Weekly
Issue – 010810
Contents:
Commentary by Bob
Booth
Waves from Europe
Commentary - The
emasculation of British aviation By David Bentley
Waves from the
Pacific
Waves from the Americas
Commentary - A Caribbean Regional
Airline?? By Ian Bertran
DOT Docket Waves - Zuckert Scoutt & Rasenberger,
L.L.P.
Air Cargo Waves
Airline Financial
Waves
Tourism Waves
Fuel Waves by Larry
Weaver
Commentary
by
Bob Booth
Airline traffic is driving the
economy?
While we
have always agreed that the economy drives the demand for air traffic, both
passenger and cargo, we are wondering if it might be the other way around.
Because while the global crisis is still an issue – especially in Europe and
the United States – the second quarter 2010 results in the results, both in
terms of demand growth and net income as reported by major carriers would
indicate the economy is catching up with the airline world. Net income in the
second quarter among airlines was way up, including record results for Delta
with $467 million net income, best performance in a decade. Others reporting
(see below “From Distress to Success) include United, Continental, US Airways,
Alaska Airlines, Jetblue, Air Tran, Allegiant, Ryanair, Kingfisher, Air
France-KLM. LAN Chile reported a record $60.6$ million net in t he second
quarter, with passenger revenue increasing 24.5% and cargo
increasing 60.35 y/y. At the same time European airline, Ryanair is
opening new a new hub in Seville, to serve 29 routes; Air Berlin is joining Oneworld; Cargoitalia
is launching freighter service between Milan and Shanghai. And airlines are acquiring new
aircraft, by leasing or buying as reported last month at the Farnborough Air
Show which listed new aircraft acquisitions by: LAN Chile; FlyBe; Air
France/KLM; Virgin America; Emirates, Hong Kong Airlines; China Southern
Airways; Aeroflot; Thai Airways; Garuda; Qatar; Azerbaijan Airlines; Air
Austral; Royal Jordanian; Azul; Republic; Kartika; Orient Thai and Gazpromavia.
IATA
reports international passenger demand (particularly China and Latin America) and freight showed strong
improvements during June compared to a year ago. According to
the latest traffic international statistics released in July. International
passenger demand was up 11.9% while international scheduled freight traffic
showed a 26.5% improvement, which means the industry is recovering from the
impact of the global financial crisis. “The industry continues to recover
faster than expected, but with sharp regional differences. Europe is recovering at half the speed
of Asia with passenger growth of 7.8%
compared to 15.5% growth in Asia-Pacific.’ Said Giovanni
Bisignani, IATA’s Director General and CEO. Middle Eastern carriers
continue to post the fastest growth – up 18% compared to June 2009.Asia-Pacific
carriers recorded the most significant demand improvement of 15.5%, with China continuing to be the region’s
growth engine. North American airlines posted 10.8% growth; European carriers
reported 7.8% growth; Latin American carriers posted a 14.7% growth while
African airlines posted a 23.6% growth positively impacted by the FIFA World
Cup. IATA’s Economic Briefing, based on
the July 2010 Survey is a must read. In June it revised up its own forecast for
2010 industry performance from a loss of $2.8 billion to profit of $2.5 billion.
Regardless,
whether I’m right in thinking that airlines are driving the economy or not –
the facts are that there is no global crisis in the airline industry. And I
expect to see the economies following suit during the balance of this year. Just my opinion.
Bob Booth. Contact: bobby@avman.com
Waves from Europe
Ryanair plans to open 44th
European hub in Spain
The low
cost airline announced last week it plans to open its 44th base in Seville in November. It will base two
aircraft in Seville to serve 29 routes, including ten
new routes. The airline will offer more than 250 weekly flights from Seville. The ten new destinations will
increase Ryanair’s traffic at Seville to 1.5 million passengers
annually which will create and sustain 1,500 local jobs in Seville. Viva Ryanair. One to watch.
