Full-service airlines stay strong despite headwinds

airlines
From left: A Qatar Airways cabin; SIA’s in-flight entertainment system; Singapore Airlines’ (SIA) Airbus A380-800; Qatar Airways’ A320

Although the world’s economic centre of gravity has in recent years shifted towards Asia-Pacific, it has not immunised airlines in this region from the fallout of ailing economies in Europe and the US and, for a brief period, the Arab Spring. A falling demand for Chinese goods in the West has dampened China’s efforts to emerge from a economic slowdown and its ability to power the entire region, but this seemed to have bottomed out by October. While economic challenges are not new to the airline industry, their timing and duration coincide with high oil and food prices, natural calamities and rising unemployment in many markets, thereby conspiring to bring about a perfect storm. In spite of this, airlines operating in this region have defied the odds and submitted report cards that bring some cheer as 2012 comes to a close.

 

Singapore Airlines

Despite being one of the most acclaimed carriers worldwide, Singapore Airlines (SIA) has not been spared the negative impact of the economic woes in Europe and the US, strong competition from the powerful Gulf airlines and low-cost carriers as well as high oil prices. The airline appears to have arrested the decline in quarter earnings, and in September, carried 1.5 million passengers (an increase of 6.1 per cent year-on-year) and raised its passenger load factor by one per cent to 80.6 per cent – powered by strong summer travel originating in the Americas and Europe. This rebound comes amid positive news that the Chinese economy appears to have bottomed out too.

CURRENT DESTINATIONS SIA and Virgin Australia have expanded their codeshare arrangement in August to cover Vietnam, Thailand, Malaysia and Sri Lanka, as well as additional cities in Australia and China. Both airlines can expect to benefit from Qantas’ decision to operate its Kangaroo Route services to London through Dubai instead of Singapore.

After Lufthansa ceased its Munich-Singapore-Jakarta route in October, SIA restored its Singapore-Munich-Manchester route to a daily service.

Growing demand for business travel to Myanmar has also led to SIA’s decision to launch daily services to Yangon, replacing seven of 16 SilkAir services on Airbus 320s with its own 323-seater Boeing 777-200.

PLANNED DESTINATIONS For the summer 2013 season, SIA has already announced additional services from Singapore to Fukuoka (from five-times weekly to daily service), to Moscow and Houston (from five-times weekly to daily service) and to Osaka-Kansai (from 11 to 14 weekly services).

According to a reliable industry source, SIA has been granted permission by the Italian authorities to operate between Milan and New York, which if proven true, could be a high-yield ‘Bankers’ Route’.

From 4Q2013, SIA will cease its nonstop Singapore-Los Angeles and Singapore-Newark routes, ending two of the world’s longest commercial flights.

FLEET Since August, SIA has announced a slew of planned improvements to its products, in-flight connectivity and in-flight entertainment systems, which will be rolled out on its new fleet of eight B777-300ERs, 15 A330-300s (delivery of both will begin in 2013) and 20 A350XWBs (delivery beginning in 2014).

With 19 A380s already in operation, SIA has placed a new US$7.5 billion order for five more A380s and 20 A350s for delivery in 2017, adding to the earlier order for 20 A350s. It now has firm purchase or lease orders in place for 68 widebody aircraft, excluding the 20 B787 Dreamliners that will be transferred to low-cost subsidiary Scoot.

OTHER DEVELOPMENTS The SIA group has also grown its overall footprint with expansion by SilkAir, Tiger Airways and Scoot – the latter pair have agreed to introduce passenger and baggage interlining to tap the growing travel demand between South-east Asia, India and Australia via the Singapore hub.

SIA is also spending S$20 million (US$16.4 million) to upgrade its SilverKris lounges in various cities, starting with the Sydney Airport in mid-2013.

