Each 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.
US airline scope clauses may hinder United meeting 2020 targets
Scope clauses have been a mainstay in US mainline pilot contracts as 50-seat, and then 70- to 76-seat, jets have permeated the US market place. There have been changes to scope over the years that have allowed American, Delta and United to add varying levels of larger regional jets based on certain percentages of their respective mainline fleets, and caps on the larger aircraft.
United Airlines has reached its cap for larger regional jets, and now is in the process of adding 50-seat regional jets as it works to become more competitive against its larger US rivals in the country’s domestic market.
It is a less than ideal scenario for United, but the airline is taking great care to stress that its ambitious earnings targets for 2020 are not based on changes to its scope clause.
To read on, visit US airline scope clauses may hinder United meeting 2020 targets
Singapore Airlines fleet strategy: 737 transfers from SilkAir to Scoot
The Singapore Airlines (SIA) Group plans to transfer 737-800s from its regional full service subsidiary SilkAir to the low cost subsidiary Scoot in the latest adjustment under the group’s ongoing strategic review. Potentially several 737-800s will be retrofitted to high-density all-economy configuration before entering service with Scoot, enabling the group to lower unit costs and compete more effectively on short haul routes now served by SilkAir.
SIA has been working to cut costs and improve profitability through several measures, including route transfers. Five routes have already been transferred from SilkAir to Scoot since late 2017, and several more transfers are likely over the next year.
As lower cost Scoot takes over more routes, a rebalancing of the SIA Group’s narrowbody fleet was inevitable. In hindsight, SIA overordered in 2012 when committing to 54 737s for SilkAir; at the time, Scoot had just launched operations as an all-widebody operator and Tigerair was not part of the group.
To read on, visit Singapore Airlines fleet strategy: 737 transfers from SilkAir to Scoot
North Atlantic aviation: UK is largest, but others are growing fast
The UK is by far the biggest European market by airline capacity to the USA, with more than twice as much as the number two, Germany. It is also more than the combined capacity to the USA from Germany and third placed France. These top three countries account for more than half of Europe-US seats, while 17 Western European countries account for 95% of Europe-US capacity.
The Netherlands, Ireland and Iceland are relatively small aviation markets overall, but they punch above their weight on routes to the US, thanks to their airlines’ hub strategies.
This gives Iceland the fastest seat growth rate to the US from Europe this year and the second fastest over the past five years. Greece has grown most rapidly on a five year view, albeit from a very small base, driven by US airline expansion and Emirates’ fifth freedom entry.
Growth from Portugal has also been strong, thanks to a resurgent TAP Air Portugal. The Scandinavian countries have experienced rapid capacity growth to the US as a result of Norwegian’s 2013 entry and SAS’ consequent decision to expand in response.
This report ranks the size and growth of the markets to the US from Western European countries.
To read on, visit North Atlantic aviation: UK is largest, but others are growing fast
Sukhoi SuperJet: from Russia, with hope
In late Apr-2018 S7 Airlines signed a letter of intent to buy 50 Sukhoi SuperJets, with options over a further 25. The order is for the as yet undeveloped 75 seat SSJ-75, the smallest variant of the SuperJet family, with a target entry into service in 2022.
The 100-seat Sukhoi SuperJet conducted its maiden flight on 19-May-2009 and entered service in 2011 (although the launch customer Armavia subsequently withdrew its single aircraft from service). The first delivery to an operator outside Russia was to the Mexican LCC Interjet in 2013, and the first delivery to Western Europe was to CityJet in 2016.
The SuperJet competes with Bombardier’s CSeries and Embraer’s E-Jet, but targets the lower end of the size range for new technology regional jets. SSJ variants will offer 75-100 seats, whereas the CSeries is in the 100-130 seat range and the E-Jet will be in the 80-140 seat range. (The SSJ size range also mainly avoids direct competition with the lower end of the Airbus A320 and Boeing 737 families).
Built by the Sukhoi Civil Aircraft Company, which is part of Russia’s majority state-owned United Aircraft Corporation, the SSJ is rare in being a Russian-built aircraft operating within Western markets. SCAC is now hopeful of securing more orders in Europe, with interest reportedly high in the Balkan region.
This report presents details of the Sukhoi SuperJet’s installed fleet and order book.
To read on, visit Sukhoi SuperJet: from Russia, with hope
Philippine Airlines: big fleet changes as A321neos, A350-900s arrive
Philippine Airlines (PAL) faces a momentous but challenging second half of 2018 as the airline group takes delivery of 13 aircraft and launches at least four new international routes. New nonstop flights to New York, Mumbai, New Delhi and Sapporo represent the latest phase in a strategic expansion plan that has already included five new nonstop long haul destinations since the beginning of 2017.
PAL recently took delivery of its first A321neo after several months of engine related delays. A second A321neo will be delivered next month along with PAL’s first A350-900. Both types feature lie-flat business class seats as part of an initiative to improve PAL’s long-haul product and attractiveness to potential partners.
PAL will use its first six A321neos, all of which will be delivered this year, for a new long haul low density narrowbody operation. Four A350s are slated to be delivered in 2H2018 and will be used to launch nonstop flights to New York and potentially to right-size London, which is now suffering from overcapacity with 777s.
To read on, visit Philippine Airlines: big fleet changes as A321neos, A350-900s arrive
Korea-Taiwan: LCCs drive growth, new city pairs. FSCs pull back
The market between Korea and Taiwan is woefully small; the total size from all airlines, LCCs and full service, equals the amount of LCC capacity between Japan and Korea.
This is the result of the lack of liberalisation between Korea and Taiwan for the main Seoul-Taipei route. In the face of restrictions, smaller airports are partnering with LCCs to generate new city pairs that are not subject to bilateral restrictions. The number of city pairs between Korea and Taiwan is expanding, and so too is the overall market – but mostly because of LCCs.
Since 2016, full service airlines have slightly decreased capacity between Korea and Taiwan, whereas LCCs have expanded and grown the overall market. LCCs have amassed a 37% market share between Korea and Taiwan. CAPA’s LCCs in Northeast Asia summit in Seoul in Jun-2018 will explore these markets, as well as airline-airport partnerships and growth opportunities for Korea’s existing LCCs and the large list of start-ups.
To read on, visit Korea-Taiwan: LCCs drive growth, new city pairs. FSCs pull back
Holidays: no rest for Europe’s LCCs
European tour operators have always sold integrated package holidays, combining flights, hotel rooms (or cruise berths) and extras such as car hire, excursions and events. This has offered not only convenience, but typically value for money compared with assembling all the elements separately. Moreover, in the pre-internet era, it was almost impossible to do it all without a travel agent.
Then LCCs came along and things changed. Their core product was flight seats, which they offered very cheaply, but they also started to offer third-party travel services, such as hotels and car hire, through their websites. This gave consumers the opportunity to self-assemble their own package holiday.
In response, the integrated tour operators started to unbundle their package holidays. Their charter airlines began to increase their seat-only offer and to grow scheduled services.
Now, a number of leading low cost airlines, in partnership with third party suppliers, are bundling up the distinct elements of a holiday (that they have long sold) to offer package holidays. Recent comments from easyJet about growing its share in this market and Ryanair’s ongoing plan to be the ‘Amazon of travel’ demonstrate LCC ambitions in holiday sales.
To read on, visit Holidays: no rest for Europe’s LCCs