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Airbus Innovation Days: Major Updates on all Programs with Jabs Thrown at Competition

By: Chris Sloan in Hamburg / Published: May 31, 2016

During the second day of the Airbus Innovation Days 2016, John Leahy, Chief Operating Officer, Customers, provided an update of the global commercial aviation market, highlighting how passenger traffic outperforms Gross Domestic Product (GDP), driven by American Airlines, Delta and United in the USA, and by low-cost carriers (LCCs) in Europe.

In the last five years, Airbus has obtained 6,400 orders, and it has taken a share of 53% of the global commercial aircraft market. Leahy commented that the current slowdown in part of a natural cycle, and that the backlog is sound enough to contend with the headwinds ahead. Just in the narrowbody sector, its A320 family aircraft has a current backlog for 5,478 aircraft, equivalent to eight years of production at a rate of 60 aircraft per month.

IMG_3501According to Leahy, the driving growth in traffic is spurred by a growing middle class, particularly in Asia Pacific, which have the money and will make the region the center of growth of air travel. To date, 33% of the Airbus in-service fleet is in the region, holding about 2,000 orders of the overall backlog, followed by Europe (31%), Americas (23%) and Africa and Middle East (10%).

“If I had a choice of growth in the slower North American market versus Asia Pacific, I would take Asia Pacific growth market.” Leahy noted.

The CSeries: A “Cute Little Thing”

During a dinner event held last night, Leahy took a moment to talk about Boeing and Bombardier, its most direct competitors: “In 1972, industry was 10% that it is now. It used to be an industry that belonged to the elite. The world is changing for better and we, the aviation industry, have changed the world: There are a few wannabes like Bombardier, while Boeing and Airbus have done a better job than anyone else.”

When asked if Airbus would strangle the CSeries, Leahy joked “I think the CSeries is a cute little airplane and who would want to strangle a cute little thing?”

The MoM… Boeing’s “Mad MAX”?

According to Leahy the A320neo program leads the market over its most direct competitor, the 737 MAX. To date, the A320neo family aircraft has logged 4,515 orders in the book with 82 customers, versus 3,090 MAX orders from 62 customers. “The reason is that we are able to do more with our plane. We can offer multiple engine options and bigger turbofans. We ended up from being just about equal to be better in the market than the 737.”

IMG_3512In terms of the so-called “Middle of the Market” (MoM) Leahy noted that Airbus “is the clear leader of the Middle of the Market.” He boasted that the A321neo is the company’s MoM.

When talked about the “Middle of the Market” airplane, Leahy said that Airbus was “the clear leader” with a 79% market share versus the 737-9 MAX. “From our point-of-view, we don’t see the middle of the market airplane gap. It’s $15 billion gap that doesn’t make it worthwhile.” Leahy also commented about Boeing’s plans about a potential MoM “I think Boeing will come out with a modified engine, but we’re not worried since they can’t reach performance of the A321. We think the MoM will be called the Mad Max.” He joked.

IMG_3529“We win by optimizing space via slim-line seats, space flex galley, smart lav, and cabin flex, which puts more seats and greater pitch on the aircraft.” Said Kiran Rao, Executive Vice President Strategy and Marketing, who also noted that Boeing has a “mismatched family in the 737 MAX” and that the Boeing aircraft portfolio is small “to compete with the larger stable from Airbus.”

A350-1000 vs. 777X: Boeing Got Wrong

Leahy believes that the A350-1000 will be a top seller, stating that there is a potential market for 1,000 aircraft, criticizing Boeing and its 777X program. “Boeing got it wrong. They had a real winner in the 777-300, and two years ago they decided the market was moving to 40 seats larger. They did it because they couldn’t compete with our A350-1000.”

IMG_3520Leahy further highlighted that the A350-1000 has an advantage of -23% cost/seat, 450nm (830km) and a lower altitude cabin “The 777-300ER is obsolete, and got bigger when they launched the 777-9. The A350-1000 does a fantastic job of replacing 777-300 ERs. We are not convinced the market moved to 40 more seats and we’re on the fence about stretching.”

Widebody Wars

Rao continued his presentation showing the advantages of Airbus widebodies over those from Boeing, starting with the A330neo program, which according to Rao will offer a 10% direct operating cost advantage over the 787. Surprisingly, Airbus claims that the A330 cabin is not only wider and more comfortable for passengers, but also is quieter when compared to the Dreamliner.

Rao also announced a new space optimization for the A350XWB, which adds up to 15 seats without compromising cabins. Rao stressed the value of every additional seat, which according to Airbus “It can be worth $3 million to an airline.”

IMG_3537

Rao also highlighted the capability of the A350 and a possible future stretch “[The A350] has room to be stretched simply. It has right wing & engines. If airlines want it, we can do it.”

Interestingly, Rao admitted that there will be a future A380neo, although it is not imminent. “This program will be around 40-50 years, and of course that there will be new engines and stretches.”

Just as reported yesterday, the new A380 cabin may add up to $23 million in additional revenue per aircraft per year. The new cabin contemplates a Premium Economy class with a 9 abreast seating layout, the removal of the sidewall storage at the upper deck, a redesigned rear stair and a combined crew rest, among other improvements.

Finally, Rao closed the presentation forecasting that the second-hand A380 market “will start opening up the plane to carriers who can’t afford a new one. [Operators] will get a favorable lease rental for the price of a 777-300ER.”

Interestingly, the Airbus A380 was only compared in terms of efficiency and comfort to the Boeing 777-9. The 747-8 Intercontinental was not even mentioned.

RELATED: Airbus Innovation Days: A320neo and A350 Production Take Center Stage


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Chris Sloan is founder of AirwaysNews.com and a veteran reporter and aviation expert with a keen historical bent and an extensive collection of aviation memorabilia and photos. In early February 2003, he created Airchive.com. Contact him at chris.sloan@airwaysnews.com


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Alaska Air, Virgin America, Receive DOJ Request for Additional Information

By: Staff / Published: May 17, 2016

Alaska Air Group and Virgin America have received a request for additional information from the Antitrust Division of the United States Department of Justice (DOJ) in connection with Alaska’s proposed acquisition of Virgin America.

RELATED: It’s Official: Alaska Airlines, Virgin America to Merge

The two carriers said the so-called “second request,” is a “standard part” of the DOJ review process. Such information request extends the period that both parties must wait to close the transaction, until 30 days after they have fulfilled the request or if the waiting period is otherwise terminated by the DOJ.

The parties further commented that the response would be expedited, and are confident that the DOJ will grant the required regulatory approval to complete their transaction before January 1, 2017.

The proposed acquisition is also subject to approval of Virgin America’s shareholders in addition to the satisfaction of other customary closing conditions, including expiration or termination of the waiting period under the Hart-Scott-Rodino Act, which provides that the parties must not complete certain mergers, acquisitions or transfers of securities or assets, until they have made a detailed filing with the U.S. Federal Trade Commission and the DOJ, which will determine whether the transaction will not affect U.S. commerce under the antitrust laws.

In early April, Alaska Airlines Group announced a $2.6 billion offer to acquire Virgin America. The emerging airline would become the 5th largest carrier in the United States in terms of capacity (available seat miles), just ahead of JetBlue Airlines. The merger would provide Alaska a larger presence in the West Coast, particularly in California, which is to date the nation’s largest market and three times the size of Oregon, Washington and Alaska combined.

ANALYSIS: Alaska Airlines Buys Virgin America


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Turkish Airlines Begins Service to Atlanta

By: Benjamin Bearup / Published: May 16, 2016

Turkish Airlines began service to Hartsfield-Jackson Atlanta International Airport Monday by flying in the carrier’s signature Boeing 777-300ER featuring a special Batman v. Superman livery.

RELATED: Turkish Airlines’ “Batman v. Superman” Plane Takes Flight

IMG_5421

At the arrival, the first Turkish Airlines 777 was welcomed by the customary water cannon salute. (Credits: Author)

At a ribbon-cutting ceremony in Atlanta’s Concourse F, Atlanta Mayor Kasim Reed joined Turkish Airlines CMO Ahmet Olmustur, and Turkish Ambassador Serdar Kılıç in welcoming the airport’s eighth foreign carrier.

At the ceremony, Kasim Reed welcomed Turkish by stating “We are pleased to welcome Turkish Airlines as the newest carrier to Atlanta, solidifying the Hartsfield-Jackson Atlanta International Airport not only as the world’s busiest airport, but also the gateway to the world.” Kasim added that “The new route will open business and tourism opportunities to a vast array of global destinations and further advance Atlanta’s tourism industry.”

IMG_5651

The ribbon-cutting ceremony led by Atlanta Major Kasim Reed. (Credits: Author)

Olmustur praised the new route stating “This significant launch reinforces Turkish Airlines as a global leader in aviation with an internationally known brand helping passengers widen their world.” Olmuster also highlighted the significance of Atlanta as the airlinewill now connect travelers through “the world’s most traveled airport, Atlanta’s Hartsfield-Jackson International Airport.”

Announced on June 15th, 2015, Atlanta is the 9th city in the United States—and the newest in North America after Miami, which received service last October—for the growing carrier.

Timing for the Atlanta flight is consistent with most Turkish flights to the United States, and is suitable for connecting to much of Europe and Asia through its Istanbul hub. The flight departs Istanbul at 14:05 and arrives in Atlanta at 19:05. Leaving Atlanta, the flight departs at 22:45 and arrives in Istanbul at 16:40, all local times.