Air Berlin is joining Oneworld
along with Iberia and British Airways
Germany’s second largest airline has
announced it is joining Oneworld. It has already has established the
pre-alliance conditions with Iberia and British Airways, the other
members of Oneworld. British Airways is sponsoring Air Berlin for the integration into
Oneworld. It has also established
strategic agreements with Finnair and American Airlines which will enable the
airlines to offer strategic services within Europe, to the United States and Asia. Viva Air Berlin.
European regulators approve the
proposed Continental/United merger
While the
merger between the two US carriers is still subject to
approval by the US Department of Justice and Congress, the European anti-trust
regulators have approved their plans to create the world’s largest airline. In
their approval, the European anti-trust regulators said they don’t believe the
merger will interfere with air travel competition in their countries. In an
e-mailed statement the regulators stated also:
“United and Continental’s networks are complimentary as they have hubs
in different US cities, the proposed merger
therefore only leads to small, incremental increases in the market shares of
the parties”. One step closer to the final merger, which is hoped will be
approved during the 4th quarter of 2010. Viva Europe.
Air France-KLM report net income in their Q1 of
736 million euros
The joint
venture airline partners report net income of 736 million euros in their first
quarter which is the April 1 to June 30, 2010 period. This is compared to 426
million euros y/y. Revenues were up 10.7% in the period compared to the same
period last year, with a total of 5.721 billion euros. These results would have
been a lot better were it not for volcanic ash in April,
in fact they estimated the volcano had an impact of 158 million euros on its
results. It’s all about consolidation.
Commentary
- The emasculation of British aviation
By David Bentley
Last week I wrote of my concerns about British Airways. Now I turn my
attention to a wider issue and one that will ultimately affect air transport
well beyond the UK’s shores.
The coalition government that emerged out of the May 2010 General
Election (and which is now referred to as the Brokeback Coalition by some of
its own Members, but I won’t go into that here), was ‘elected’ clandestinely on
a ‘green’ ticket. By that I mean that the voters knew that the Conservatives
had a green agenda of sorts but understood it came well down their list of
priorities. What most voters did not suspect was that the Liberal Democrats
would not only seize the reins of power within a coalition but be the party
that ‘wears the trousers’ in the marriage. And the Lib Dems are obsessive about
the environment.
For all the mess the previous (Labor) administration made of the country
(we are in debt to the tune of close to GB£1 trillion and counting) it at least
‘stood its corner’ for aviation and had agreed to a much-needed third runway
for London Heathrow Airport, which is still the world’s busiest international
airport by some measure. It also evaluated the claims (unfounded ones in my
view) for a floating ‘Estuary Airport’ in the River Thames to the east of
London without dismissing them, although the project was unlikely to be had
been realized. There was also a public enquiry taking place to examine the
validity of BAA’s case for a second runway at Stansted Airport, the world’s busiest airport serving budget
airlines.
This is how things have changed in the last couple of months. For the
sake of brevity I refer to a statement made by the Secretary of State for
Transport, Philip Hammond, on 28th July 2010 at a meeting of the all-party Parliamentary
Transport Select Committee. He said the UK Government has not only blocked
the third runway at Heathrow and second runways for Stansted and Gatwick
(implying that this is ‘forever’) but has ruled out increasing capacity at
Heathrow on the existing two runways through mixed-mode operations (a method
that has been under examination for years). Mr. Hammond also rejected the idea
that regional airports could expand in place of Heathrow (nearly all the growth
here post ‘9/11’ came from regional airports), rejected the Mayor of London’s
plan for a new Thames airport to replace Heathrow and restated the Government’s
commitment to moving domestic traffic from air to rail. He wants to make
airports ‘better, not bigger’, whatever that means. This from
the ‘party of big business.’
So that’s it then. To summarize, there will be
no expansion of Britain’s airports during the
life of this government, period (and they are already maneuvering, as
politicians do, to perpetuate their power-sharing existence to infinity and
beyond). No attempt will be made to utilize unused capacity at major city
airports like Birmingham, Glasgow and Manchester (which, like Heathrow
actually has two runways but less than a third of the traffic), let alone the
many secondary level airports. And existing domestic air traffic will be
eradicated as soon as possible to be replaced by trains, irrespective of the
financial and moral cost of building new lines and ripping up the countryside.
