Low Cost Carriers News Update: Odds & Ends

By Vinay Bhaskara
Published September 9, 2013

The world of LCC’s keeps on heating up. Our own Vinay Bhaskara brings us a thorough update from around the world of the LCC’s:

Europe

  • Flybe reports that traffic is up 23% on its Inverness to Amsterdam route.
  • August 2013 traffic results came out for AirBerlin and they don’t look good. Traffic in August was down 5.3% and year-to-date (YTD) traffic is down nearly 5.8%. The oneworld member, who continues to struggle financially, is certainly in a period of transition.
  • airBaltic announced a net profit of 1.37 million Euros for the second quarter, reversing from a loss of more than 10 million Euros YOY. Good news on the air fares front with RASK up 4% and yield up 5.4% to 101.46 Euros. Eastern Europe’s airline industry, despite the structural challenges, continues to outperform that of broader Europe (as with the macroeconomy). Hopefully now that Air Serbia (formerly JAT Airways, not Eithad’s other play-toy Jet, but JAT) is in the hands of better management (keep in mind I’m not entirely sure that a blindfold donkey throwing darts at a map might not have been more succesful than the ex-JAT route planning team) via Etihad, hopefully Eastern Europe’s airline industry will continue to recover. airBaltic also took delivery of their final Bombardier Dash 8 Q400 (from an order of twelve) this week. Right now they also operate a fleet of thirteen 737 Classics, but once those are replaced with the CSeries (10 orders  + 10 options), airBaltic might become the first mainline carrier (I’m excluding the US regionals and EU legacy carrier regional subsidiary’s here) with an all Bombardier fleet. PLUNA down in Uruguay might have been the last one but they went bust more than a year ago.
  • Ryanair is accusing rival Aer Lingus for false advertising over the latter carrier’s “admin fee.” There’s a joke in here somewhere about Ryanair accusing someone of false advertising, but I’ll refrain from making it. The irony here is that Ryanair owns 29.8% of Aer Lingus and recently attempted to merge with Aer Lingus before being thwarted by the European Competition Commission and then ordered to reduce its stake in Aer Lingus down to 5%. I wonder if US Airways will sue American for having too nice of a customer experience on the new Airbus fleet if the merger is blocked by the DOJ lawsuit (I’m kidding…. mostly).
  • Ryanair reports record traffic in August of more than 9 million passengers (see table below). Over the last 12 months, Ryanair crossed 80 million passengers in the September-August period for the first time ever.
  • Wizz Air expands in Sofia:
    • The company has based a fourth Airbus A320 aircraft at Sofia; Bulgaria from May 2014 and announced a new route: twice weekly to Malmo, Sweden from 16th May
    • Wizz Air is also expanding frequencies from Sofia to:
      • Brussels Charleroi – 3x weekly to 4x weekly
      • Eindhoven – 4x weekly to 5x weekly
      • London Luton – daily to 11x weekly
      • Milan Bergamo – daily to 10x weekly
    • Wizz Air has certainly stepped in to fill some of the void in Eastern Europe as the legacy carriers in the area undergo their painful restructuring.
  • A little bit older, but SkyTeam member Air Europa is launching operations to Germany with twice daily flights between Madrid and Frankfurt.
  • Jetairfly’s launching Miami-Brussels – 2x weekly 767-300ER from 4th April, 2014. Miami’s now up to 14 European destinations – impressive growth in that sphere over the past few years. Still no nonstop to Austin though. Who would have thought that Austin gets a nonstop to London before it does Miami (yes, I know that there’s plenty of capacity on Austin – Miami, but still)?
  • EasyJet announced its summer schedule. New UK routes include:
    • London Gatwick – Bucharest, Manchester – Venice, Liverpool – Larnaca (Cyprus), London Stansted – Sofia (again!)
  • Norwegian Air Shuttle is launching a massive long haul expansion using its fleet of Boeing 787 Dreamliners. The carrier already serves Oslo/Stockholm – New York JFK/Bang, and by the end of May 2014 will have launched the following routes to and from the US:
    • Copenhagen – New York JFK, Oslo/Stockholm/Copenhagen – Fort Lauderdale, Oslo/Stockholm/Copenhagen – Los Angeles, Oslo/Stockholm – Oakland, and Oslo-Orlando.
    • The total operation for summer 2014 is set to be 32 flights per week on 12 routes to 5 US destinations – not bad, and already busier than Scandanavian rival SAS.
    • CEO Bjorn Kjos is a cool guy – I met him at the press briefing in New York to celebrate the expansion, and besides his propensity to make jokes about how half of India has migrated to the UK (five times he made reference to this between the party and pres briefing) I think he’s a really shrewd and bold CEO who’s managed Norwegian well.
    • Long Haul LCC isn’t traditionally a space you want to be in, varied names from AirAsia X, eos, MaxJet, and Oasis Hong Kong have tried and failed over the past decade. But Jetstar seems to have survived with long haul low cost between Asia and Australia, a space that Singapore Airlines venture Scoot has also ventured into with some success. Even Air Canada’s much maligned Rouge operation appears to be doing well in Edinburgh with Dublin soon to come. And keep in mind that Norwegian will have a more optimal aircraft (the Dreamliner) than any of them.
    • Another quick Norwegian note, even as traffic results for airlines across much of Europe floundered, Norwegian recorded strong passenger growth in August of more than 14%.