 

Japan Airlines

Japan Airlines (JAL) declared bankruptcy in January 2010 and underwent restructuring as it sought protection from the all-too-familiar Chapter 11 of the US. Once safe from creditors, the airline shed tens of thousands of employees, terminated loss-making routes, grounded and sold many non-fuel efficient airplanes, closed down its dedicated freight operations and went through an attitude reform beginning with admitting that its dire situation resulted from internal mistakes and not external forces. The entire company embraced the multi-pronged JAL philosophy of simplifying the business, striving for perfection and working earnestly.

The Enterprise Turnaround Industry Corporation injected ¥350 billion (US$4.4 billion) into JAL, and as its current president Yoshiharu Ueki continues to steer the company into stability and profitability, the airline was able to repay this investment together with a dividend of ¥300 billion. In the process, JAL restored the tsuru (crane) logo ditched in 2003 and listed its shares on the Tokyo Stock Exchange in September. When JAL received the first two of 45 Boeing 787 Dreamliner orders in March, Ueki said: “We will concentrate on improving our service, product and network, and the Dreamliner allowed us to achieve this.”

CURRENT DESTINATIONS In addition to adding a third daily service between Tokyo and Singapore in late-October, it will also launch services to San Diego and Helsinki in December 2012 and February 2013 respectively, with both routes being operated on B787s.

PLANNED DESTINATIONS On a visit to India, Ueki disclosed that JAL is seeking to increase services to New Delhi, and is also exploring establishing services to Myanmar, Cambodia, Bangladesh and Sri Lanka.

Ueki disclosed that JAL is targeting to increase capacity – measured in available seat kilometre – by 25 per cent in the next five years.

FLEET Deployed on flights to Moscow, Boston, Beijing, New Delhi and Singapore and on longhaul trans-Pacific flights, the B787 is up to 18 per cent more fuel-efficient than the B777.

The B787 also enjoys tremendous popularity with passengers as a result of its revolutionary features such as dimmable windows – which are already the largest on an airline – higher cabin humidity and pressure (both factors mitigate the effects of long-distance flights and jet lag), stability in flight and quieter cabin.

JAL has customised the mood lighting in the B787 cabin with pastel green and pink hues to match the green shoots and the cherry blossoms of spring respectively, with corresponding colours to match other seasons.

The Japanese carrier expects to have 10 B787s by the end of the current fiscal year and 33 B787s by the end of its 2016 fiscal year.

OTHER DEVELOPMENTS Going forward, JAL, which already has a joint business agreement with American Airlines, has inked a similar agreement with British Airways, thereby allowing it to share revenue, coordinate flight timings to maximise connection possibilities and coordinate fares.

Customers can also choose a combination of one-way segments on the airlines in a single round-trip itinerary, which are offered at unprecedented fares available for such flexibility.

In transitioning from a bankrupt airline to becoming one of the most profitable at the time of its relisting on the Tokyo Stock Exchange – a period spanning about 973 days – JAL has proven that the phoenix, or in this case, the crane, can rise from the ashes and fly proudly again.

 

Qatar Airways

The Gulf carriers continue to make headlines throughout the aviation industry, most recently for their earth-shaking moves made in the airline alliance arena. While Emirates inked a 10-year alliance with Qantas that caused the latter to realign its Kangaroo Route, Qatar Airways was courted by oneworld member British Airways and in early October, confirmed its entry into oneworld. Pending all necessary due diligence, Qatar is expected to join oneworld within 18 months.

In an interview with Bloomberg, Qatar Airways’ CEO Akbar Al Baker said: “Several years ago, I have said that the future of the airline industry will somehow or the other belong to an alliance. I was never against an alliance.” He described the International Aviation Group’s CEO Willie Walsh as “very forward-looking”.

With a touch of irony, Al Baker noted that Qatar Airways’ first codeshare flights with an European carrier were with Lufthansa. “Unfortunately, their strategy was to kill competition,” he said.