In these circumstances I was staggered to
learn that the hitherto successful ‘hybrid’ airline, Flybe, signed one of the
bigger contracts at the Farnborough Air Show, for 35 E-175 jets, with options
and purchase rights for a further 105 (as reported in last week’s Airwaves).
Flybe operates selectively on European routes where there is little competition
from the likes of Ryanair and easyJet but it built its reputation on UK
domestic flights, connecting isolated cities and regions in different parts of
the country with small, efficient (and green), turboprops like the Dash 8 Q400
and jets like the E195. It flies routes like Exeter (southwest England) to Aberdeen (northeast Scotland) and Edinburgh to Norwich. Britain may be a small place
compared with, say, the U.S. and Brazil but take my word for
it – these routes are impractical by road or rail, especially for short, sharp
business trips.
I can only assume that this deal signifies
that Flybe intends to start shifting its operations out of the UK into Europe as Ryanair has done
before it, thereby also avoiding the punitive tax regime here, which I will
deal with, within a European framework, at a later date.
For, if you think
about it, there are few reasons to stay here. The UK’s airports handled 17 million (7.3%) fewer passengers in 2009
than in 2008, down to 218 million, the largest annual decline for sixty-five
years. It is the first time numbers have fallen consecutively for two years,
reducing passenger numbers to levels not seen since 2004. I’m happy to quote
Unite, the union whose cause I partially championed last week: “Without the government's firm
commitment to improving transport infrastructure and supporting airport
expansion including additional runway capacity, UK passengers will continue to be
blighted by long queues before take-off and landing. Without addressing such
fundamental matters, the real competition for the major UK airports will come from other
European airports where the incumbent government has acknowledged its
responsibility to support the industry.”
The ways in which
I disagree with the statement are (1) competition is also fast arriving from
the Gulf, where they are building huge hub airports like it is going out of
fashion (as, indeed, it is in Britain!), and (2) passengers are voting with
their feet already, fed up not just with queues but with security hassles and
the sheer expense of travelling by air within, or from and to Britain. While
most world regions report air traffic increases well into double digits in the
last quarter, if there is any growth at all at British airports it registers
like a fart would on a seismograph.
Why
will all this affect aviation beyond the UK’s shores? Because Britain, despite being a rapidly
declining power, still punches well above its weight in some quarters. That was evident from April’s volcanic ash cloud incident when many
mainland European countries seemed to take the lead from the Volcanic Ash
Advisory Centre that is embedded in the Meteorological Office, a UK government agency. Also from the way European governments are queuing up
to impose punitive aviation taxes in the British fashion.
And it
will get worse. Right now, new Prime Minister Cameron is galloping around the
world, one day in the U.S., then in Turkey, then straight on to India, trying
to make up for lost time and set the global agenda on a host of issues while
President Obama is pegged back by problems at home like healthcare reform and
the Gulf of Mexico oil leak crisis. And you can bet your bottom dollar that two
of those issues will be aviation and the environment.
David Bentley is Joint Managing
Director of Big Pond Aviation, a British-Canadian air transport research and
consulting company and who have been an industry media commentator and analyst
for much of the last decade. During this time he has researched and written 12
management reports on a variety of subjects including airport privatization and
financing; low cost airports, airport security and airline financing. www.bigpondaviation.com
Waves from the
Pacific
China Southern Airlines adding aircraft and new cargo service from Shanghai
The
airline is taking delivery of two A320s and mandates Credit Agricole-CIB
(France)
For financing of one A321. It has also launched new cargo service to Amsterdam last month and is launching a Shanghai to Los Angeles service on August 28, both routes
operated with B777-200Fs. Stay tuned.
“India: Latin America’s Next Big Thing”
Is the
title in a study released last week by the Inter-American Development Bank.