Asia

  • Moving on to Jetstar Hong Kong, the new Qantas group venture with China Eastern ambitiously applied for the rights to serve no less than 129 destinations across 16 countries, including 48 in China from Hong Kong. Keep in mind that the venture doesn’t even have an operating certificate yet. Of course the incumbent, Cathay Pacific, who dominate the Hong Kong air travel market, turned around and alleged that the very Jetstar Hong Kong operation itself is illegal due to ownership issues (namely that the owners are mostly Australian, illegal under Hong Kong law). If you remember, a similar accusation was thrown at Virgin America when they first started up. And what did you expect Cathay Pacific to do, welcome a fierce competitor into their home market with open arms? This is also notable news as it’s our second inter-alliance spat of the week, following Delta-Korean in SkyTeam.
  • China’s most successful LCC Spring Airlines, has made progress in its Japanese subsidiary and is aiming for a May 2014 launch. Lots going on in the Japanese LCC market, though most of it in nomenclature. And its not just the food carriers (Vanilla Air, Peach). There’s also a Japanese LCC called Kiss Air. Spring Airlines Japan seems positively tame by comparison.
  • AirAsia is challenging the ruling from Malaysian competition authorities that its 2011 cooperation deal with Malaysia Airlines was anti-competitive. Really, a deal that allowed two carriers holding 85% of the Malaysian market to effectively collude wasn’t anti-competitive? The only thing I can’t figure out is why the deal wasn’t blown up by the competition authorities when it was announced. Ironically, the deal fell apart less than a year later, so there’s that.
  • Tigerair turns 9! Always nice to see an airline survive, and Tigerair is nicely positioned with the recent Virgin Australia purchase of a 60% stake completed.
  • Peach is adding one extra roundtrip flight on Osaka Kansai – Hong Kong (up to 2x daily) and Osaka Kansai – Tokyo Narita (up to 3x daily).
  • Cebu Pacific took delivery of their second A330-300. The aircraft will be used on Manila – Cebu and Manila – Hong Kong. The aircraft will be introduced on Manila-Dubai from 7th October. Cebu Pacific’s A330-300s are going to seat 436 passengers; that’s a tight squeeze. They’re also adding:
    • Two new weekly frequencies on each of Manila – Dumaguete, and Manila – Roxas on A319s from September 16th, one new weekly frequency on Iloilo – Hong Kong (up to 3x weekly), 3 new weekly flights on Cebu-Zamboanga, and up-gauging 4 weekly Manila-Virac from ATR 72 to A319 – more than doubling seat capacity
    • More fun news from Lion Air – the latest reports have them allocating four passengers for every three seats. Just the latest in a string of safety mishaps from Lion Air – you’ll remember, they’re the ones who had a plane hit a cow a couple of months ago. Their safety record is truly abysmal, even for Indonesia – and they must have had a dozen planes off the end of a runway in the last year lone. Lion Air’s slogan is “We Make People Fly.” Perhaps that’s a literal reference to the ejector seats Indonesian safety authorities are going to force them to install in all of their planes soon? In other news, Lion Air is also set to have the largest fleet in Southeast Asia by year end….. Awesome.
      • And this news is a couple of months old, but it was just too good to pass up. Apparently Lion Air runs a flight school? For which they recently ordered 20 Cessnas? Pardon the language, but who the he// is going to Lion Air for flying lessons?