The estimated flight time is between 11 and 12 hours each way. Turkish will fly the Boeing 777-300ER on the Istanbul – Atlanta route. The largest aircraft in its fleet, the 777-300ER seats 349 seats in a two-class configuration (49 in Business and 300 in Economy). Turkish currently has 29 777-300ER aircraft in its fleet.  The airline has also said the Atlanta route will decrease from daily to 5X weekly, starting October 30th, for the winter season at least.

Turkish will likely be the second passenger airline to take advantage of the city’s Air Service Incentive Program (ASIP). Launched in 2014, the five-year program is designed to entice foreign carriers into starting service to Atlanta by offering them subsidies including a 12-month landing fee waiver, and contribution of marketing funds. So far, the airline has yet to sign a contract with the city for the Air Service Incentive Program but negotiations are currently ongoing.

In December 2014, Atlanta Airport Assistant General Manager for Commercial Development Vivica Brown told Airways “We’re focusing on this because we know that growth in international markets is exponentially higher than domestic market.” Brown added “So we thought it would be a great idea one, to incentivize airlines to start international destinations at Hartsfield, and two, to diversify our current destinations to fast-growing economies like Asia, India and the Middle East.”

RELATED: Atlanta Airport Targets International Service With New Program

Passengers were greeted to snacks and drinks courtesy of Turkish. (Credits: Author)

Passengers were greeted to snacks and drinks courtesy of Turkish. (Credits: Author)

In October of 2014, Virgin Atlantic became the first carrier to utilize the Air Service Incentive Program by launching service to London-Heathrow. At a ceremony welcoming Virgin Atlantic to the market, Atlanta Airport General Manager Miguel Southwell spoke to Airways about the program. “If your preference is to fly a U.S. airline, we have a U.S. airline. If your preference is to fly a British carrier with an outstanding reputation, then you have that choice,” he said.

Turkish stands to pose a challenge to Delta Air Lines and partners Air France/KLM on transatlantic routes out of Atlanta, along with Qatar Airways, which is set to begin its Doha service on June 1st, and also to be served with a Boeing 777-300E. Both carriers will provide a combined 608 daily seats to the Atlanta market.

Delta has been critical of Turkish Airlines and the Middle East carriers and their expansion in the U.S. market. Last February, Delta opted to suspend its daily Dubai flight that would have competed directly with Turkish and Qatar.

RELATED: Gulf Carriers Adjust Capacity on North American Routes: Are “Subsidy” Allegations Miscalculated?

RELATED: Qatar Airways to Fly its Airbus A380 in Inaugural Service to Atlanta


IMG_2799Benjamin Bearup has had a love for aviation since he was born. A local from Atlanta, Georgia, Ben is accustomed to life around the World’s Busiest Airport. In his spare time, Benjamin enjoys plane spotting, traveling, tweeting, and writing. You can follow him on Twitter @TheAviationBeat, or email at benjamin.bearup@airwaysnews.com.


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ANALYSIS: JetBlue Is Better Off Without Virgin America

By; Vinay Bhaskara / Published: April 29, 2016

JetBlue Airways recorded a net profit of $199 million for the first quarter (Q1) of 2016, an increase of 45.6% year-over-year (YOY). The New York-based airline bucked overall industry trends and recorded a healthy 6.1% YOY increase in operating revenues to $1.62 billion, though unit revenues (passenger revenue per available seat mile or PRASM) predictably fell 8.0% YOY in what was a rough quarter all around for US airlines on that metric.

The drop in unit revenues was more than offset by flat operating expenses (down 0.2% YOY to be precise) despite a 14.1% YOY increase in capacity (available seat miles or ASMs), which was of course led by a 35.8% decline in fuel expenses to $215 million. Overall, JetBlue’s financial results generated an excellent operating margin of 21.6%.

JetBlue came close to winning Virgin America

When news first broke of the finalized merger between Alaska and Virgin America, and the steep $2.6 billion price tag, our initial view was that JetBlue dodged a bullet.  JetBlue only has +/- $1.3 billion in cash and cash equivalents, and buying Virgin America would mean sacrificing the excellent balance sheet that JetBlue has built over the last few years (with $403 million of the $1.7 billion its outstanding debt to be paid off through the remainder of calendar 2016).

Virgin America certainly had some strategic value for JetBlue as it would allow the airline to get closer to being a national airline (still lacking a hub in the central 90% of the country to be fair). The fit between the Los Angeles and Long Beach hubs would have been awkward, but the fleet and the product match up very well, and JetBlue would be well positioned to win the same customers in San Francisco that Virgin America does (“techie millennial” is the stereotype). So at the right price, Virgin America would have made a lot of sense for JetBlue.

It would appear, however, that JetBlue’s management team had a different idea of the right price than we did. In fact, thanks to a recent Securities and Exchange Commission Filing by Virgin America related to its merger, we have a ton of details on what JetBlue did to try and close a deal with Virgin. JetBlue was actually the first airline to approach Virgin about a potential merger, opening talks with Virgin back in November of 2014 as Virgin America was racing towards an initial public offering (IPO). Those talks ultimately did not develop and Virgin completed its IPO on November 19, 2014.

The talks then picked back up last fall as another three US airlines (including Delta, Alaska, and we believe one of the ultra low cost carriers [ULCCs] Spirit or Frontier) jumped into the discussion process for a merger. Throughout the first couple months of 2016, Virgin negotiated with each of the other airlines and provided assessments of the synergies on offer. Delta ultimately dropped out because it did not believe that the merger would win regulatory approval from the US government, and the third carrier dropped out because the synergies from the merger reportedly weren’t large enough.

This left Alaska and JetBlue, which was actually the first to place a bid of $43.00 per share on February 12, 2016. Over the next month and a half, both carriers found themselves in a bidding war for America’s least viable airline, with Alaska offering bids of $44.75, $48.00, $53.50 per share, and JetBlue offering bids of $46.00, $50.00, and $55.00 per share.

On the afternoon of April 1, 2016, Alaska increased its bid to $57.00 per share and JetBlue stood by its $55.00/share best and final offer. Alaska had won the bidding war for Virgin America, but in our view, JetBlue was better off without it. As JetBlue CEO Robin Hayes put it on the airline’s quarterly earnings call:

“As widely reported, we did consider acquiring Virgin America as a way to more quickly build a larger West Coast presence. However, as we explore this possibility, the price reached a level where it became clear our strategic plan for organic growth offered a better path to value creation.”

And Marty St. George, JetBlue’s EVP-Commercial & Planning noted on the call that JetBlue has plans for organic growth on the West Coast:

“We have a challenge in the West Coast with facilities. It’s certainly one of the things we find attractive about Virgin America. We’ve been working with the airport authorities in both airports trying to get additional gate access, and we’re still optimistic that we will get there at some point… Not for nothing, this is one of the reasons why we have been focused on trying to grow in Long Beach for quite a while, because we think it’s a great airport for Southern California. With respect to Northern California, we’re somewhat constrained now. We actually don’t have our own gates in San Francisco today, and we’re always looking for opportunities to grow more.”

Hayes added that, “both of those markets remain priority markets for us [JetBlue] to serve. I mean, we’ve seen a lot of success with our Mint expansion, and we do believe that there needs to be access for airlines like JetBlue to come in and offer more choice and lower fares. And we’re going to be working extremely hard to make sure those – that happens both in LAX and San Francisco.”

Ultimately Virgin America’s value to JetBlue was in the value of its assets – those assets ended up costing too much to be worth it.

Growth focus turns to Fort Lauderdale

Instead, it appears that JetBlue will focus on growing its existing focus cities, particularly Fort Lauderdale. On the earnings call, Robin Hayes stated, “In Fort Lauderdale-Hollywood, we continue to be pleased with our results, as evidenced by a continued strong customer response to our double-digit capacity growth. It is clear, our service, our brand and our network are an excellent fit with the South Florida market. Over the next few years, we plan to grow this focus city to 140 daily flights, or about 75% above our current levels.”

140 daily flights is a massive figure, even larger than what we projected when we analyzed the Fort Lauderdale market last October. The justification for that capacity is probably there with the current fuel environment and economic growth in South Florida, though the tenor of that growth will probably shift to encompass more domestic growth given Latin America’s woes – the recent addition of Mint to the market is a signal of this.

Speaking of Latin America, analysts fretted on the call about Fort Lauderdale growth increasing exposure to Latin America, but Marty St. George largely squashed those concerns: “We have a pretty strong Latin portfolio out of Fort Lauderdale now. And I’d say the last few routes we’ve had at Fort Lauderdale have included domestic routes, routes like Nashville which starts beginning of May, San Diego which starts in June, and we announced New Orleans for this fall. So, we see growth both domestically and internationally, and we’ve got a great international presence there right now. So, I don’t think we’ll look at this as a marked change in our overall Latin exposure.”

ANALYSIS: The Fort Lauderdale Market Heats Up – Part 1 / Part 2

JetBlue considering the Airbus A321LR

With the success that JetBlue has found with its Mint product on domestic routes, it has been our view that JetBlue would absolutely expand the product to fly longer range routes to South America (from Fort Lauderdale) and Europe (from Boston and New York JFK). With Latin America’s economy in the doldrums, the focus has probably shifted some to Europe, but in our eyes the A321LR is a no brainer for the next phase of JetBlue’s evolution.