With 1.1 billion people and a relative scarcity of natural resources, India could become a large buyer of
agricultural and mineral goods. The authors of the study not
e that currently India represents just
0.8% of the region’s overall trade, compared with China’s 7.7% share. The article which covers the
story, the Inter-American Dialogue’s Latin American Advisor goes on to state
that India must reduce its tariff on Latin American agricultural goods is 65%,
more than five times China’s 12.5% tariff. Moreover, India and Latin America must reduce transport costs.
Currently India, unlike China, has no direct shipping services
to the region. Goods must be first shipped to Singapore or Europe, which increases both freight
rates and shipping time. One
to watch.
Spring Airlines launches its first
international flight
The
privately owned, Chinese airline which was founded in July 2005, has launched
three-times weekly charter flights between Shanghai and Japan’s Ibaraki
Airport, about 50 miles north of Tokyo. The flights are being operated by an
Airbus A320. The charter flights are sold exclusively through travel agents in China. Spring Airlines is the first low
cost carrier in China and is planning to launch regular
scheduled flights to Japan and Korea. Stay tuned.
Emirates Airline – The Pride of Dubai
Is the
headline in an article in last week’s issue of Airliners.
The article is an in depth look at the world’s largest
operator of Boeing 777s – which has ordered 30 more Boeing 777-300ERs. The
article says: “Emirates is the world’s largest operator of 777’s and its latest
order, adding to 71 B777-300ERs previously ordered, affirms Emirates’ strategy
to become a world leading carrier and to further establish Dubai a central
gateway to worldwide air travel”. July’s Boeing order follows up on the
airline’s order for 32 additional Airbus A380s. With these latest additions,
Emirates’ 777-300ER and A380 order totals increase to 101 and 90 aircraft
respectively, of which 53 and 11 are in service. The article is a ‘must read’ –
if you are not a subscriber I suggest you contact the magazine’s Creative
Director, Robert Christensen at email Robert@airliners.tv
for a free copy.
Waves from the Americas
World Bank committed $17.9 billion
in support of Latam in 2010
Is the
headline in the MercoPress South Atlantic News Agency earlier last month. The article begins with the statement: ‘The World
Bank Group (WBG) committed $17.9 billion US dollars in fiscal year 2010 – a
slightly higher figure over last year’s record lending o $17.2 billion – to
support countries in Latin America and the Caribbean (LAC) as they recover from
the global financial crisis and resume a path of sustained growth, according to
the latest report from the multilateral organization”. The region is expected
to post 4.5% growth in 2010, with Brazil leading the recovery with a
projected 6.5% expansion on account of strong commodity demand. Other South
American economies such as Peru, Argentina and Uruguay are also expected to reach or
pass the 4% growth mark. For the complete ‘must read’ article, go to
http:/en.mercopress.com. Another reason
we call the region “where the action is”.
Colombia to have three new airlines with national & foreign capital
According
to Oscar Rueda, Colombia’s Vice Minister of Tourism
announced last week that the Civil Aviation Authority (Aerocivil) has already
received the request for authority to begin service by Air Oasis and its
partner LAN Chile and could be operating by February of 2011. The plan is for
LAN to acquire control of Air Oasis and launch the airline as LAN Colombia. Air
San Andres is the second startup is working on obtaining authority to launch
service in the second half of 2011. The airline plans to be based in Barranquilla and operate 11 domestic and 10
international routes. The third new startup is Fast Air which will operate
domestic routes, but no further details were available at press time. Colombia is definitely a growth market. Stay tuned.
Pluna had the highest evaluation in Bazil
Uruguay’s “born again” airline obtained
first place among all airlines in South America. The evaluation is organized by Brazil’s National Agency of Civil Aviation
(ANAC), with passengers surveyed... A total of 43 airlines which serve the
Brazilian market, and Pluna obtained seventh position overall in the ranking
with 8.36 points of 10, 36% ahead of the average for all airlines, which was
6.13 points. Viva Pluna!
Aero Republica
to launch nonstop service to Mexico City
The
Colombian partner of Copa Holdings has announced plans to launch nonstop
service between Bogota and Mexico City on October 2. The operation will
be with E-190 regional jets which offer business class. The service will
compete with both Aeromexico and Mexicana which currently serve the
Mexico-Bogota market. Way
to go, Roberto Junguito Pombo and team.
