Airline Weekly - January 23, 2012

Cover Story

The Bulls of Barcelona: Its home economy is stagnant. Its airline market is anything but.

There’s pain in Spain. Economic pain. But apparently—in Barcelona anyway—airlines didn’t get the memo.

In 2011, Barcelona’s main airport El Prat saw its passenger volumes surge 17% y/y, making it one of the fastest growing airports in the world, let alone Europe. There is, however, a catch: nearby Girona airport saw its traffic plummet 38% last year, reflecting Ryanair’s decision to shift a large number of flights. And nearby Reus airport saw traffic fall as well in 2011, although in its case by just 4%.

But wait. There’s more to this story. Barcelona handled 34.4m passengers last year, 5.2m more than it did in 2010. Well, those 5m couldn’t all have come from Girona and Reus, which handled just 6.3m people combined in 2010 and then 4.4m in 2011. Something else is going on in Barcelona. In fact, quite a lot is going on.

For starters, the airport’s leading airline grew significantly last year. Vueling, an LCC catering to both leisure and business travelers, carried 12% more passengers in 2011 than in 2010, by increasing ASKs 6% and load factors by more than two points. Vueling did allocate much of its growth outside of Barcelona but still grew Barcelona seat capacity about 7% y/y, according to an Airline Weekly analysis of Innovata data using Aviation Dataminer. Not only did it add new routes like Zurich, Toulouse, Bordeaux and Ciudad Real. It also began promoting Barcelona as a hub, which generated more connecting passengers.

Vueling isn’t the only airline headquartered in Barcelona. Spanair, once the property of Scandinavia’s SAS, is now an independent Star Alliance member partly owned by the regional government of Catalonia. Although it pared frequencies to some of its largest domestic markets—Palma, Madrid, Alicante and Bilbao, for example—Spanair’s overall seat counts were up 5% thanks to new flights and more capacity to Helsinki, Berlin, Hamburg and Munich, all Star Alliance hubs (Blue1 in Finland and Lufthansa in Germany). It’s also growing in areas along Europe’s periphery, serving cities like Banjul, Bamako... (352 of 1,407 words)

Also Inside this Issue:

Happy Lunar New Year to those who celebrate, and happy fourth quarter earnings season to those with an interest in airline industry finances.

Southwest got things under way with a mildly upbeat report, proclaiming healthy revenue trends but worrisome cost pressures, notably in the areas of wages, aircraft maintenance, airport fees and—most importantly—fuel. For the quarter, Southwest made money, but not nearly as much as it did during the same quarter last year. In addition, its operating margin was just 4%, less than the 6% to 8% that Delta expects to report Wednesday. (United, US Airways, Alaska and JetBlue also report this week).

Also reporting last week was Jet Airways, whose lousy results highlighted the many woes afflicting India’s airline sector at the moment: high fuel prices, a weak currency, a government subsidized zombie airline, fare wars, excess capacity and high taxes and airport fees.

If only things were as calm in India as they are in Canada. Home to just two major airlines, or three if you count Porter in the east, the Canadian airline market enjoys relative stability. But WestJet isn’t content serving just the major metro areas and instead wants to tap the regional market as well. It’s now asking employees for their consent.

Elsewhere, Airbus reviewed its outstanding commercial success in 2011, while getting a few new A350 orders from Cathay Pacific.

Japan’s Big Two unveiled network plans, AirAsia X finally won rights to serve Sydney and Virgin America is heading for Philadelphia. This week: more Q4 earnings.

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