Robin Hayes said as much on the call: “The [A]321LR is something we are looking very seriously at because we think that the incremental amount of complexity that that provides is very manageable. I think a step-up to wide-body is a much bigger deal. I think, it’s something that, whilst one could never say never, it’s something potentially further out.”

Overall, it was another excellent quarter for JetBlue and our view is that over time, they dodged a bullet in not acquiring Virgin America at that price.


Editor’s noteOur readers now have access to our weekly eNewsletter, which includes a recap of our top stories of the week, along with the subscriber-only exclusive Weekend Reads column and Photo of the Week from our extensive archives. The newsletter comes out every Saturday morning. Stay in the know; click here to subscribe today!

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Is Airline Food Key Part of the Passenger Experience?

By: Nik Loukas / Published: April 21, 2016

I’ve been tracking my flights since early 2012 and according to Jetlovers I’ve taken 370 flights, flown over 385,000 miles and spent around 40 days in the air. I love flying, but my favorite part is the meal service.

The anticipation of what may be served and how it will look and taste all adds to the inflight passenger experience. As I’ve said numerous times before, airline food is a form of inflight entertainment, whether good or bad. There are some airlines who really know how to do airline meals correctly whilst others who need a lesson or two. Here’s a look at some examples of memorable inflight meals over the years, each with its own reason why.

Norwegian Airlines

Back in 2012, I flew with the airline from New York to Oslo (remember all those issues they had with its Boeing 787s?) the food was bad, really bad. But they redeemed themselves recently,  I flew from Oslo to Bangkok only 2 weeks ago with the airline and managed to book a number of meals. My inflight taste test cost me €35.00 and I received a main meal as well a second service breakfast pack. The crew saw me taking lots of photos and ended up giving me an extra hot meal to test out. I immediately noticed a massive improvement in quality and taste. The meals were fresh, served hot and most importantly tasty and yes the chicken was succulent too.

Xiamen Airlines

I wasn’t expecting much from this Chinese airline even though I would be flying business class,  but was pleasantly surprised on a flight from Amsterdam to Xiamen on their Boeing 787. It was Christmas Day 2015 and I was served a delicious meal of chicken with roast potatoes, French onion soup and a crisp salad. Not only did the airline hand out dinner candles to all passengers, but the service and inflight product was just fantastic. Sure the lounges weren’t the best in China, but inflight this airline was perfect!

Malaysia Airlines

Well known for its fantastic satay sticks in business class, Malaysia Airlines didn’t disappoint on this flight from Kuala Lumpur to New Delhi. Passengers on Malaysia Airlines gobble up 20,000 satay sticks each day! They are cooked in a special way at around 60 degrees and blast chilled (cooled down very quickly) then kept cool until they are served inflight no later than 12 hours after being cooked. Passengers can choose between lamb or chicken, and have the satay sauce drizzled all over the meat, or on the side.  Whilst the the rest of my meal was mediocre on this flight I thoroughly enjoyed those satay sticks!

Swiss International Airlines

SWISS really knows how to consistently serve some of the most amazing looking meals in business class on their European flights. The airline is well known to support local Swiss producers and offer these products to passengers inflight. Back in November 2014 the airline had a pop up restaurant event on flight LX16 from Zurich to New York. Swiss chef Chef Andreas Caminada and his ten-member team took 12 months to plan for the inflight event. Passengers in all cabin classes were served an array of meals that were freshly prepared inflight. Here’s a perfect example of how Swiss even treat economy class passengers to Swiss produce.

Turkish Airlines

Whether you’re in business, premium economy or economy, Turkish Airlines certainly knows how to deliver a fantastic meal no matter what cabin class you travel. Even on short  flights within Europe the airline will offer something delicious. Like this inflight snack box on a flight from Athens to Istanbul featuring a typical Turkish breakfast, not bad for a flight of around 1:20!

Breakfast! Istanbul to Athens with Turkish Airlines. #inflightfeed #planefood #airplanefood #staralliance #widenyourworld A photo posted by Inflight Feed (@inflightfeed) on

Singapore Airlines

Probably my most memorable meal was flying SQ in their A380 suites, I pre ordered the Japanese Kyo-Kaiseki dish. My favorite part of the meal was the Nino-Zen, it was the third course in this four course tasting menu. It included:


  Gohan

~ Boiled Rice with Mushrooms

Pickles

~ Pickled Baby Plum, Pickled Japanese Cucumber, Pickles Burdock, Pickled Nozawa Leaf with Tangle

Soup with garnish

~ Japanese Clear Soup

~ Garnish: Fish Ball with Beans, White sea Tangle roll, Kinome

Yakimono

~ Braised Duck Breast, Fresh Bean Curd Skin, Braised Japanese Baby Eggplant, Stick Sauce with Ginger, Carrot, and Braised Japanese Taro

~ Broiled Seabass with Miso Sauce, Yukukoshou Miso, Scallop, Boiled Fresh Spinach, Boiled Chest Nut, Carrot Flower, Ginko Nuts, Broiled Beinasu, Scallop Shell

The service was impeccable and whilst this dish wasn’t the tastiest I’ve ever tried, it really impressed all of my senses. The way the meals were served, described, explained how to consume, how they looked all added to overall positive experience of this meal.

My obsession with airline food has me now launching a Kickstarter to raise funds to film a documentary about airline food. So far I have Qantas, Air France, Turkish Airlines, Air Baltic, Cathay Pacific and many more involved. There are some amazing avgeek perks if you’re interested in backing the project, so please check it out if you like.


About the Author: Nik runs Inflight Feed the blog and website highlighting airline food options on over 100 airlines worldwide. He travels over 100,000 miles each year sampling as many inflight meals as he can and speaks regularly at industry events about airline food trends.


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COMMENTARY: U.S. DOT Clears Norwegian Air International

By: Vinay Bhaskara / Published: April 18, 2016

The US Department of Transportation (DOT) has tentatively cleared Norwegian Air International (NAI), the Ireland-based subsidiary of Scandinavian ultra low cost carrier (ULCC) Norwegian Air Shuttle, to launch flights to the United States, ending a months-long standoff. NAI proposes to operate long haul, low cost flights between Europe and the United States with an Irish operating certificate (the parent airline is based in Norway). Ireland has relatively permissive (by European standards) labor laws and regulations, and accordingly, NAI would be able to staff flights from Europe to the United States with crews from an entirely different country (initially planned as Thailand and other Asian countries). NAI’s plans have been staunchly opposed by an unlikely alliance of management and labor groups at US airlines, the latter of whom object to competition from lower wage nations. Interestingly, however, no such opposition was mounted by European airlines or their notoriously militant employee workgroups.

NAI isn’t breaking any laws

Regardless of the merits of the objections of US workers to lower wage competition (which will be considered below), Norwegian’s actions were technically allowed based on the letter of the law (if not the spirit). The United States and European Union have an Open Skies Agreement (inclusive of Scandinavia) that allows for airlines to fly any nonstop route between the two geographies regardless of who the airline staffs their flights with. Separate EU rules also allow for Norwegian companies to operate wholly owned subsidiaries in Ireland (and vice versa) and the intersection of these two laws means that Norwegian and NAI were complying with all applicable laws. Ultimately, that is probably what forced the DOT’s hands, regardless of the arguments about protecting American workers, NAI wasn’t doing anything illegal – and it didn’t have grounds to stop them.

DOT Protects Consumer Interests

Another factor that the DOT had to have considered (or at least a beneficial side effect) is the boon to consumers that a viable long haul, low cost airline represents on trans-Atlantic flights. Along with WOW Air in Iceland (who has the luxury of operating narrowbodies on most routes to the Eastern US and Western Europe), Norwegian has made Europe more accessible than ever for American travelers.

Thanks to Norwegian, $300-500 roundtrip fares between the US and Europe are now not only available but common. Even if these fares are only available in limited quantities, they represent a very real opportunity for a new class of customer, perhaps families who would normally travel domestically, to actually reach Europe and have a special kind of experience.

Beyond their direct impact, they have more broadly driven down fares for the market at large by driving a huge response from the traditional legacy, full service airlines on trans-Atlantic flights. Scandinavia has had the most pronounced experience with this effect, as fare sales from the region are routine and frequent. Some of this is of course enabled by the sharp reduction in fuel prices, but Norwegian has absolutely driven much of the decrease.

NAI enables Norwegian to serve more European destinations (particularly London and Paris to start) in a cost-effective manner. In fact, thanks to the reduced labor costs, Norwegian will be able to drop fares even further on those flights, which could create amazing deals for American vacationers.

It comes at the expense of (some) employees

Despite the consumer benefits, the concerns of US airline employees are certainly valid. Competition from lower cost, foreign labor is a problem that has beset many industries, though it was most notably problematic for workers in manufacturing. Airline jobs are particularly painful to lose, given that they are one of the few classes of jobs in today’s economy that provide a middle class wage without necessarily requiring college.