Volaris reports 84% growth in its international service
Mexico’s LCC has reported that its
international flights have grown 84% since it began international service a
year ago. According to the airline’s CEO, Enrique Beltranena the airline has
carried more than 478,000 passengers since July 2009. He also stated that the
success of service between Mexico and the United States has only been possible due to the
carrier’s solid consolidation within Mexico. The airline has also gown
domestically 12% in Mexico since May 2008. It makes the
airline the third most important airline in Mexico and the biggest low cost carrier.
Congratulations Enrique and team.
Domestic traffic in Peru increased over 20%
through May 2010
According
to the Peruvian Civil Aviation Agency (DGAC), 2,039,061 passengers were carried
on domestic flights in the five months ending May – for a 20.59% increase over
the same period in 2009. Just in May the domestic traffic reached 456,947
passengers for a y/o growth of 28.29%. LAN Peru had the highest number of
passengers in the five month period, carrying 1,469,763 passengers with 90% of
the domestic market. So where’s the crisis? Viva LAN Peru.
Domestic traffic in Colombia increased 40.6% through May 2010
The
Colombian association of Air Transport (ATAC) reported that domestic traffic
grew from 3.628 million from in the same period last year, to 5.097 million in
2010, growing by 40.6%. – while international traffic in the same period grew
from 2.097 million in 2009 to 2.283 million in 2010, for a growth of 8.9%.
Domestic air freight grew from 38.264 tons in the same period in 2009 to 39.424
tons in 2010. International air freight grew 15.1% in the five month period. Where’s the crisis?
Delta Air Lines has applied for
expanded service to Brazil
The
airline has applied to increase service between Detroit and Sao Paulo to five-times
weekly service. Delta has already received approval to launch t twice-weekly
service to Sao Paulo from Detroit October 21. The application is
expected to be approved and will continue Detroit’s expansion as an international
hub. Stay tuned.
Commentary - A Caribbean Regional
Airline??
By Ian Bertran
Caribbean
Airlines (CAL) recent assumption of Air Jamaica’s mature ethnic and VRF routes
and the pending demise of the latter airline have raised expectations that a
viable Caribbean Regional Airline can be established were the expanded CAL to
merge with mainly Eastern Caribbean intra-regional airline LIAT.
The Challenge Movement to this viable single regional entity presents
significant challenges at this time.
It is
important to remember that BWIA, when owned by BOAC, was a single regional airline.
It was however unprofitable and was only saved from closure by its
purchase by the Government of Trinidad & Tobago (GORTT).
CAL, the foundation for the possible
new entity exists on fuel price support from GORTT based on the highly dubious
assumption of US$50/bbl WTI crude. This
despite being extremely well capitalized and flying mature ethnic and VFR
routes with an efficient single aircraft type.
The takeover of the JM routes significantly increases the cost of the
fuel price support to GORTT, at least in the short-term, at a time of large
fiscal deficits and re-ordering of priorities by the new Trinidad & Tobago
Government. It is not clear at this time
that sufficient economies of scale can be generated by the expanded CAL to be profitable without GORTT
fuel support. Such economies of scale
can only approach optimization with a single aircraft type for the current
expanded international operations but this step requires significant funding.
LIAT,
operating in a quasi-monopoly environment, states that it is profitable without
any fuel price support. However its
level of profit does not mitigate the serious challenge the airline faces for a
required fleet upgrade. Further, its
operations require a different aircraft type from that needed by CAL.
Moreover there is minimal overlap in the schedules of CAL and LIAT. It will be a pleasant surprise therefore if a
merger of CAL and LIAT brings significant economies of scale.
To
compound matters, Caribbean governments have been divesting of airline ownership. Only GORTT will have equity risk in the
expanded CAL and only Barbados, Antigua and Antigua have equity risk in LIAT. In a merger between CAL and LIAT, the
majority equity risk will reside with GORTT which will then have to assume the
challenge of a major fleet restructuring/upgrade for the single regional entity. It is certainly not clear that GORTT will
want to assume such a challenge now or in the short-term. Rapid movement toward
a single Caribbean Regional Airline will therefore require a strategic airline
equity partner that can provide funding, generate additional economies of scale
to ensure viability and is sympathetic to regional aspirations. I believe that such airlines exist within the
greater Latin American region.