North America

  • Air Canada Rouge is doing well on Toronto – Edinburgh, with Dublin coming online soon. I’m intrigued by Rouge – that type of operation has done well in Canada (read Air Transat), and if they can hold out till the 787s come on property, Air Canada could have a (rare) winner on its hands. That being said, I’m not 100% sure Air Canada will manage to keep Rouge costs down long enough for that to happen, or 50% sure, or 25% sure……
  • JetBlue announced that it has selected Aviation Technical Services (ATS) to install WiFi on the carrier’s fleet of Airbus A320 aircraft.
  • Allegiant reported solid August traffic. But more importantly, it’s launching its first national television advertising campaign. This is just the latest in a series of interesting steps from Allegiant (the others being the new Los Angeles – Honolulu, and Las Vegas – Austin route) that make me question whether Allegiant is trying to shift itself into the Spirit-esque role of nationwide expansion. Just a couple of data points in favor of this at the moment, but this is certainly a departure from the Allegiant of old.
  • As Frontier shifts towards a ULCC model, its operation is in flux, so no surprise that traffic results were deliciously mixed in August (ASMs/RPMs down 8% each but passengers carried actually up 1%). Reflects more short haul flying and the de-emphasis of Denver within the Frontier network. On that note, the Metro Denver Economic Development Corporation released its annual air service report comparing August 2013 vs. August 2012 at Denver International. Couple of interesting notes on Frontier there: YOY traffic is down 17% and departures are down 23%. Frontier still has around 110 peak day departures from Denver, but I expect that to come down further (probably settling somewhere around 75) as Frontier continues to evolve. A whole different animal indeed.
  • On the note of Frontier’s network evolution, here are some new leisure point to point routes for Frontier from January-end 2014 that just got uploaded to the GDS:
    • Lansing – Cancun, Lansing – Puerta Vallarta, Lansing – Punta Cana, St. Louis – Cabo.
    • The Lansing stuff is interesting because that’s Sun Country territory on the domestic side, but its being done with Apple Vacations so it has a solid shot at sticking around.
    • Not much news from Mexico’s LCCs – all Volaris here on the routes side:
      • Volaris inaugurated Guadalajara – Merida and Guadalajara - Tuxtla Gutierrez, its 17th and 18th destinations out of its Guadalajara hub
      • They also want to fly Guadalajara – Ontario, and about a month ago applied for the following routes from the DOT:
        • Culiacan/Hermosillo to Las Vegas, Guadalajara to Denver/Orlando/San Antonio, Tijuana to Oakland/San Jose.
  • Volaris is really pursuing a fast expansion to the US as it races against Aeromexico to fill the still un-filled somehow) void of Mexicana. Keep in mind that most US-Mexico airport pairs are limited to service from two carriers from each side (four in total). How this market hasn’t gotten Open Skies yet is beyond me.
  • Southwest and AirTran flight attendants reached a tentative agreement on the CBA that first became amenable in late May. Not much to add here except, that the CBA pushes up pre-merger AirTran crew costs up to Southwest levels; this is why you’ve seen Southwest shrink much of the old AirTran network, giving Atlanta a major haircut and ridding themselves of the 717 fleet. I think Southwest is scared of a confrontation with its crews, so it continues to sacrifice cost competitiveness for labor peace. This is fine so long as you can grow revenues in tandem (which pre-merger Southwest did), but the ex-AirTran network is more price sensitive; this is why a lot of it is going away post-merger. If the DOJ is angered by the American-US Airways’ merger’s effect on fares, one can only imagine how much of a hissy fit (and make no mistake the lawsuit, with all its flaws basically amounts to a hissy fit) the DOJ would throw if it ever went back and looked at the effect the AirTran – Southwest merger had on competition.