Norwegian’s rise isn’t necessarily going to kill any jobs today – they’re too small and today’s fuel environment allows airlines to make a steady profit even while having to match Norwegian’s fares on a limited basis. But if Norwegian survives the inevitable onslaught from legacy airlines once fuel prices rise again, its not inconceivable that they could grow to serve 150-200 trans-Atlantic city pairs (this is more than a decade out) and +/- 50-60 daily departures.

That would be a tangible reduction in market share for legacies on both sides of the aisle and could conceivably cause a few hundred airline crew jobs to be reduced. All of this is to say that the airline employees are not necessarily being paranoid. Airline managers and shareholders on the other hand are being nakedly protectionist.

But the truth of the matter is that governments should always move to protect consumers over narrow stakeholders (i.e. employees). In the case of Norwegian, the consumer benefit undoubtedly outweighs the pain that employees will feel, even if the latter is more painful on a per person basis. And if the government’s goal is to improve the economy at large, then it has to choose the path that has the most net benefits for all citizens (not just airline employees).

To get a sense of what this looks like with some back of the envelope math, for Norwegian’s flights to really impact jobs at US airlines, it would need to be offering at least a million to two million seats annually in the Trans-Atlantic market. Let’s take a number of 1.5 million for midpoint’s sake. Even if those passengers just save $50 on average, that is a direct consumer benefit of $75 million. On top of that, Norwegian’s entry has an indirect effect on competitors, and another 10 million passengers save $10 on average. Between direct and indirect consumer benefits, 11.5 million people benefit to the tune of a collective $175 million.

Meanwhile on a 2 million passenger market share (much of it gained by creating new customers and stimulating the market), perhaps 750 jobs might be lost (and this is probably an overestimate). Even if those 750 jobs had an average wage of $100,000 (again a huge overestimate), that would create an economic loss of $75 million.

So when you merge the two, Norwegian’s entry onto US routes benefits the economy as a whole by $100 million, and millions of American citizens benefit. The problem is that the costs to the 750 people are a lot more visible than the silent majority of millions who are better off, and this is usually why protectionist arguments hold water. Despite the very real costs to those employees, it’s a no brainer for the DOT to rule in favor of American travelers.


VinayVinay Bhaskara covers finance, operations and regulatory matters surrounding the U.S. and international airline industry. Bhaskara has been quoted in the Washington Post, Wall Street Journal and South China Morning Post, The LA Times, and his work has appeared in Forbes, Business Insider and Skift. You can contact him at vinay.bhaskara@airwaysnews.com.


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Embraer Deliveries Make a Good Start in 2016

By: Staff / Published: April 14, 2016

Brazil’s Embraer SA delivered a total of 44 aircraft in the first quarter of 2016. While commercial aircraft deliveries were flat when compared to 1Q 2015, the airframer achieved a 37.5% delivery increase over the previous year, thanks to its executive jets.

During this quarter, Embraer delivered 21 commercial aircraft (19 E175 and two E195 EJet family aircraft). The E175 continues gaining momentum among U.S. regional carriers. Just this week, Alaska Air Group subsidiary Horizon Air announced a purchasing agreement for 30 E175, with options for 33 aircraft, valued at 2.8 billion dollars at list prices if all options are exercised. The value of the deal will be included in the Embraer’s 2016 second quarter backlog.

Meanwhile, business jet deliveries made include one Phenom 100, 11 Phenom 300, as well as five Legacy 500 and six Legacy 650 aircraft.

According to the company, the highlight of the quarter was the rollout in February of its E190-E2, marking the start of a new generation of regional family aircraft from the Brazilian manufacturer. Since its launch in 2013, the E2 has obtained 640 commitments, 267 firm orders, and 373 options and purchase rights from both airline customers and leasing companies.

RELATED: Horizon Air Signs Contract for 30 Embraer E175s

RELATED: Embraer Rolls Out New E-Jet E2 Family Aircraft

Embraer expects to deliver in 2016 105 to 110 commercial aircraft and 115 to 135 executive jets. The company’s backlog of firm orders is valued at $21.9 billion as of March 31, down from $22.5 billion registered at the end of 2015.

The company ended the last year with 101 commercial aircraft and 120 executive jets delivered. The overall number of 221 aircraft set a record for Embraer in the last five years.


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ANALYSIS: The Battle for Los Angeles – Part II

By: Vinay Bhaskara / Published: April 11, 2016

The head-to-head battles in the Los Angeles (LAX) marketplace are heating up in 2016. In order to get a sense of how the constant growth from carriers such as American and Delta will play out, we conducted an in-depth analysis of the LAX market along several axes. In Part I of this analysis, we took a broad look at the overall market, as well as the specific operations of Alaska, Southwest, United, and Virgin America. Now, we will focus in on the head to head contest between Delta and American.

To assess these carriers head to head, we will use as reference the following table that outlines the LAX operation for each of the six most important carriers at the airport: Alaska Airlines, American Airlines, Delta Air Lines, Southwest Airlines, United Airlines, and Virgin America. The date in question is a peak summer day for air travel, July 14, 2016, which encompasses every announced route by the six carriers, including American’s most recent announcement. The table displays frequency for every route (airport pair not city pair) operated by one of the six carriers at the airport on this date. Additional destinations by the airline that are not served on this peak day are marked with an “X”, as are seasonal services that may not operate during the IATA Northern Summer season.

LAX hubs 1

LAX hubs 2

LAX hubs 3

LAX hubs 4

American, Delta, and United are closely clustered in market share

American will be the largest carrier at LAX in the summer of 2016 by a substantial margin in terms of frequency and network, with 26% more daily departures than Delta and service to 68 destinations versus 62 for Delta. Thanks to the US Airways merger, American is also ranking first in passenger market share at LAX, with 19.2%. The full 2015 market share data for LAX is shown in the chart below.

Source: Los Angeles World Airports

Source: Los Angeles World Airports

 

The chart only reiterates some of the key assertions from part one, namely that rumors of United’s demise in the LA market are overblown and that American and Delta are the two biggest and most important competitors. It is important to note, however, that Delta actually had a higher share than American Airlines proper, and only fell behind once US Airways was added in.

American is once again LAX’s largest carrier

American has had a large presence in Los Angeles since its inception, as the airline’s key route in the 1930s was its flagship DC-3 transcontinental route from New York to Los Angeles. Throughout the years, American’s LAX presence waxed and waned depending on the particular strategy of the management team in a given year, but maintained a steady pace of long-run growth.

For example, shortly after the deregulation in 1983, American had just 23 daily departures in to seven destinations. By 1989, it had built out a 156 daily-departure hub to 23 destinations, split between mostly widebodies on mainline service to hubs and major domestic destinations, and turboprop service on American Eagle to a bevy of destinations in California. Throughout the 90s, American maintained the LAX hub at 160-165 daily departures with a similar mix of destinations and aircraft. The operation crested in 2001 after the TWA merger, at a massive 231 daily departures, though roughly 70 of those were Saab 340 turboprop flights within California.

And then things went sideways. Between the collapse of the 90s tech bubble driving a recession and the knock off effects of 9/11, American dismantled large chunks of its California prop operation and saw its overall traffic decline slightly, ending up at ~150 daily departures in 2005. By 2009, amidst the global financial crisis, American’s LAX “hub” had fallen to just 118 daily departures, a far cry from its heights earlier in the decade. But after the recession receded and American pivoted to its “Cornerstone” strategy of focusing on core hubs and focus operations, LAX grew in concert.

The hub operation today is actually larger by capacity and destinations served than the prior peak back in 2001, though frequency is still a bit short of that 231 figure. Meanwhile, the route network for American at LAX is a mix of high frequency service to hubs, and key business travel markets around the country with mainline aircraft, high frequency regional jet service to key destinations in the Western United States, low frequency (1-2 daily flights) service to mid-continent and transcontinental markets with strong origin and destination (O&D) travel demand, and a small but growing trans-Pacific gateway. This mix is borne out in the breakdown of daily departures by aircraft type which can be seen below:

  • 28x A319
  • 61x A321
  • 34x 737-800
  • 1x 757-200
  • 3x 767-300ER
  • 2x 777-200ER
  • 6x 787-8
  • 4x 777-300ER
  • 19x CRJ-700
  • 3x CRJ-900
  • 52x E175

Much of American’s recent buildup in Los Angeles has been with regional jets (RJs), so it’s no surprise that 70+ seat RJs are just under 34% of total departures. The big story with American’s LAX operation is the rise of the A321. Even if you exclude the high frequency flights to New York JFK, the A321 now replicates much of American’s peak 2001 network that was served with 767s and 757-200s.

Delta is trying to “Win Los Angeles”

Like American, Delta has a long and complicated history in Los Angeles, and its operation at LAX has run the gamut from barely a focus city to important hub for Delta since deregulation. LAX’s first cycle as a key hub for Delta came via its merger with Western Airlines in 1987, which saw Delta inherit a hub with 160 flights per day to a variety of destinations across the United States (including 69 commuter departures daily in the Western US). Delta operated its inherited hub for almost 10 years nonstop, with the operation peaking at 216 daily departures in the summer of 1992, driven largely by high frequency services in the Western US (both mainline and commuter).

Despite the loyal customer base it had been ceeded with from Western, Delta struggled to make LAX work in the 90s in the face of growth from both American and United, and by 1997 had dismantled its hub back down to 110 daily departures. For the next decade and a half, LAX wandered the proverbial wilderness in Delta’s network, sometimes catching the fancy of Delta’s route planners after getting hit on the Delta Dartboard, while at other times shrinking after traffic and revenues failed to keep pace with expectations. The absolute trough for Delta came in 2009, when its LAX operation dwindled to just over/under 80 daily departures and its market share nestled into fourth place, far behind United and American and even trailing Southwest.