In this
thrust, the consumer must not be forgotten.
Competition for this single regional airline must therefore be
encouraged. With the now rapid movement
toward de facto and de jure international “open skies” air services agreements, competition on
international routes is all but assured.
The challenge however is to encourage competition on the intra-regional
routes. This can best be achieved by
accelerating the development of a regional “open skies” Multi-Lateral Air
Services Agreement that embraces airlines from the Greater Caribbean.
The Vision Against this background, The CARICOM Secretariat has been
presented with the following vision of a Caribbean Regional Airline as an input
to its Strategic Plan for Regional Development (SPRD).
“A
regional airline structure, embracing the services of the expanded CAL, LIAT, Suriname Airlines and commuter airlines, with
public/private sector ownership, whose shares are listed on the regional stock
exchanges and are therefore guided by commercial objectives. The group will
optimize functional cooperation to assist in the viability of its participants.
The airlines will be private
sector controlled and have a commercial corporate culture while recognizing a
socio-economic responsibility to the region.
The grouping will serve the following:
·
the intra-regional market,
both business and recreational, including multi-destination tourism
·
the Caribbean Diaspora, which
will have a strong emotional attachment to the group that will be continually developed
·
the traditional tourism
market, to which they will represent the start and end of a wonderful Caribbean vacation
The group would likely utilize six (6) types of
aircraft, subject to route viability:
·
long range wide-bodied jets for possible
re-introduction of inter-continental service
·
medium range narrow bodied jets for
intra-continental service
·
regional jets for regional and thin Greater
Caribbean routes
·
larger turboprops for heavier sub-regional routes
·
smaller turboprops for thin sub-regional routes
·
freighter aircraft for international and regional
cargo service
This
regional airline structure will be supported by a common air space, regional
and national aviation policies that ensure common regulatory regimes that have
international acceptance and respect, “open Skies” air service agreements,
whether bilateral or multi-lateral that give commercial operational freedom to
airline managements. The group may eventually evolve into a single regional
entity.”
Ian Bertran is a former CEO BWIA, a Principal of El Perial
Management Services, a consulting firm focused on the Caribbean. Ian was co-author with Bob Booth on the
seminal Caribbean Airline Functional Cooperation Study.
DOT Docket Waves
Zuckert Scoutt & Rasenberger, L.L.P.
Washington, D.C.
On the Internet: www.zsrlaw.com
In recent
developments before the U.S. Department of Transportation:
Frontier
Airlines applied for authority to operate service between St. Louis and Puerto Vallarta.
The carrier plans to operate weekly flights on a seasonal basis starting
on December 18, 2010, using A319 aircraft. (Docket DOT-OST-2010-0166.)
Virgin
America applied for authority to operate service in three U.S.-Mexico markets:
San Francisco-San Jose del Cabo (5 flights per week, starting late 2010); San
Francisco-Cancun (3 flights per week, starting early 2011); and Los
Angeles-Cancun (5 flights per week, starting early 2011). All of the flights would be operated with
A319 aircraft. (Dockets
DOT-OST-2010-0167, DOT-OST-2010-0168, DOT-OST-2010-0169, and
DOT-OST-2010-0170.)
American
Airlines applied for the allocation of three U.S.-Brazil frequencies which it
would use to operate service between Dallas/Ft. Worth and Rio de Janeiro.
The carrier plans to operate daily flights starting on November
18, 2010,
using B767 aircraft. (Docket
DOT-OST-2010-0179.)
United
Airlines and US Airways applied to temporarily reallocate seven U.S.-Brazil
frequencies from United to US Airways, which would enable US Airways to operate
daily service between Charlotte and Sao Paulo.