CURRENT DESTINATIONS This year, the airline added 12 new destinations including Baku, Tbilisi, Baku, Zagreb, Erbil, Baghdad, Perth, Kilimanjaro, Yangon, Maputo, Belgrade and Warsaw. Significantly, Qatar Airways grew its footprint Down Under with Perth added to Melbourne – its first Australian destination launched in 2009.

PLANNED DESTINATIONS The airline intends to launch 15 or 16 new destinations in 2013. The Doha-Ho Chi Minh City service will be extended to Phnom Penh starting February 20, 2013. Three more destinations – Gissim, Najaf and Chicago – have also been announced for the first four months of next year. Al Baker has let on that Qatar Airways has plans for another three destinations in the US: Detroit, Atlanta and Boston.

FLEET As the Gulf carriers stamp their mark on the airline industry, Qatar Airways continues with its stellar growth in both fleet and network.

The airline has a current fleet of 111 aircraft – 67 of which are widebody aircraft, including seven freighters – with an impressive tally of more than 250 aircraft on order and option. This includes a firm order for 10 Airbus A380s, the first of which will be delivered in January 2014 for deployment to airports that face severe slot restrictions. It also has an order/option for up to 80 A350s and is currently considering a further order for 20 Bombardier CSeries aircraft (with a further option for another 20).

The airline has begun to reduce the size of its fleet of Airbus A330, with Air Seychelles receiving one that will eventually be deployed to China.

Qatar Airways’ first B787 Dreamliner has already been handed over by Boeing, but will only enter service after being fitted with in-flight connectivity at Charleston in the US. Its B787s will be the first in the world to have this facility, and these will initially be deployed to London. Further deployments will be decided depending on the aircraft’s performance on the Doha-London route.

OTHER DEVELOPMENTS The New Doha International Airport is nearing completion and, pending successful trials, should open in 2013. Besides offering Qatar Airways a sparkling new home base, the airport will also provide it with ample room for growth.

 

Myanmar Airways International

For the longest time, inbound travel into Myanmar existed under the shadow of the country’s political struggles and international trade sanctions. As Myanmar continues to introduce political reforms resulting in the easing of sanctions in many countries, travel to the country has kicked into high gear. Airline seats and hotel rooms are now in short supply, and international airlines are lining up to restore services or launch new services to Yangon.

CURRENT DESTINATIONS Myanmar Airways International (MAI) commenced a Yangon-Bangkok-Singapore service on October 28. The Yangon-Kuala Lumpur service has also been increased from five-times weekly to daily, while the nonstop Yangon-Singapore service has been increased from 10 weekly to 12 weekly, although it will revert to the former frequency from January 1, 2013.
In China, MAI currently only operates to Guangzhou, and will continue to feed traffic through this gateway.
The airline also has a thrice-weekly service from Mandalay to Bodhgaya in India, but the aircraft is deployed out of Yangon.

Although MAI has no traffic rights to launch domestic services, it recently gained permission to operate once- or twice-weekly services between Yangon and Mandalay starting November. Seats on this route can only be sold outside of Myanmar, but this is a timely infusion of capacity into Upper Myanmar during the upcoming peak winter season.

PLANNED DESTINATIONS In the longer term, MAI hopes to gain permission to base aircraft in Mandalay to operate direct services to Bangkok and elsewhere, such as Singapore. It is awaiting the allocation of slots before launching thrice-weekly flights from Yangon to Hong Kong. Further expansion to South Korea in 2013 and to Japan from 2014 is being considered. Other routes in the making are Yangon-Mandalay-Gaya (thrice weekly) and Yangon-Mandalay-Bangkok (four-times weekly).

Said Ye Jhan, MAI’s country manager Thailand and Cambodia: “There are many Myanmar workers in Dubai, but the airline is actively considering operating to Abu Dhabi because we do not have the strength to compete head-on with the likes of Emirates and Qatar Airways.” Qatar Airways has just re-launched thrice-weekly flights between Doha and Yangon.