Middle East

  • Saudi Arabian LCC Nasair took delivery of the Middle East’s first A320s with sharklets, 4 of them to be exact.

Australia

  • Lots of route announcements from Jetstar proper (i.e. the Australian one):
    • 3x weekly Adelaide-Auckland on A320s from 16th December- nicely timed expansion after full service Qantas withdrew from Adelaide long haul after nearly 30 years of service, canceling Adelaide – Singapore.
    • China Eastern, China Southern, DELTA, Malaysia Airlines, El Al, SWISS and Turkish Airlines have been added as interline partners. Lots of SkyTeam and Star Alliance in there, but it’s not as if Qantas Group are model oneworld citizens there anyway.
    • 18 new weekly services from Singapore starting 27th October: 2 more weekly Singapore-Bali flights, new 3x weekly Singapore – Phnom Penh, one additional weekly flight on each of Singapore-Hangzhou/Shantou, 4 more weekly Singapore-Medan flights, and 4 additional weekly flights on Singapore-Jakarta; a route now up to 25x weekly.
    • New 2x weekly Melbourne – Phuket from 14th December (up to 3x weekly from March 2014), increase of Melbourne-Honolulu from 3x weekly to 4x weekly from 19th December, another shot across the bow of Hawaiian Air who is struggling with yields on its recent (and massive) Pacific expansion.

India

  • India’s LCCs didn’t really do much either except hike fares by 25 (IndiGo) and 30 (SpiceJet) percent along with full service carriers Jet Airways and Air India. The one holdout (GoAir) is expected to fold soon and hike its fares as well. India’s airlines are really struggling with the Rupee’s devaluation – in the airline industry, there are certain costs (most importantly aircraft finance/leasing) that have to be accrued in dollars. And the adverse effect on India’s macroeconomy of the Rupee’s fall isn’t helping the already soft demand environment. Of course India’s carriers have committed to grow their fleets with massive new orders over the next few years. And you have AirAisa India and Air Costa (in an attempt to re-live the [not-so] glorious days of failed operator Paramount Airways by operating regional jets in a market where turboprops are given an additional 50% cost advantage over regional jets thanks to government incentives) throwing their hat into the rink as well. When will they ever learn?

Africa

  • African LCC fastjet raised 3 million pounds in further equity and launched a new route between Dar es Salaam and Mbeya, 3x weekly on the Airbus A319, which is notable in that it’s Mbeya’s first ever commercial service. A tip of the hat to Sir Stelios (as bonkers as he can be sometimes), for the idea behind this trail-blazing venture. Keep in mind that in Africa, traveling by ground can be very dangerous which limits inter-city trade greatly. fastjet and other LCCs that are sure to spring up in Africa are sure to play an important role in business development there.

About the author, Vinay Bhaskara

VinayVinay is Airchive’s Senior Business Correspondent and analyst. He is based in Chicago, Illinois. He has been covering the industry in some form since 2008, and currently covers the industry for Bangalore Aviation and Aspire Aviation in addition to his duties for Airchive. His area of specialty lies in airline finance and business practices, as well in data analysis. Bhaskara has been an avgeek since his first long haul flight, when his fascination with Delta’s route map birthed a lifelong passion. In his life beyond aviation, Bhaskara is the co-founder of Admissions Hero, a college consulting service tailored towards students seeking acceptance to elite American universities. He also co-authored an SAT prep book and 2 ebooks related to aviation. In what little free time he has, he enjoys watching and playing all types of sports, as well as binge-watching USA Network television shows and Bollywood films. Follow him on Twitter @TheABVinay, connect with him via his Facebook page, or reach him via email at vinay.bhaskara@airchive.com

 

Airchive’s Jeremy Dwyer-Lindgren contributed to this report.

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