Then, the tables turned. The best analog for what Delta has done in LAX over the last six years is the buildup it engineered at New York LaGuardia after its slot swap in an effort to “Win New York.” In many ways, Delta is attempting to do the exact same thing at LAX. Just like New York JFK, the Seattle hub handles the kind of international flows that would normally bolster a hub in LAX’s geographic position, so Delta’s buildup in Los Angeles has really been focused on domestic O&D traffic, adding high frequency services in the Western US, strategically deploying narrowbodies on mid continent routes, and making smart, if unconventional investments into the market at large. Put another way, Delta has spent the last six years trying to “Win Los Angeles,” and like in New York City, victory here is loosely defined as competitive parity with the number one carrier (United in NYC, American is Los Angeles) on key routes for the purposes of corporate contracts and a number two position overall.

Accordingly, today the route network for Delta at LAX is a mix of high frequency service to hubs, high frequency RJ and Boeing 717 service to key destinations in the Western United States, low frequency (1-2 daily flights) service to mid-continent and transcontinental markets with strong origin and destination (O&D) travel demand, daily and less than daily nonstop service to key Mexican and Central American destinations, and a tertiary trans-Pacific gateway after Seattle and Detroit. This mix is borne out in the breakdown of daily departures by aircraft type which can be seen below:

  • 5x A319
  • 2x A320
  • 1x A330-300
  • 34x 717-200
  • 32x 737-800
  • 6x 737-900ER
  • 24x 757-200
  • 7x 757-300
  • 4x 767-300
  • 6x 767-300ER
  • 3x 777-200LR
  • 12x CRJ-900
  • 31x E175

For Delta, the key takeaway from the aircraft type breakdown is the rise of the 717s, which were nowhere to be seen just 2-3 years ago at LAX. Delta’s 70+ seat RJ departure counts have actually gone down even as overall frequency has skyrocketed thanks to the 717s, and unlike American, Delta hasn’t pulled the 757-200s out of LAX quite yet.

Fuel prices have created a land grab between the two carriers

A head to head comparison between American and Delta’s LAX network reveals distinct strengths and weaknesses for each carrier, though the overall edge almost certainly tilts towards American. Thanks to the current price of fuel and competitive environment in LAX right now, the battle between American and Delta has really coalesced into a land grab for beach heads in critical markets. Thanks to massive overall profitability at the network level, both carriers can afford to lose money on the marginal LAX markets (many of which are profitable due to fuel anyway), and accordingly are racing to add destinations and frequencies to as many destinations as possible.

The logic behind this expansion is that an early presence in said markets will give the first carrier to cultivate them a leg up in winning O&D market share and customer preference. On a macro level, there is also an arms race where each carrier must keep pace with the other in order to retain corporate contracts and frequent flyers.

Looking specifically at the holes and strength areas in each airline’s network, it is instructive to consider distinct geographic buckets of service. The following chart outlines destinations served by at least one of the six hubbed carriers that Delta and American respectively do not offer service to.

AA vs. DL at LAX

Looking at the chart, it is clear that the biggest hole for Delta is in the middle of the continent, where it lacks any service to two massive O&D markets in Chicago and Houston. These are absolutely critical holes, and along with the thinner destinations, it is clear that the mid-continent is a major hole for Delta. The Western US also appears to be relatively balanced but is in fact tilted towards American, as the cities where it lacks service (outside of Boise and Spokane) are largely tiny or vacation destinations while Delta’s network is lacking in key metro areas like Fresno, Colorado Springs, Albuquerque, and Reno.

The trans-continental network and long haul networks are a wash, in particular because both carriers have a bevy of alliance partners to draw connecting feed from. American’s one real weakness at LAX is to Central America and Mexico, where Delta has spent much of the 2000s carving out a niche in serving key Central American destinations. These are huge O&D markets in LA, and American needs to bolster its service offering to the region in order to build a comprehensive hub.

How will things play out?

LAX can probably support all four major hubbed carriers with fuel at current prices, but in a recession or fuel spike, only two out of United, Delta, and American will likely be able to sustain a 200+ daily departure hub. With that as the backdrop, here is how we expect the LAX market to shake out over the next 3-5 years.

The new Alaska Airlines after its merger with Virgin America has an opportunity for a very specific kind of growth. Thanks to the combined scale of +/- 80 daily flights and the reality of an operation split across two terminals, Alaska will probably shift much of its focus at LAX to a heavier focus on origin and destination (O&D) traffic, building on its natural points of strength in the Western US and substituting some unprofitable and highly competitive long haul Virgin routes for shorter length but better yielding regional flights. A potentially interesting gambit could be for Alaska to trade LAX gates at Terminal 6 for gates at Terminal 2 in San Francisco on a 1-1 basis with American Airlines. The combined carrier would then be able to boast a true hub at San Francisco while pruning unprofitable Virgin flying in SoCal.

Southwest would probably like to grow LAX but can’t thanks to terminal constraints, so its operation will look more or less the same, only with some Hawaiian routes mixed in and more 737-800s. United, we believe, is likely to shift its west coast focus firmly to San Francisco, but LAX is too large and important a market to just abandon outright. Instead, United is likely to shrink its LAX operation down to mirror American’s focus city at New York JFK, with a cadre of long haul flights, high frequency service to hubs, and a few flights per day to key domestic O&D destinations. This could be achieved easily by pruning the remaining intra-California services and cutting routes and frequencies in the Western US.

Delta will likely grow its LAX operation to 225-250 daily flights, focused heavily on high volume domestic routes. It will fill the obvious holes to Chicago, Houston, and Washington D.C. while also bolstering its mid continent and western networks. But the ultimate king will be American, who will build the largest hub at LAX with close to 275 daily departures and a true trans-Pacific gateway to rival Delta in Seattle and United at San Francisco, adding nonstop service to Seoul, Taipei, and Melbourne, Australia.

These plans appear to be progressing apace, though Delta recently made a play to spoil American’s plans by applying for Los Angeles – Beijing rights and the last seven remaining US-China frequencies for primary cities. Beijing is a critical pillar in American’s quest to build a Trans-Pacific hub at LAX, and losing the route to Delta would be a big blow. Still, thanks to its dominant gate position at LAX, American Airlines is poised to seize the mantle as the airport’s top carrier.

Note: This article was written before American announced its new nonstop service from LAX to Hong Kong and written before Delta announced its new nonstop service from LAX to Beijing. Said service adjusts some of the figures in this article slightly, but does not materially affect the overall analysis.


VinayVinay Bhaskara covers finance, operations and regulatory matters surrounding the U.S. and international airline industry. Bhaskara has been quoted in the Washington Post, Wall Street Journal and South China Morning Post, The LA Times, and his work has appeared in Forbes, Business Insider and Skift. You can contact him at vinay.bhaskara@airwaysnews.com.


Editor’s noteWhat are the benefits of subscribing to our weekly newsletter? You’ll get a summary of our top stories of the week, along with our exclusive Weekend Reads column and a Photo of the Week from the extensive AirwaysNews archives. The newsletter comes out every Saturday morning. Click here to subscribe today!

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Boeing Reports Decrease in First-Quarter Deliveries

By: Staff / Published: April 7, 2016

Boeing Commercial Aircraft deliveries fell approximately 4.3 percent in the first quarter compared to the same period a year ago, according to data provided by the airframer today.

Deliveries for the first quarter of 2016 stood at 176 versus 184 in 2015. The biggest share came from the 737, equivalent to 68.75% of all deliveries made.

Boeing also delivered 30 Boeing 787s and 23 777s. Last January, the company announced a 777 production rate cut of over 15% for next year, fixing the new rate to 7 aircraft per month to close the gap bridge ahead of the forthcoming 777X.

RELATED: Boeing to Trim 777 Production, Boost 737 Build Rate

Meanwhile, only a single 747-8I and a 767-300 were delivered. The ‘Queen of the Skies’ will experience a drastic cut to just six aircraft per year, citing softness in the air cargo market. The company previously announced that the rate would drop from 1.3 per month to one per month, which started the last month.boeing-747-factory-june-2014-8_33002767 Factory - Everett WAK65261-01RELATED: Boeing to Cut Production Rate of the 747-8 as Demand Slows

The company reported orders for 122 aircraft through April 5, with the 737 accounting nearly the 90% of the current book.


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Spending a Day with Anchorage Airport

The mountains that surround Anchorage provide some stunning views.

The mountains that surround Anchorage provide some stunning views.

Photos and Story By: Brandon Farris / Published: April 01, 2016

While Airways News Correspondent Brandon Farris was recently on vacation up in the “The Last Frontier,” the State of Alaska, we spent the day at the Anchorage Airport and sat down with airport manager John Parrot, spent some time with the Airport Police and Fire department, and finally with Airport Operations.

In this first part about Anchorage, we will talk about the airport, followed up with pieces of our interviews where we learned all kinds of unique things about the airport and how everything works together in this niche area for cargo flights between the United States and Asia.