FLEET Faced with the possibility of a reduced market share as airlines clamoured to launch flights to Myanmar, MAI quickly supplemented its fleet of four owned Airbus A320 with a further two on lease from Bulgaria’s BH Airlines. Unlike seasonal leases of an A321 in the summer of 2010 and 2011, the latest leases are for a longer term and will be used to operate the year-round Yangon-Bangkok-Singapore service.

Ye Jhan revealed that MAI is considering A330 or similar-sized aircraft, with ongoing discussions with both Airbus and Boeing as it looks to operating in the Middle East.

OTHER DEVELOPMENTS To support MAI’s expansion, managing director Si Thu spoke of the critical need to implement efficient IT systems. It is relying on its decade-long relationship with SITA to introduce new systems for passenger management (multi-channel distribution including an online booking engine, and working with codeshare and interline partner airlines), passenger processing at the airport (check-in at the counter, kiosks and via mobile devices, baggage handling and security), as well as airport and flight operations over the next three years.

 

Lao Airlines

Although recent political changes in Myanmar has made it the star of the Mekong region, Laos – and in particular Lao Airlines – is not keen to bask in the shadow of its larger neighbour.

CURRENT DESTINATIONS A year after introducing two Airbus A320s and thrice-weekly services between Vientiane and Singapore, Lao Airlines is embarking on further expansion in the last quarter of 2012. This includes ramping up the flight frequency on the Vientiane-Singapore route from thrice- to four-times weekly.

PLANNED DESTINATIONS A thrice-weekly Vientiane-Guangzhou service will be kicked off on November 29 using A320, while a thrice-weekly Vientiane-Danang service using ATR72-500 will begin on December 4.

Scheduled charter flights from Seoul-Incheon (A320) and Busan (A320) will also start on December 21 and December 31 respectively.

FLEET In late-2012 and 2013, Lao Airlines will take delivery of two new 70-seater ATR72-600 turboprop aircraft, adding to the four ATR72-500s already in operation. The airline is progressively retiring its fleet of Chinese-made MA60 aircraft and reconfiguring them to pure freighters.

OTHER DEVELOPMENTS Despite not having the capacity and capability to operate to longhaul markets, Lao Airlines has not been deterred from targeting longhaul visitors. Departing in the evening, its Vientiane-bound flights from Singapore are timed to maximise longhaul feed from Europe and Australia arriving via Changi.

 

Jet Airways

Jet Airways was in the red for five quarters in a row, but in 3Q2012 posted a net profit of US$5 million against a net loss of US$24 million a year ago.

CURRENT DESTINATIONS In March, Jet Airways boosted its connection from tier-two Indian cities, such as Raipur, Bhopal and Nagpur, as well as southern cities, including Hyderabad, Bengaluru, Chennai and Kochi.

Since September 10, Jet Airways suspended its Brussels-New York JFK service, but continues to serve the Chennai-Brussels route on a daily basis, with Brussels remaining a ‘scissor hub’ for its Mumbai-Brussels-Newark and New Delhi-Brussels-Toronto routes. The airline also suspended its Mumbai-Johannesburg, Chennai-Kuala Lumpur and Chennai-Dubai services.

PLANNED DESTINATIONS  Having been granted capacity increases, Jet Airways will add 14 weekly flights to Singapore, and seven each to Dhaka, Chittagong, Male and Dar es Salaam, the last three being new routes. The airline has also received the thumbs up for 56 new flights to the Middle East, of which 14 will be used for Kuwait.

FLEET The airline has 11 Airbus A330-200s, five Boeing 777-300ERs, 47 B737-800s, seven B737-700s, two B737-900s and 18 ATR72-500s. On order are 10 B787 Dreamliners, five  A330-200s, four A330-300s, 46 B737-800s and five ATR72-600s.

OTHER DEVELOPMENTS There are rumours that Jet Airways is being courted by Star Alliance over its rival Air India. 

Additional reporting from Shekhar Niyogi

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