The flights also would display United’s code. US Airways plans to start flights in January
2011, or as soon thereafter as all necessary approvals have been obtained,
using B767 aircraft. (Dockets
DOT-OST-2009-0003 and DOT-OST-2010-0183.)
Sky Bahamas, which has authority to operate
charter service between points in the U.S. and points in the Bahamas, received authority to operate
scheduled service in six U.S.-Bahamas markets:
Ft. Lauderdale-Exuma; Ft. Lauderdale-Mash Harbor; Ft. Lauderdale-New
Bight; West Palm Beach-Exuma; West Palm Beach-Mash Harbor; and West Palm
Beach-New Bight. (Docket
DOT-OST-2003-15552.)
Salsa d’Haiti received authority to display its code on flights
operated by Insel Air International between Miami and Port-au-Prince.
The carrier does not plan to operate flights using its
own aircraft. The carrier also
applied for authority to permit it to (i) engage in scheduled foreign air
transportation of persons, property and mail between any point or points in
Haiti, on the one hand, and any point or points in the United States, on the
other hand; and (ii) conduct charters in accordance with the requirements of 14
C.F.R. 212, using aircraft wet leased from, or pursuant to a codeshare
agreement with, a duly authorized and properly supervised U.S. or foreign air
carrier. In its filing, the carrier
indicated that it intends begin expanded service to points in Florida from Cap Haitian in addition to Port-au-Prince.
(Docket DOT-OST-2010-0110.)
AirTran
Airways received authority to operate service between points in the U.S. and points in the Dominican Republic.
The carrier plans to operate flights between Atlanta and Punta Cana starting on December
15, 2010,
using B737 aircraft. The frequency of
service will vary on a seasonal basis. (Docket DOT-OST-2010-0158.)
American
Airlines was allocated additional rights to use four U.S.-Brazil frequencies
that it is currently using to operate summer service between Miami and Buenos Aires.
The carrier states that it also plans use the frequencies to operate an
additional four flights per week (for a total of 18) between November and
April. (Docket
DOT-OST-2010-0178.)
Air Cargo Waves
World Airways adding capacity in response
to growing demand
The
subsidiary of Global Aviation Holdings, Inc. has reached an agreement to lease
two B747-400 freighters to its fleet and will grow the B747-400 fleet to four
aircraft upon delivery of the two additional B747s, which are due in December
2010 and February 2011. World is also in the process of reactivating a MD-11
freighter that it had placed in storage and will begin operating in December
2010, and will return its MD-11 freighter fleet to nine active aircraft. Brian
Bauer, chief commercial officer of the airline, said: “By growing our Boeing
747-400 and MD-11 freighter fleet, World Airways will be able to meet the
strong demand for the multiple applications of our modern, long range,
fuel-efficient freighter service.” The Global Aviation Holdings Inc. subsidiary
provides customized transportation services for major international passenger
and cargo carriers, the United States military, major freight
forwarders and international leisure tour operators. For more information,
visit www.woldairways.com. It’s all
about demand and the economy. Stay
tuned.
Cargoitalia to launch to Shanghai from Milan
Italy’s freighter operator, Cargoitalia
has announced it plans to launch scheduled service between Milan and Shanghai in September. It will use the
recently-delivered third MD11 freighter aircraft. The flights will be nonstop
twice-weekly. It plans to increase the service to three times weekly in
October. From September the airline will operate twice weekly flight to New York, twice weekly to Chicago, one to
Sharjah, three to Hong Kong two to Dubai – all from Milan. Stay tuned.
