Cross-border airline JV model: is there still room in Southeast Asia?
Southeast Asia was a pioneering region for the cross-border joint venture model. AirAsia and Jetstar were the first movers, launching new LCCs in multiple Southeast Asian markets more than 10 years ago.
Lion, Scoot, VietJet and AirAsia X have joined the trend over the past five years. There are now 11 cross-border JVs in Southeast Asia, operating in five countries. The cross-border JV model has enabled ambitious airline groups to circumvent airline ownership regulations and expand rapidly throughout ASEAN - a dynamic market with a fast expanding middle class.
With so many JV airlines now operating and the introduction of ASEAN open skies, which has opened up the regional international market to any Southeast Asian airline regardless of domicile, it is questionable whether more JVs are needed. However, AirAsia, Lion and VietJet are still seeking to expand their ASEAN portfolio while others, including Jetstar, remain on the lookout for potential opportunities.
To read on, visit Cross-border airline JV model: is there still room in Southeast Asia?
CAPA Fleets: Rolls-Royce Trent 1000 engine directive implications
The Rolls-Royce Trent 1000 engines that power the 787 are back in the news due to an airworthiness directive requiring more frequent inspections, as well as applying a reduced ETOPS rating.
The Trent 1000 powers 39% of 787s so far delivered while the remaining are powered by GE, which is not impacted. Most Rolls-Royce engines for the 787 are under scrutiny, although the newer version - the Trent 1000 TEN - is not impacted. The latest development concerns Package C Trent 1000s.
ANA, LATAM, British Airways and Virgin Atlantic fly the greatest number of aircraft with Package C power plants. The number of faulty engines is unclear: Norwegian has identified one problematic engine, while LATAM has stored one aircraft and Virgin Atlantic has stored two. As airlines wait for a solution due next year, they are seeking interim lift capacity.
To read on, visit CAPA Fleets: Rolls-Royce Trent 1000 engine directive implications
Airline loyalty programmes, FFPs, data and revenues
Although airlines on the whole are financially stronger and becoming more countercyclical than at any previous time, investors often ask if an airline plans to spin off its loyalty programme. The perceived opportunity is for an airline to generate short term cash and reduce management distractions in what are typically complex organisations.
Yet the increasingly common view is that loyalty divisions - like an LCC subsidiary - are too valuable for total control to be given up. These units are core to an airline, unlike previous assets (hotels, GDS stakes) that airlines have disposed of. Loyalty programmes are a licence to print currency.
Through design, and accounting, they are almost always profitable - so selling them off creates revenue conflict between the airline and loyalty programme shareholders. The advantage is that outside ownership and management can bring loyalty programmes the innovative environment they need to benefit the airline but can also, increasingly, achieve the new objective: utilising data.
To read on, visit Airline loyalty programmes, FFPs, data and revenues
IAG and Norwegian Air begin to tango
IAG's interest in Norwegian Air was unexpected, but also not surprising. From nothing five years ago, Norwegian has built a 5% seat share on the North Atlantic, IAG's biggest long haul market. In response, IAG established Level, but an acquisition could rapidly accelerate its long haul low cost ambitions. It would extend IAG's leadership of the North Atlantic and make it Europe's biggest airline group overall.
Norwegian is a long haul low cost pioneer, but IAG will be wary of Norwegian's two annual losses in the four full years since it launched long haul operations, and its growing debt burden. IAG may also be wary of Norwegian's increasingly unfocused business model, encompassing European short haul, trans-Atlantic and Europe-Asia long haul, a new Argentine domestic airline and aircraft leasing.
Nevertheless, IAG says its 4.61% stake in Norwegian is "an attractive investment, …intended to establish a position from which to initiate discussions with Norwegian, including the possibility of a full offer". Norwegian said that it had not been in contact with IAG about this, but added that "interest from one of the largest international aviation groups demonstrates the sustainability and potential of our business model and global growth."
Norwegian meanwhile appears coyly to have taken up the invitation to tango with IAG. Let the fun begin.
To read on, visit IAG and Norwegian Air begin to tango
Stansted: London's expanding airport reduces its Ryanair dependency
London Stansted Airport is adding five new airlines to its list of operators this summer: Primera Air, Emirates, Air Corsica, WOW air and Albawings (in order of seat capacity). The list has increased from 14 airlines in Aug-2016 to 22 in Aug-2018, as the airport attempts to reduce its dependency on Ryanair, the facility's dominant airline. After only entering in 2017, Jet2.com is now Stansted's number three operator after Ryanair and easyJet.
Primera Air will add destinations in North America (Boston, New York Newark, Washington Dulles and Toronto) to Stansted's network and Emirates will add Dubai, but the airport remains short/medium haul dominated (181 out of 189 destinations in Aug-2018).
This summer, Stansted's seat growth rate is faster than at any other London airport and it is also adding more seats in absolute numbers than at any other airport. Stansted has had some success in attracting new airlines in recent years, but Ryanair still accounts for 70% of seats at the airport in Aug-2018.
To read on, visit Stansted: London's expanding airport reduces its Ryanair dependency
Ryanair talks "Amazon of Travel" at CAPA's Dublin Summit, 17/18-May
Ryanair, Europe's biggest airline by passenger numbers and most profitable by operating margin, has always focused on low fares and low costs. But that alone is not enough to keep it at the top in a highly competitive industry. Ryanair aims to be the 'Amazon of Travel'. This involves building on its annual customer base of 130 million passengers, most of whom buy directly from the airline's website and mobile app, to sell a much wider range of travel-related services.
Ryanair has made great strides with its digital strategy since relaunching it in 2014, but it is determined to remain at the forefront. This focus by one of the world's most successful airlines, at a time when the airline sector has been experiencing a period of historically high profit margins, points the way for others to follow. Successful customer engagement, through harnessing the IT revolution, is a major challenge for an industry that has often been slow to embrace innovation and change.
At CAPA's Airline Leader Summit in Dublin on 17/18-May-2018 Kenny Jacobs, Ryanair Chief Marketing Officer, and Bobby Healy, CarTrawler Chief Technology Officer, will jointly present their views and experience of this challenge in a keynote talk entitled 'Special Vision 2030 - What will the Travel Digital Ecosystem look like; and the opportunities it presents'.
To read on, visit Ryanair talks "Amazon of Travel" at CAPA's Dublin Summit, 17/18-May
Alaska Air and JetBlue: US value airlines reposition
The roll-out of basic economy fare options by the US major global network carriers and the effects of those new pricing structures on ULCCs has been a dominant theme in the country's aviation business during the past couple of years.
One question arising from the debut of the major airlines' basic economy fares is where the new pricing structures leave value airlines such as Alaska Air Group and JetBlue Airways on the competitive spectrum. Those airlines do not have the network breadth of the majors, nor the cost structures of ULCCs.
But both Alaska and JetBlue have moved to carve out their place in the US market during recent years: Alaska through its merger with Virgin America, and JetBlue with its focus city strategy and the introduction of its successful premium product Mint.
For Alaska, it will take some time for the Virgin America acquisition to bear fruit. JetBlue, meanwhile, is still evaluating a major move into the long haul, low cost trans-Atlantic market. But a pertinent question for those value airlines is their appropriate size in the US market as ultra discounters continue growing their share.
To read on, visit Alaska Air and JetBlue: US value airlines reposition