Qatar Airways’ pledge to freeze any plans for operating fifth freedom flights, followed by a similar deal with the UAE, has resulted in the US Big 3 claiming victory in their years-long subsidy campaign while American, Delta and United’s opponents in the debate are left scratching their heads over what exactly is being accomplished.
American, Delta and United have argued that their grievances were never about the elimination of fifth freedom flying on a broad scale. It was “subsidised” fifth freedom operations and the potential for expansion that raised their ire. A similar agreement with the UAE should allay the concerns of FedEx that its crucial global fifth freedom operations are not in jeopardy.
Emirates obviously has more skin in the game since it actually operates fifth freedom flights. But given that those operations represent a microscopic proportion of the airline’s operations, perhaps agreeing not to pursue further fifth freedom flying is a small price to pay in order to end the years-long subsidy controversy.
However, now that a similar agreement has been reached with the UAE, is it really the end of the debate or merely a temporary truce?
To read on, visit US-Gulf airline conflict: peace with (almost) honour
Rising oil prices focus airline management on the need for the latest generation of fuel efficient aircraft. For the bulk of airlines and the bulk of routes, where narrowbodies dominate, this means the Airbus A320neo and Boeing 737MAX families.
However, the 737 order backlog currently stands at around nine years, and the A320 backlog is 12 years (based on 2017 delivery numbers and current orders outstanding). Increases in production rates help to ease the backlog, but problems with engine delivery work against this.
This report examines data from the CAPA Fleet Database on Europe's A320neo and 737MAX fleets and orders. In Europe the A320neo is more popular than the 737MAX, and its popularity seems particularly high among LCCs. Pegasus Airlines is Europe's biggest neo operator and Norwegian is Europe's biggest MAX operator. Wizz Air has Europe's biggest neo order and Ryanair has Europe's biggest MAX order.
To read on, visit Europe prefers Airbus A320neo over Boeing 737MAX – especially LCCs
On 17-May-2018 Brent crude oil touched USD80 for the first time since Nov-2014. As of 17-May-2018, the average Brent crude oil price for the year to date was USD69 – a 28% increase on 2017's average price of USD54. If the price were to remain at USD80 for the rest of the year, the average for 2018 would then be USD76, which is 40% up on last year.
Based on the year to date jet fuel price of USD83 per barrel, IATA estimates that the world's airlines will pay USD39.3 billion more for fuel in 2018 than in 2017. With net profit at USD34.5 billion in 2017, this is a significant additional cost.
It is a sign of the airline industry's greater resilience that it can face the prospect of such a significant increase in fuel costs without the prospect of losses. Nevertheless, it is likely to be a factor in taking airline operating profit margins further down from recent cyclical peaks.
To read on, visit Airline margins: squeeze is on as Brent crude oil touches USD80
Royal Brunei Airlines has confirmed plans to launch nonstop flights to London following delivery later this year of a fifth 787-8. Royal Brunei has served London since 1990, initially as a two-stop service via Singapore and Dubai and since 2004 as a daily one-stop service via Dubai.
Offering a nonstop product from Bander Seri Begawan to London Heathrow is a major milestone for Royal Brunei which will raise the airline’s global profile and improve its position in the Southeast Asia-London and Australia-London markets. The new service will also raise Brunei’s profile as a country and could help Brunei meet its objective of doubling visitor numbers over the next four years.
However, the new 14-hour route will pose commercial challenges as Royal Brunei will need to rely heavily on sixth freedom traffic in a handful of extremely competitive city pairs. Royal Brunei is now offering very low fares on its new one-stop Melbourne-London connections.
To read on, visit SE Asia-London: Royal Brunei launches new competition
Singapore Airlines (SIA) has unveiled plans to merge its regional full service subsidiary SilkAir into the parent airline in the next decade, following a major cabin product upgrade project that will involve retrofitting SilkAir’s entire fleet with lie-flat business class seats. Seatback inflight entertainment systems will also be installed as SIA upgrades SilkAir’s current product to SIA’s higher standards, resulting in a more seamless experience for the group’s full service passengers.
Once the more than USD100 million narrowbody retrofit programme is complete, SIA will have the distinction of offering lie-flat business class seats across the group's full service fleet. Earlier this year SIA announced the introduction of lie-flat business class seats on its regional widebody fleet as new 787-10s and regional A350-900s are delivered to replace A330-300s and older 777 variants, which are fitted with an outdated angled flat product.
SIA Group’s decision to upgrade its full service narrowbody product is sensible, given the large – and growing – product gap between the SilkAir narrowbody and Singapore Airlines' widebody fleets. Competitors have also been improving their narrowbody product, forcing SIA to make a move.
Meanwhile, the absorption of SilkAir into SIA should enable the group to reduce costs and improve efficiency as the number of operator's certificates, which just a year ago stood at five, is reduced to only two. The SIA Group has already merged the short haul LCC Tigerair with the long haul LCC Scoot and folded SIA Cargo back into SIA; the folding of SilkAir into SIA was inevitable.
The China-US market – like many markets from China – has been growing fast in volume and percentage in recent years. It is inevitable that there will be some contractions along the way, even if long term growth is the result of significant expansion.
United Airlines has ended service to two secondary Chinese cities, but a bigger change comes from American Airlines suspending Chicago-Beijing service until American can relocate to Beijing's new airport at Daxing in 2019 and grow its partnership with China Southern. Even with a relatively short time to wait (assuming American will still want to resume the service), American is not willing to stomach losses for the interim.
American's Chicago-Beijing service has been troubled since before it started; American struggled to secure slots. American now has better slots, but they preclude connections in Beijing. Its former partner Hainan was in a separate terminal and had limited inventory for onward connections.
To read on, visit American suspends Chicago-Beijing: partnerships and slots the solution
Scoot launched operations six years ago, in Jun-2012, as a new long haul low cost subsidiary of Singapore Airlines. Scoot pursued rapid expansion in its first five years, becoming Asia’s second largest long haul low cost airline with a fleet of 14 787s and a network of 23 destinations, as of its fifth anniversary.
Scoot began a new chapter in Jul-2017 as it completed a merger with Tigerair, a short haul LCC which started operating in 2004. Tigerair Singapore was operating 23 A320 family aircraft to 41 destinations when it combined with Scoot under a single operator's certificate and brand.
As of the close of the fiscal year ending 31-Mar-2018 (FY2018) Scoot, the surviving brand, was operating a fleet of 40 aircraft (16 787s and 24 A320 family aircraft) to 63 destinations. Scoot plans to grow its fleet by eight aircraft in the fiscal year ending 31-Mar-2019 (FY2019) as part of an ambitious five-year expansion programme.
To read on, visit Scoot SWOT: ambitious expansion plan presents opportunities, threats