Behind Memphis, Ted Stevens Anchorage International Airport sits as the second airport in the United States for landed cargo weight while sitting fifth worldwide as it is served by 25 cargo operators with regular service to 49 destinations across the globe. The airport averages 600 wide-body arrivals a week for cargo operations ranging from 777’s to 747’s. About 40% of the 747 operations have been upgraded to the new Boeing 747-8F.

In the 1996, Anchorage Airport was granted a gift from the US Department of Transportation when they approved the Cargo Transfer Rights that began to grant some carriers from some countries the rights to get a permit to expand cargo operations at Anchorage International Airport. What that means is air cargo carriers had expanded rights to interline cargo to/from non-US carriers along with US carriers. Carriers may also transfer on-line between flights, change of gauge/”starburst” service along with commingling of US and non-US traffic on the same flight.

300_8724But it’s not just about cargo with Anchorage Airport. During the peak in the summer rush, the airport is served by as many as 25 different carriers, also serving destinations domestically within the state of Alaska, the United States and internationally in Russia, Japan, Germany and Iceland. As of right now, the airport is capped on it passenger side, and with no more room at this time for additional flights, the airport is studying possible future expansions for passenger terminals.

Alaska is overall an interesting state, as 82% of its outlying villages have no access to any highway or road system. This provided a unique opportunity for niche carriers like McGee Airlines, founded in 1932 and eventually becoming what is known today as Alaska Airlines, and local carrier Ravn Alaska, which serves 92 destinations with a variety of nine different aircraft types in a 71 aircraft fleet.

300_9191Overall, Anchorage is an interesting airport in an interesting location that truly helps it be in a niche position over other airports. Our day started off with sitting down with the Airport Manager where we got to learn more in detail about Anchorage and future expansion plans from a possible fourth runway to creating more concourse space for more carrier to serve the airport.

Airways then spent about an hour with police and fire Deputy Chief Dave Schulling, when we discussed how an airport preps for an emergency and how, with so many flights flying over Anchorage, they need to be prepared for diversions of many interesting types that don’t regularly serve the airport. We also discussed how airports like Anchorage learn from real life events like those in San Francisco and what takeaways they were able to get from that.

Following our interview, we got to go on a tour of the Police and Fire departments, where we were shown how the airport processes people arrested for anything from a DUI to other things. Anchorage Police and Fire is a unique group as they are one work group and spend every other day as a cop/firefighter, so officers are trained and qualified on both sides.

After our tour of the department we were granted the unique opportunity of going for a ride along with officer Kevin Mader who took us on one of the fields Oshkosh fire trucks where we got to see how the trucks work and respond to an emergency. From spraying down the scene to how, if the truck gets too close and gets engulfed in a fuel fire, they have sprayers under the truck that will help extinguish the flames while the truck backs away to safety. After taking some exterior photos we climbed back onboard and rode down the taxiway where we got the truck up to 70 mph as if we were responding to a real emergency. To be in a big truck like that going that fast was something special and a unique opportunity.

300_8595After our time with the Police and Fire Department, our next visit was with Airport Operations, where we spent several hours with the Operations Manager Terri Tibbe and Operations Agent Tim Lufkin and were given an extensive tour of the airfield and discussed the operations side of the airport and how Anchorage handles all of the large aircraft. We followed a Dreamlifter as it taxied out to the runway with new Boeing 787 parts heading down to Everett to be built. You can tell that these guys are ones that love their job; as we discussed the airport and what the operations position does in ensuring the airport is always ready, we could see a smile break across both of their faces.

300_8687All of our interviews with the different departments of the Ted Stevens Anchorage International Airport will be coming out soon. Airways would like to send a special thanks to Trudy Wassel for helping coordinate these opportunities to spend so much time with the different departments, to Airport Manager John Parrott for sitting down with us and spending a little bit of time out of his morning to discuss the state of the Anchorage Airport, to Deputy Chief Dave Schulling for discussing how the airport handles emergencies and is prepared for anything that might get thrown at them, and finally to Operations Manager Terri Tibbe for allowing us to spend two-afternoons with operations agents Tim Lufkin and Jason Duffy, giving us the opportunity to capture many unique images of the operations at Ted Stevens that take place day-to-day and that will be seen in a gallery coming out soon along with our interviews.


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ANALYSIS: Will Virgin America Consolidate?

by Vinay Bhaskara / Published March 24, 2016DSC_0012

Low cost carrier (LCC) Virgin America may be partly or wholly for sale, according to a recent article by Bloomberg’s Mary Schlangenstein. The San Francisco-based carrier, widely thought of as America’s top airline in passenger experience, currently trades on the New York Stock Exchange (NYSE) after an initial public offering (IPO) in 2014. The airline is now valued at roughly $1.7 billion, still 22% below its peak valuation at just over $2.2 billion but up 14% over it’s initial valuation of 1.5 billion.

Initial investors need to cash out

The big carrot for a potential Virgin America sale is for another set of investors to be able to cash out after years of pouring money into America’s most financially unstable mainline airline. Investors, led by private equity firm Cyrus Capital and of course the famed Virgin Group of airline entrepreneur and media personality Richard Branson, have poured hundreds of millions of dollars to start up and prop up Virgin since 2007. And despite a mantle full of awards for passenger experience and inflight service, those investors have not seen much of a return for their stake.

Cyrus Capital got some cash out of the IPO but private investors still hold more than 50% of Virgin’s shares and they are getting increasingly impatient. Virgin America’s financials have certainly progressed over the course of the 2010s decade, as they are no longer cover-your-eyes abysmal but merely mediocre. Virgin America actually generated a $168.2 million net pretax profit on 2015 revenues of $1.53 billion for a not terrible 11.0% net margin. Its operating margin came in at 11.6% via operating profits of $177.2 million and the broader takeaway is that while Virgin America isn’t setting the world on fire, it finally resembles a sustainable airline.

The problems are threefold. First and foremost, even the current level of profitability probably isn’t enough to generate a huge return for investors. Operating and free cash flow have lagged behind profits for several quarters now, and Virgin simply isn’t throwing off enough cash as a business to compensate Cyrus via pure dividends. This is only exacerbated by the fact that it took a unique and extraordinary fuel price environment  for Virgin to even reach this level of financial success.

Said fuel price environment appears to be persisting for the moment, but it is far from certain to last long enough for Cyrus to cash out on a time-adjusted basis. And the underrated factor in Virgin’s run of profitability recently is sustainable and reduced capacity growth (3.7% in 2015). This, along with a booming local economy at Virgin’s largest hub at San Francisco kept Virgin’s revenues afloat.

But Virgin has 43 new jets on order (40 from the A320neo family) and it cannot continue to defer that growth forever. Virgin will begin by adding 10 A321neo’s to the fleet in 2017-18, and 30 A320neos will follow between 2020 and 2022. Such fleet growth will naturally drive capacity growth, and Virgin’s revenues may well suffer for it. In fact there’s an open question as to whether Virgin even has many markets left that are viable in the competitive hotbed of Los Angeles or even San Francisco.

Domestic airlines limited by antitrust concerns; imperfect fits

With all of that as the backdrop, it makes sense that Virgin’s owners would begin to shop the airline around. Virgin has already revealed that it received a takeover bid, which immediately sparked speculation of domestic mergers and consolidation. A popular name that was bandied about was Delta Air Lines, but we are suspicious of those reports for a couple of reasons. First and foremost, we believe that the Department of Justice (DOJ) is going to take a very hard look at any consolidation attempt by the four largest US airlines, and that antitrust concerns will torpedo any further mergers for those airlines (particularly for United – who has a major hub in San Francisco alongside Virgin). Beyond that, the fit with Delta is awkward – the airline would mainly be acquiring a fleet of A320s plus some gates/routes in Los Angeles and would likely have little use for the San Francisco operation (the more profitable piece of Virgin based on DOT data).

Amongst the remaining US airlines, there aren’t a ton of great fits either. Ultra low cost carriers (ULCCs) like Spirit Airlines, Allegiant Air, or Frontier Airlines would not be a match in terms of business model and thus would only be acquiring Virgin for its assets (aircraft, slots, and gates). Alaska Airlines is actually an excellent network match (and would instantly create a new force to be reckoned with at LAX) but the fleets don’t line up, and Hawaiian doesn’t really have any use for Virgin’s network.

Fellow LCC/network hybrid JetBlue would thus appear to be the only match from a fleet and network perspective, and there are some pluses in favor of such a merger. The combined carrier would fix network weaknesses for both individual airlines though the middle of the country would continue to be a weakness. The fleets and product strategies both align, and Virgin might benefit from a dose of the discipline that JetBlue CEO Robin Hayes imposed on the airline after the departure of his predecessor Dave Barger. JetBlue is also a small enough airline that the combined carrier might even be able to pass antitrust muster, perhaps with required divestments at JetBlue’s hub – New York JFK. A merger with JetBlue could be a viable option for Virgin’s investors.

Foreign buyers and private equity also lurking

Other news reports pinpoint international investors such as Middle Eastern giant Etihad Airways or a variety of Chinese investors flush with cash. An international investor buying a Virgin stake would be a fit of delicious irony given the challenges the airline initially faced with foreign ownership restrictions on Branson and Virgin Group. A foreign airline could certainly generate a ton of strategic value from Virgin, including feed at LAX and SFO for a Chinese airline or a US leg for Etihad’s so-called “equity alliance.”