Airline Financial
Waves
LAN reports net income of $60.6
million in second quarter 2010
Chile’s “model airline” has presented
its second quarter financials with $60.6 million in net income, compared to
$4.2 million in the same quarter last year, marked by strong recovery in both
cargo and passenger revenues. Total revenues reached $1,033.6 million compared
to $785 million in the same quarter 2009, due to a 24.5% increase in passenger
revenues and a whopping 60.3% increase in cargo revenues. Passenger and cargo
revenues accounted for 66% and 31% of total revenues respectively. Operating
income was $112.6 million, compared to $34.9 million in the same period last
year. Operating margin was 10.9%, an increase of 6.4 points compared to last
year’s 4.4%. While total operating revenue of $1,033.6 million grew 31.6% in
the quarter, the six months total was $2,068.5 million for a 24.1% increase in
the period. Net income in the six months increased 115% to $148.9 million. The “model airline” also announced it has
signed an MOU for the purchase of 50 NG Airbus A320 family aircraft to be
delivered between 2012 and 2016. The company also signed and agreement in July
with Boeing to adjust the delivery of two B787-8 Dreamliner aircraft in 2012,
which means it will be taking delivery of a total of
five B787-8 aircraft in 2012. This will allow the airline to anticipate delivery
of 10 B787-8 already announced in March 2010. As a result, LAN will be the
first airline in the western hemisphere to take delivery of this new and modern
aircraft. Viva LAN Chile.
From Distress to Success
Is the
headline in last week’s Airline Weekly which comments first on Delta’s second
quarter net profit of $467 million, the best performance in a decade? We
reported in last week’s Air Waves on the three major airlines, including Delta,
followed by United (with $273 million net income) and Continental (with $233
million). Airline Weekly also included the following carrier’s net income in
the second quarter: US Airways (with $279 million); Alaska Airlines (with $59
million); JetBlue (with $30 million); AirTran.
($12 million); Allegiant (with $18 million); Ryanair (with $118
million); and Kingfisher (with $40 million). The interesting side note is that
most of these airlines had double digit margins. How about that for coming out
of the crisis?
Tourism Waves
Argentina expects more than 5 million foreign tourists in 2010
According
to an article in one of our favorites, MercoPress, South Atlantic News Agency, Argentina is expecting more than five
million foreign tourists in 2010, an increase of 15.5% over 2009 according to
Tourism Minister Enrique Meyer. Who stated that the growth is based on the
numbers from the first quarter, up 14.5%, May, plus 21.9% and April, 9.7%
compared to last year. So where is the crisis? Viva Argentina.
Fuel
Waves
By Larry S. Weaver
Reuters
reported that OPEC is meeting only half its promised cuts in oil supply this
month thanks to a big jump in exports from Nigeria and despite a smaller decline in production in Angola. Supply from OPEC (ex-Iraq) averaged 26.95 million bpd in
July up from 26.75 million bpd in June – both of which are over their “target”
of 24.84 million bpd. Nigeria wants its OPEC oil quota revised upwards to at least 2
million bpd, where it was before the militants in the Niger Delta disrupted its
production. With Nigeria now enjoying some amnesty and a reduction in attacks to
the production, their export capacity is growing and is currently about 2.5
million bpd and they could go up to 3 million bpd within the year.
Crude Prices were up on
Tuesday with WTI adding $1.21 per bbl on the NYMEX although it has been
oscillating this (Wednesday) morning trading at $82.61 per bbl as this is
written. The US DOE statistical report this morning showed a drop of 2.8 million
bbls in crude stocks as crude imports dropped to
9,629 bpd from the 11,153 bpd in the previous week. Product imports did not
change that much and refining production increased to 91.2% of capacity from
90.6%. Products supplied to the market – per the DOE slid slightly across the
board.
A report from OAG showed
airline seat capacity increased 1% in North America while it jumped 7% in
Europe – both from year ago numbers. Asian airlines increased their capacity by
10% pulling up the worldwide numbers by 7%. With this increase in flying, jet
fuel demand will increase and this will – very likely – shove up jet fuel
prices although the changes are not expected to be substantial staying under
$2.50 per gallon through the rest of the year.
Larry Weaver is
an Aviation Fuel consultant headquartered in Tampa, Florida with over forty years experience in aviation
fuels. He is the founder and President of Dellem,
LLC. Prior to starting Dellem,
he was employed in the Aviation Sales Department of Texaco Inc, and was Manager
of Texaco Aviation's Worldwide Operations. Dellem has
provided worldwide Fuel Acquisition and Management services to airlines for
over twenty-five years and has managed in excess of 25 million gallons of fuel
per month for Dellem's clients. Contact: lweaver@dellem.com
