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:
- Etihad’s Abu Dhabi hub: more partners stop service, shifting Etihad’s outlook to a boutique airline
- EasyJet’s new connections service breakthrough leap-frogs Ryanair. Punctuality will need to improve
- Royal Brunei Airlines: North Asia & India expansion as narrowbody fleet expands with A320neos
- Trans-Pacific challenges cloud Air Canada’s bullish outlook for the rest of its network
- Pobeda: an indispensable part of the Aeroflot Group, even as the LCC’s growth slows
Etihad’s Abu Dhabi hub: more partners stop service, shifting Etihad’s outlook to a boutique airline
Etihad and its Abu Dhabi hub are shifting from an expansive network involving multiple partners to a smaller footprint centred around Etihad. 2017 is witnessing an exodus from Abu Dhabi of Etihad’s equity partners. Air Berlin, Air Serbia, Niki and Virgin Australia have all ended Abu Dhabi flights. Air Seychelles has reduced capacity.
Jet Airways, the largest partner in Abu Dhabi, is reducing its presence as it favours a new partnership with Air France-KLM and Delta, and shifts its flying from Abu Dhabi to Amsterdam and Paris. Jet Airways is scaling back Abu Dhabi service from secondary Indian cities, the market the Abu Dhabi hub was right for.
Etihad has more work ahead of it as it unwinds its partnership strategy and receives a new CEO, but it is evident the future Etihad will be more boutique and have to rely more on itself as its strategy is refocused.
EasyJet’s new connections service breakthrough leap-frogs Ryanair. Punctuality will need to improve
EasyJet’s announcement of a new connections service, ‘Worldwide by easyJet’, is a major new step towards blurring the lines between full service network airlines and LCCs. The new service involves a booking platform to facilitate the transfer from easyJet onto other airlines’ long haul flights and easyJet-easyJet transfers. Launch partners are Norwegian and WestJet at London Gatwick. The LCC plans to add more airlines, with Emirates and Cathay Pacific possible contenders, and to roll out the service to other airports. It is also to sell tickets on its website for partner airlines, starting with UK regional carrier Loganair.
‘Worldwide by easyJet’ uses Gatwick Airport’s ‘GatwickConnects’ product, launched in 2015 on a platform built by Icelandic travel technology company Dohop. The main innovation is the IT that links the schedules and pricing of different airlines, presenting customers with a single interface. EasyJet’s new service is an incremental change in that it uses an existing service, but it is harnessing it to its large European network and its highly visible website.
EasyJet will need to improve its punctuality record at Gatwick, but there is no fundamental change to easyJet’s operating model in terms of its point to point schedule and network philosophy. However, easyJet does appear to have stolen a march on Ryanair and leap-frogged it in offering connections.
Royal Brunei Airlines: North Asia & India expansion as narrowbody fleet expands with A320neos
Royal Brunei Airlines is planning to resume network expansion over the next 18 months as its fleet expands from 10 to 14 aircraft. New routes to China, Korea, Japan and Taiwan are likely as the flag carrier aims to diversify its network and benefit from an anticipated rise in visitor numbers from North Asia.
Royal Brunei may also launch services to southern India. It currently operates scheduled services to only two destinations in North Asia, and does not have any destinations in South Asia.
The airline is growing its narrowbody fleet by three aircraft as seven A320neos are delivered by early 2019. The A320neo enables Royal Brunei to reduce its cost base and open up new medium haul routes to India and North Asia.
Trans-Pacific challenges cloud Air Canada’s bullish outlook for the rest of its network
Conclusions presented by Air Canada at the end of 1Q2017, that trends were moving in the right direction in domestic, US transborder and trans-Atlantic markets, have largely come to fruition. The airline posted positive passenger revenue growth and yield increases in each of those entities in 2Q2017, and believes the positive momentum should continue into 2H2017.
The airline still faces challenges on its Pacific routes, and will transfer capacity deployed from its Vancouver hub to Beijing and Shanghai to the Atlantic, where demand is stronger.
It is not clear when yields on Air Canada’s Pacific routes will turn positive, but the company’s own capacity growth of more than 20% year-on-year in those markets has also pressured yields as it cycled through introductory pricing on routes launched in the trans-Pacific during that period.
Air Canada’s system capacity growth should slow in 2018 as it nears completion of a widebody fleet revamp and turns its attention to updating its narrowbody fleet. Growth in the airline’s average stage length will also start to slow down, which will mitigate the decline in yields Air Canada has experienced during the past few years as it has worked to bolster its international network.
Pobeda: an indispensable part of the Aeroflot Group, even as the LCC’s growth slows
Pobeda has firmly established itself in its first two and a half years. The Aeroflot subsidiary, Russia’s only low cost airline, has a 5% share of seats in the domestic market, which accounts for 85% of its capacity. Domestic routes will remain its main focus, but it also has a burgeoning international network of 12 routes and will launch Moscow Vnukovo-Karlsruhe/Baden Baden in Oct-2017.
Pobeda enjoyed rapid growth in passenger numbers from its launch in Dec-2014 until late in 2016, accompanied also by strong load factor gains. In 2017 its capacity is falling slightly, but its passenger count has continued to grow, albeit at much slower rates than last year. Nevertheless, it still holds high growth ambitions beyond 2017.
Russia’s geography, together with Pobeda’s low fares and the lack of LCC competition in the domestic market, often mean that it is the only convenient means of travel between cities. These conditions, together with a focus on a simple product and low costs, helped to make Pobeda profitable in 2016 (only its second full year of existence) and it expects another positive result in 2017.
In its short life, Pobeda appears to have become an indispensable part of the Aeroflot Group.