The other factor to remember is that there is growing appetite for airline acquisition amongst private equity firms for airline ownership in the US. Most famously, Indigo Capital Partners has in quick succession made a ton of money off of ULCCs Spirit and Frontier. Virgin, and its more challenging business model are probably a different beast all together, but an enterprising private equity firm could see Virgin as an attractive bet. These news reports may turn out to be nothing but hot air. At the same time, Virgin America is ripe for a deal, from a variety of acquirers.


VinayVinay Bhaskara covers finance, operations and regulatory matters surrounding the U.S. and international airline industry. Bhaskara has been quoted in the Washington Post, Wall Street Journal and South China Morning Post, The LA Times, and his work has appeared in Forbes, Business Insider and Skift. You can contact him at vinay.bhaskara@airwaysnews.com.


Editor’s noteWhat are the benefits of subscribing to our weekly newsletter? You’ll get a summary of our top stories of the week, along with our exclusive Weekend Reads column and a Photo of the Week from the extensive AirwaysNews archives. The newsletter comes out every Saturday morning. Click here to subscribe today!

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ANALYSIS: The Battle for Los Angeles – Part I

by Vinay Bhaskara / Published March 24, 2016

Los Angeles International Airport (LAX) has seized the mantle from Denver International Airport (DEN) as the site of the hottest competition between legacy and network carriers in the United States. Thanks to the intersecting competition between American Airlines, Delta Air Lines, Virgin America, and Southwest Airlines, as well as the historically seeded operations of United Airlines and Alaska Airlines, LAX has erupted into a four, sometimes six-way battle for passengers and revenue in several key markets. And with American and Delta in particular ratcheting up the competition at Los Angeles, we decided to conduct an in-depth analysis of the LAX market and how things will shake out amongst the six key players over the next couple of years. Part one of this analysis will look at the broader market and the four smaller players, while part two will focus in on the key battle between Delta and American.

Terminal machinations are the backdrop

At LAX, the messed up terminal situation underlies pretty much everything that happens in the market. Thanks to nakedly self-serving and blatantly anti-progress court activity, residents in Los Angeles with a not in my backyard (NIMBY) stance on airport expansion,  have managed to create a hard gate cap of 153 gates and an annual passenger traffic cap of 78.9 million passengers. Luckily, both the gate and passenger cap expire in 2020, but passenger traffic hit 74.9 million in 2015 with 6.0% growth year-over-year. Another year of similar growth (feasible given capacity additions) could push LAX right up against that cap, embroiling the airport in heretofore unknown legal challenges.

As it stands right now, LAX is largely constrained by its current terminal setup, with 153 gates spread across 10 gate complexes, including the Tom Bradley International Terminal and the nine-gate American Eagle Satellite. Southwest has controlled Terminal 1 outright since 2013, when US Airways moved to Terminal 3 and eventually Terminal 6 in advance of its merger with American Airlines. Southwest is now in the middle of a $508 million renovation to the 15-gate terminal which will be completed in spring of 2018. The combined 24 gates at terminals 2 and 3 host a potpourri of airlines, with Terminal 2 housing international carriers that don’t fly out of TBIT as well as a few international flights from Southwest, and Terminal 3 hosting a variety of domestic carriers anchored by Virgin America.

TBIT houses most of the international airlines that operate at LAX, though American Airlines has preferred access to four swing gates at TBIT. American’s primary operation at LAX is split between the nine gate Eagle satellite to the east of United’s Terminals 7 and 8 (requiring passengers to be bused to and from Terminal 4) and 16 gates at Terminal 4. When combined with the four swing gates at TBIT and four gates at Terminal 6 plus further rights to one inactive gate at LAX, American will eventually have access to up to 34 gates (and 30 around the clock) at LAX, most if not all of which will be capable of handling mainline aircraft.

Terminal 5 is the primary Delta terminal, with 15 gates that recently underwent a $229 million renovation. Delta also has partial access to 8 gates at Terminal 6 on a common use basis out of 14 total, which also houses Alaska and four gates for American. Terminals 7 and 8 are exclusively used by United, who controls 20 gates between the two terminals. Finally, the newly reconfigured TBIT has 18 gates thanks to a $2 billion modernization program, with 11 further gates scheduled to open in 2020 once the new midfield concourse is built.  In all, this will leave the airport with 141 gates by 2020, substantially under the cap.

Of course all of this is going to change substantially thanks to the recent LOI signed by Delta to move its entire operation over to Terminals 2 and 3. This move, if it went through, would allow LAX to finally rationalize operations once and for all. Under the new alignment, Delta would be able to rebuild the complex that currently houses Terminals 2 and 3 (perhaps increasing to 28 gates with better spacing of gates on the current Terminal 2 site) enabling a substantial increase in its LAX operations. The airport could also consolidate American’s Eagle Terminal and Terminal 6 gates into Terminal 5’s 15 gates, which along with the four TBIT gates would satisfy it’s obligation to American for gate access. This would free up a net 5 gates under the gap (by eliminating the Eagle remote terminal) and allow LAX to expand the midfield concourse to 27 gates in all.

The airport would then have its four key hub carriers with full control of various terminals: Southwest in Terminal 1, Delta in Terminals 2 and 3, American in Terminals 4 and 5 (with behind security connection to TBIT), and United in Terminals 7 and 8. The international carriers displaced from Terminal 2 and some of the domestic carriers in Terminal 3 would move to the expanded midfield concourse while the remainder would join Alaska in the vacated Terminal 6. So in the long run, LAX probably has a workable plan for its airfield constraints. But in the near-term, the airfield configuration creates some interesting issues and incentives for the various hubbed carriers.

The current marketplace – each airline’s hub

The following table(s) outline the LAX operation for each of the six most important carriers at the airport: Alaska Airlines, American Airlines, Delta Air Lines, Southwest Airlines, United Airlines, and Virgin America. The date in question is a peak summer day for air travel, July 14, 2016, which encompasses every announced route by the six carriers, including American’s most recent announcement. The table displays frequency for every route (airport pair not city pair) operated by one of the six carriers at the airport on this date. Additional destinations by the airline that are not served on this peak day are marked with an “X”, as are seasonal services that may not operate during the IATA Northern Summer season.

LAX hubs 1

LAX hubs 2

LAX hubs 3

LAX hubs 4

Alaska has an oddball operation focused on the West Coast and Mexico

As indicated by the table, Alaska is the smallest of the six “hubbed” carriers at LAX (using that term loosely), clustered with Virgin America at a substantial distance behind the other four major carriers. Alaska has had a focus city in Los Angeles for more than a decade, beginning in the early 1990s by adding a cadre of leisure routes to Mexico. Throughout the late 90s and early 2000s, Alaska continued to build out the LAX hublet with more service to Mexico and point-to-point routes up and down the West Coast via subsidiary Horizon Air.

The frequency and destinations peaked prior to the recession in 2007 (when operations for Delta and American were at a historical trough), at which point Alaska began to pivot into its current orientation with powerful hubs at Seattle and Portland and a massive network between the West Coast and Hawaii. At the peak, LAX was nearly as big as Anchorage for Alaska, but today it has settled comfortably into a distant fourth place focus city with service to 17 destinations. Outside of the oddball flight to Baltimore-Washington and a beyond perimeter flight to Reagan, the remaining flights are concentrated to Mexico/Central America and the Western US.

Virgin America has shifted focus to Dallas and San Francisco

Los Angeles is nominally Virgin America’s second hub and in the past was a more robust operation for Virgin with several daily flights to destinations that today only see 1-3 flights per day like Washington Dulles, Newark, and Boston. Several factors have played into LAX’s decline at Virgin, but the primary reason is the further buildup at San Francisco and the new focus city at Dallas Love. Combined with an effective cap on capacity growth leading up to and after the carrier’s initial public offering (IPO), the ~16 new flights per day at Dallas and the maintenance of frequency at San Francisco meant that growth had to be funded from somewhere. The LAX operation was a natural victim.

And looking forward over the next several months, there are a few additional flights that are likely to be pruned before growth restarts with the first of Virgin America’s A320neos. In particular, the four daily flights to Las Vegas, and the three daily flights to Seattle represent token presence in markets that are absolute bloodbaths right now. Relative to the lucrative origin and destination (O&D) travel up for grabs at San Francisco, this type of low yield leisure route is something that Virgin America should continue to minimize.

Southwest is still a domestic powerhouse at LAX

Fresh off a deal to expand its access to LAX, Southwest has retained its position as a domestic O&D powerhouse in the LAX market. As recently as 2011, Southwest was the second most important airline in the LAX market in terms of domestic traffic carried with an overall network that rivaled those of Delta and American at the airport. But the last five years have seen Southwest mostly stay pat at the airport with the only real new service coming on the international front, and Southwest has declined to fourth place despite maintaining service and in fact up gauging several routes to the Boeing 737-800 and adding capacity thanks to increases across the fleet.

Southwest is still a major player in its core markets at LAX, punching above its weight in attracting O&D and centered on a slew of high frequency services to California destinations (including 35 daily flights to the Bay Area alone). Moving forward, the exclusive control of Terminal 1 should enable Southwest to push up towards 140 or even 150 daily flights if utilization is highly streamlined but the reality of facilities constraints create a natural cap on Southwest’s growth. The major shift over time may well be that some of the intra-California and Western US flying is up-gauged, freeing up frquencies to fly to Hawaii and internationally to Mexico and Central America.

