA Fleet Database, the 2,379 aircraft orders currently outstanding with European airlines represent 30% of the 7,824 aircraft currently in service (as at 30-Apr-2018). However, these orders are concentrated among relatively few airlines. Among the 72 airlines with outstanding orders (out of a total of more than 500), the number of orders is equivalent to 49% of their combined fleet in service.
The European airline with the largest number of orders is Wizz Air, with 273 aircraft still to be delivered. Wizz Air also ranks at the top of the list of orders expressed as a percentage of its existing fleet, with a figure of 284%. Ranking European airlines with outstanding orders in this way, rather than by absolute numbers, reveals those with strong ambitions relative to their current size.
Those placed high up the ranking of orders as a percentage of current fleet include some quite large operators, such as Wizz Air, Norwegian, Pegasus Airlines, S7 Airlines and Air Europa, and some smaller ones such as Primera Air, Red Wings, Travel Service, La Compagnie and Germania.
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