Airline Weekly - November 25, 2013
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Airline Weekly - November 25, 2013

Getting Hammered: For European longhaul airlines, pressure from Gulf carriers continues

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Cover Story

Getting Hammered: For European longhaul airlines, pressure from Gulf carriers continues

European airlines watched with horror last week as Gulf carriers ordered another 400 widebody aircraft, auguring huge competitive capacity increases. Worse yet, all this demand for new planes is pushing up aircraft ownership costs for airlines everywhere—even Ryanair, which normally couldn’t care less about what Gulf carriers are doing, cites that as a reason widebodies are too expensive for it to consider a new transatlantic unit.

But it was a lesser-noticed piece of news last week that explains more precisely why Gulf carriers are such a threat to Europe’s longhaul airlines, long before all the newly ordered aircraft arrive.

Qatar Airways will, in late May, start flying from Doha to Edinburgh—just five days a week, and with just 254 seats on a B787. But in doing so, it will change everything about how people travel between there and many parts of the globe, just as Gulf carriers have done in so many other European cities.

Today, when people want to travel between Edinburgh and Delhi, for example, fully 44% of them fly British Airways and connect at London Heathrow, according to an IATA Consulting analysis for Airline Weekly of PaxIS data for the 12 months through October. Those 44%, moreover, paid an average of $940 each way, a rather healthy fare. Another 22% connected in Paris or Amsterdam on Air France/KLM.

But to see the ghost of Edinburgh future, look no farther than Scotland’s other large city, Glasgow, about an hour’s drive away. The two midsized markets have a lot of similarities—and one huge difference. As in Edinburgh, frequent BA flights connect Glasgow to Heathrow and the world beyond. But in Glasgow, 44% of people traveling to Delhi don’t connect at Heathrow on BA. Nor do 34%. Nor 24%. In fact, just 16% of travelers flying between Glasgow and Delhi during the same past 12 months chose BA. And they didn’t pay $940 each way—nor $840, nor $740, nor $640. No, adding yield insult to volume misery, those mere 16% paid a paltry $501 each way.

So if not on BA—and if not on other European airlines like KLM, which carried just 5% of passengers paying similar garbage fares—how do people travel between Glasgow and Delhi? On Emirates of course, using two daily Glasgow-Dubai flights, accounting for just 6% of all Glasgow seats (according to an Airline Weekly analysis using Diio Mi). With this it captures nearly three-quarters of all Glasgow-Delhi passengers, exceeding even BA’s dominance in Edinburgh. It’s no... (425 of 1,699 words)

Also Inside this Issue:

In Europe’s airline industry, there’s a lot of gloom and doom: shrinking economies, weak demand, labor strife, onerous taxation, excess fragmentation and so on. But it was all smiles at easyJet, whose summertime profits dazzled. It did so well chasing shorthaul business traffic, in fact, that even Ryanair is copying some of its moves.

If only Malaysia Airlines were doing so well. On the contrary, it’s having another miserable year, exposed to the overcapacity and cargo woes of its region, made worse by its own lavish aircraft buying and overzealous expansion. Did it really need A380s?

One problem Malaysia Airlines can’t shake is AirAsia and its longhaul sister airline AirAsia X. Both are growing rapidly from Kuala Lumpur, and both are making money, albeit the former more than the latter. AirAsia still must prove, however, that its grand ambitions in Indonesia, the Philippines and—soon—India don’t end in tears like its adventure in Japan.

At the Dubai Airshow, Boeing walked away the big winner by getting its new B777-X program off to a great start. Airbus thanked the heavens for some more A380 orders, and Bombardier won itself some Q400 orders. It sold a few CSeries planes too, although orders for the new plane family still lag.

United shared some of its cost-cutting and revenue enhancing strategies with investors, while also tweaking its Asian and European networks. Turkish held an investor event too, sharing its excitement about Istanbul’s hub potential. And Etihad, after a long wait, finally closed its deal to buy 24% of India’s Jet Airways.

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