Monday, July 8, 2013

08JUL edition

Air India has officially announced that it will be launching new daily services to Australia effective 29AUG13 from its Delhi hub. Flights shall be routed as 3 weekly DEL-MEL-SYD-DEL + 4 weekly DEL-SYD-MEL-DEL all operated with a 256 seater Boeing 787-800. The triangular services are operated to ensure a daily presence exists in both key market segments and for each to have a minimum 3 weekly nonstop service to India in either direction. All flights depart DEL at 1300 and arrive back the next day at 1800 local time.

officially announced that it will be embarking on a new long term corporate plan designed to help it achieve an "operating profit in 2014" and a "net profit from 2016" onwards as the carrier looks at identifying ways to help it achieve these set goals.

Details of the new plan can be read here:


With regards to the new long haul markets identified, their demand levels over the past year (stats from MarketIS and Shepherd System) were as follows:

VCE/NRT - 33,000

MXP/AUH - 32,000; this is obviously a partnership arrangement with Etihad similar to their FCO-AUH deal
MXP/PVG - 125,000
MXP/KIX - 24,000

FCO/ICN - 120,000; Sky Team hub to hub service should do well. What will happen here is that KE operates 3 weekly B744s on this route, so one would expect AZ to operate the remaining 4 days a week using a B777 !

FCO/NBO - 15,000
FCO/SFO - 53,000
FCO/JNB - 31,000
FCO/SCL (Santiago) - 21,000

Now as one can see from the above market size levels, there are 2 routes that are no brainers i.e. PVG-MXP + ICN-FCO and one which is good to provide feeder traffic at low cost beyond another airline's hub i.e. MXP-AUH which EY/9W will code share on and then they will feed it with GCC, ISC and SE Asia pax.

However, the choices which are not commercially justifiable include JNB, SCL and NBO for the following reasons:

1. JNB is not a Sky Team hub and low yielding for VFR traffic as the premium market demand between South Africa and Italy is marginal. The market size demand level is not high enough to even warrant a 3 weekly A332 nonstop service. It is best code sharing via CDG/AMS on AF/KL to South Africa. In addition, FCO-JNB is a long haul flight averaging 10 hours in flying time + in order to ensure good connections via FCO in both directions to Europe, the aircraft would also have a long ground time at JNB airport thus the aircraft utilization mixed with the low yield market characteristics of this route does not make it viable.

2. NBO maybe a Sky Team focus airport which can in turn result in KQ feeding it with pax bound to Central/East/South Africa via its hub but if an airline such as KQ could not itself make FCO work on its own over the past few years coupled with the fact that the O&D demand between Italy and Kenya is very low + what is even lower yielding would be the 6th freedom transfer traffic between EU/UK/USA and NBO. Another issue with FCO-NBO is that since its a 7 hour flight, it cannot be operated with AZ's A320/A321 fleet in order to reduce costs hence only an A332 needs to be utilized and unfortunately both these aircraft are too big to service this route and too expensive to justify a daily or even 4 weekly service !

3. SCL is a One World hub airport and not Sky Team. The flying time from FCO would be approximately 11:45 hours to service a market segment of 21,000 pax? In addition, transfer traffic volume potential via FCO to Eastern/Central Europe is also not that high. Once again, the return on investment on utilizing an expensive B777 on this sector is not commercially justifiable.

Instead, to replace these 3 above mentioned routes, AZ should seriously think about the following:

a) FCO/PEK - market size 101,000 + another 80,000 bound to other parts of Italy + huge feeder traffic potential available via FCO to Europe and North Africa. Good mix of high yielding business class and leisure/VFR traffic to be obtained here. Currently, only Air China operates this route nonstop on a daily basis using an A332 with a flying time of 10 hours 15 minutes which means for AZ a daily A 332 is perfectly well suited too. In case anyone is wondering why CAN-FCO is not being advocated in spite of it being a Sky Team hub of CZ, its due to the O&D market size between FCO and CAN being only 9,000 pax over the past year !

b) MXP/HKG - this market segment is very high yielding and has exploded in terms of demand levels since Cathay Pacific launched its services here 2 years ago. Market size is 102,000 and the O&D yield here is 35% higher than FCO/HKG ! Kindly note that before CX launched daily MXP-HKG services using a B77W, the annual market size demand on this route was only 36,000 pax which means over the past 2 years, it has grown by over 200% primarily due to CX creating this market stimulation ! For MXP-HKG, I would propose a daily B777-200ER operated service as it has a larger J class cabin (30 vs 20 on A332) and can carry more cargo in the belly. In addition to the O&D demand, it can carry transfer traffic via code share or on its own operated service to Europe out of MXP.

c) FCO/HND - the current demand between Tokyo and Rome alone is 190,000 passengers with only AZ operating a daily nonstop service using a B772ER. Along with this they also operate a daily MXP-NRT service using the same aircraft type and the annual demand for this route is 108,000 passengers. One option that should be considered by AZ here to increase their dominant monopolistic position is to launch a new daily service to HND with the B777. Currently, AZ's flights from Japan arrive into both MXP and FCO at 1800-1900 which limits the number of onward connections via their hubs to Europe + for some the arrival time early evening might be un-attractive. The yields of both FCO-NRT and MXP-NRT are identical and in order to offer another flexible schedule option + provide feed from Japan for its EU bound flights, AZ needs to consider the below mentioned schedule:

AZ XXX Dep FCO 2300 Arr HND 1810
AZ XXX Dep HND 0030 Arr FCO 0615

Emirates has officially announced that it shall be launching a new long haul route to West Africa namely to the city of Conakry (CKY) in Guinea effective 28OCT13. Flights shall be operated 4 times per week with a tag on to DKR-Dakar, Senegal using an A340-300. The routing will be triangular service i.e. DXB-CKY-DKR-DXB as EK looks at ways to help boost its current DKR operations. In other news, EK too revealed some further capacity changes to its long haul network for the upcoming IATA W13 season of which the main highlights are as follows:

WAW - capacity increased from daily A332 to daily B773

VIE - capacity increased to 13 weekly B773s from daily A345 + daily B773

KUL - capacity increased to triple daily B773s + daily A380

United Airlines has officially announced that it has placed a further order with Boeing for 5 additional B787 models as the carrier looks to rapidly accelerate getting these aircraft into its fleet to replace its aging B767s and early bird B772As to realize the mega operational cost saving benefits that the B787 brings to the table. In total, UA's 65 B787 order is henceforth split as being 21 B787-800s + 24 B787-900s and 20 B787-100Xs.

Air China has announced capacity reduction changes for its Germany bound flights for the upcoming IATA W13 season where demand levels tend to be light. On its core PEK-FRA route, frequencies reduced from double daily to 11 weekly flights all operated with B773s where as PVG-FRA gets reduced from daily to 6 weekly nonstop using an A332.  

Malaysia Airlines has revealed that it will be launching 2 new medium haul routes to expand its regional network offering less risk and higher yields versus experimenting with new routes to Europe or Africa. MH confirmed that the cities of Kochi in India + Darwin in Australia will be inaugurated effective 27OCT13 flown nonstop from its KUL hub along with frequencies to AKL (Auckland) being increased in the following manner:

COK - new daily nonstop flights using a B738

DRW - new 5 weekly nonstop flights using a B738

AKL - frequencies increased from 6 weekly to daily nonstop using a B772ER

Eva Air of Taiwan has officially announced its long term fleet plan that will see the carrier through to 2025 across its regional and long haul route network. The main highlights are as follows:

i. Regional narrow body network will be exclusively operated by Airbus A321-200s of which an additional 10 shall be ordered bringing the total expected A321 fleet size to 14 aircraft

ii. Eleven A332s + three A333s to be replaced exclusively by the Boeing 787-100X of which an order shall be placed in due course. The B787-100X will also be used on long haul flights to Europe, Australia and North America along side high density regional services to the ASEAN region.

iii. Size of freighter fleet to be reduced i.e. 9 B744Fs + 6 MD11Fs to be all replaced eventually by only 11 B777-200LR freighters!

iv. Long haul and high demand regional routes to be exclusively operated by the Boeing 777-300ER of which an additional 9 units shall be ordered to the 15 already in service. Airline is showing keen interest in Boeing's 777-900X program for growth in the next decade.


Korean Air has officially revealed few changes to its long haul route network for the IATA W13 season of which the main highlights are as follows:

CDG - capacity reduced from daily B744 to daily B773ER

SVO - frequencies increased from 4 to 5 weekly nonstop using a B772ER

MXP/FCO - capacity reduced from 3 weekly B744s to 3 weekly B772ERs
HKT - capacity increased to daily B744 nonstop service

Philippine Airlines has finally officially released information regarding its highly anticipated launch of new nonstop flights to DXB-Dubai, UAE from its Manila hub. Services will be launched effective 01OCT13 using an all economy class configured A333 operated daily with a 1815 arrival time into DXB and a departure at 1945. As a result of this, planned services to Doha are for the time being pushed back to be launched in IATA Summer 2014 season.

British Airways has revealed few capacity changes to its long haul route network for the upcoming IATA W13 season of which the main highlights are as follows:

BOM - capacity increased to double daily B744s

PEK - frequencies increased from 6 weekly B744s to daily nonstop using a B772ER
- capacity increased from double daily B772ERs to daily B744 + daily B772ER

FNA/ROB - frequencies increased from 3 to 4 weekly flights using a B763ER

PVG - frequencies increased from 6 weekly B772ERs to daily nonstop i.e. 2 weekly B773ERs + 5 weekly B772ERs

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