United has a narrower replica of its San Francisco hub

For a long time, United was the dominant carrier in the Los Angeles market, an artifact of its historical west coast roots centered on a dual hub strategy for both Los Angeles and San Francisco complemented by a western gateway in Denver. And for a long time, United’s San Francisco and Los Angeles operations grew in tandem, and were similarly sized. By the early 2000s, San Francisco was the larger Trans-Pacific gateway but Los Angeles sustained similar overall frequency and capacity thanks to a high volume of domestic O&D.

But over the past decade, the path of the two California hubs has steadily diverged, with San Francisco growing into a true behemoth as the absolute best hub on the West Coast (akin to Newark in the Northeast) bar none for United and the Bay Area market as a whole booming thanks to the rise of Silicon Valley and the tech economy. Meanwhile’s LA’s more muted economic performance has been exacerbated by the rise in competition from Southwest, American, and Delta, leaving United with an easy decision to shift resources and growth towards San Francisco on both a relative and absolute basis.

From being the largest airline at LAX by far, United has shrunk down into third place by frequency and capacity, a marked decline. The absolute scale of the cuts is probably overblown, given that a lot of what went away was low-capacity turboprop flying in California and regional jets (RJs) flying in the Western US. But it is undeniable that LAX simply isn’t a priority for United anymore thanks to the rise of San Francisco.

Note: This article was written before American announced its new nonstop service from LAX to Hong Kong and written before Delta announced its new nonstop service from LAX to Beijing. Said service adjusts some of the figures in this article slightly, but does not materially affect the overall analysis.


VinayVinay Bhaskara covers finance, operations and regulatory matters surrounding the U.S. and international airline industry. Bhaskara has been quoted in the Washington Post, Wall Street Journal and South China Morning Post, The LA Times, and his work has appeared in Forbes, Business Insider and Skift. You can contact him at vinay.bhaskara@airwaysnews.com.


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The Need for Speed: A Review of GoGo’s New 2Ku In-Flight Wi-Fi

By: Contributor / Published: March 18, 2016

When it comes to Wi-Fi, speed is everything. And for those wanting to go online whilst in the air, it’s been anything but speedy of late. So much so that American Airlines sued GoGo, its in-flight Wi-Fi provider, because of slow connectivity, arguing that competitors such as ViaSat, which powers Wi-Fi on United, among others, is significantly faster than GoGo’s service. However, it looks as though slow speeds at 30,000 ft are about to change, thanks to GoGo’s new 2Ku satellite-based Wi-Fi system. AirwaysNews was onboard the company’s 737 Airborne Test Lab at SXSW this week to see just how fast this new service is.

RELATED: Gogo, American Spar Over In-Flight Connectivity Solutions

IMG_0045

Ready, set, download!

The GoGo testbed flight departed Austin-Bergstrom International at 11:38 local time with several of the company’s engineers and executives onboard, along with about a dozen media armed with every sort of device, from smartphones and tablets to laptops. The plan was to spend about an hour in the air simply experiencing the functionality of the 2Ku system. The atmosphere was relaxed and informal, and within about five minutes of being airborne, 51 separate devices were connected to the internet, according to the GoGo reps onboard. I noticed many were watching one of two live television channels (I opted for Bloomberg Television but also switched across to Russian ice hockey on ONE World Sports, and why not!) whilst others surfed the internet and watched movies on YouTube and Netflix.

IMG_0057The 2Ku satellite technology was developed in-house, and as Scott Carmichael, GoGo’s Manager of Social Media and Online Communities, told me, it brings together a variety of things that are very important to airlines. “First of all,” noted Carmichael, “it saves on fuel because, as you can see on the plane, the dome that covers our antennas and that adds to the top of the airplane, is very low, only about five to six inches versus fourteen inches.”

IMG_0054However, the real emphasis is on speed with in-flight Wi-Fi, and according to Carmichael, the 2Ku technology provides a huge amount of extra speed.

RELATED: Gogo Reaches Significant In-Flight Connectivity Milestone

Exactly how much extra speed did we (and will passengers themselves be able to) enjoy?

GoGo’s Ku band satellite, which they currently use on Delta’s international fleet, gets up to 12 megabits per second (Mbps). That’s about the most that one can get out of any Ku band antenna, according to Carmichael. On this particular flight, the modem was configured to handle 25 Mbps and was a vast improvement compared to the former 3 Mbps from GoGo’s early air-to-ground system. Currently, the antennas used on the Boeing 737 Test Lab can deliver a combined 70 Mbps of downstream bandwidth.

IMG_0058As Steve Nolan, VP of Public Relations and Communications at GoGo, explained, the modem, as with one’s own home system, is the first so-called “choke-point” for incoming data, and the same is true for in-flight Wi-Fi. “So if there is a bottleneck, it’s going to be coming from the limitations of the modem,” said Nolan.

With 2Ku, users will initially be limited to 25 Mbps downloads with uploads being capped at .5 Mbps. This, Nolan explained, was designed to make live outbound video streaming virtually impossible. And even though 25 Mbps is a vast improvement over the tortoise-like speeds of air-to-ground service, GoGo is also testing a new satellite modem with proprietary features that integrates with 2Ku that will, ultimately, be capable of delivering up to 400 Mbps to an aircraft. These antennas will be able to do that by linking into newer, upcoming lower-orbit geosynchronous satellites, such as those being launched in 2018 by OneWeb. At this time, low-latency broadband will become a reality at 30,000 ft.

Onboard the GoGo 737, the 25 Mbps modem handled the demands from all 51 devices seamlessly. On my iPad, SpeedSmart consistently recorded download speeds of anywhere between 8.5 to 15.5 Mbps, with uploads averaging .45 Mbps, really good by any standards. None of the journalists I spoke with reported any issues with the system.

There are several factors that impact Wi-Fi speed, including the capacity of the satellites in use, how many planes are flying in and actually using a particular sector, and, of course, the capability of the modem itself. The fact that the 2Ku antennas are significantly bigger, which makes it easier to pick up multiple channels, is what is ultimately putting the demand on the modem to deliver more speed. Another major advantage of 2Ku is that coverage extends internationally, and GoGo have already completed the first transcontinental test flight, with continual connectivity on a flight from Canada to Germany.

According to Carmichael, what GoGo have done with 2Ku is make it compatible with existing Ku-band systems, which is significant given the excess capacity with current high-orbit satellites. But by 2018 or 2019, with satellites much closer to Earth and a lot more of them, users will be able to experience spectacular speeds. As Steve Nolan told me toward the end of the flight, what GoGo wants is for people to simply be able to do what they want to do. If that is the metric by which 2Ku is to be judged, I’d say – mission accomplished.


Slatteryphoto1Mike Slattery, who holds a Ph.D. from the University of Oxford, is both a College Professor and AvGeek. Originally from South Africa, Mike’s work takes him all over the globe to landscapes as diverse as the cloud forests of Costa Rica to saving rhinos in the game reserves of southern Africa. At last count, he had flown more than 1.3 million miles, equivalent to being in the air 112 days or 54 times around the Earth. He lives with his family in Fort Worth, Texas.


Editor’s noteWhat are the benefits of subscribing to our weekly newsletter? You’ll get a summary of our top stories of the week, along with our exclusive Weekend Reads column and a Photo of the Week from the extensive AirwaysNews archives. The newsletter comes out every Saturday morning. Click here to subscribe today!

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First Trip Report: Onboard the Singapore Airlines Airbus A350 Delivery Flight

Story and Photos by: Andreas Spaeth / Published: March 3, 2016

The Airbus A350 has only reached delivery stage for about 14 months, but since the first aircraft went to Qatar Airways just before Christmas 2014, new deliveries to new customers start to get a bit of a routine at Airbus.

DSC_0050After Qatar Airways, Vietnam Airlines, Finnair and TAM, Singapore Airlines (SIA) joined the exclusive club of A350 operators this week.DSC_0020

When aircraft number 16, MSN 026, A350-941 registered 9V-SMA, was handed over to Singapore Airlines (SIA) on Wednesday, the buzz was considerably less than before. Even more so in comparison to the last milestone delivery for SIA in Toulouse, the first-ever Airbus A380 in the fall of 2007. With the first A350 for the Asian quality carrier, it was almost a low-key event for Airbus and SIA standards.DSC_0179Adding to that was that Airbus’ top brass was in China at the time, breaking ground for a new A330 completion center in Tianjn. So Didier Evrard , EVP Programmes at Airbus and former Head of the A350 Programme, was the master of ceremonies on the manufacturer’s side back in Toulouse. “Having SIA as a customer is the strongest possible endorsement of the A350”, remarked Evrard during the handover ceremony.DSC_0069

For SIA, the A350 is a truly new dimension. “In the last five years, we had very little expansion on long haul, we didn’t have the right aircraft with the right efficiency to expand in a commercially viable manner”, said SIA-CEO Goh Choon Phong in talking to AirwaysNews.

“The A350 is a game changer for us because it is this particular aircraft offering us the right size, efficiency and cabin to add more capacity on long haul.” In fact, the A350 will open up a new route for SIA, from Singapore to Düsseldorf, Germany, in July this year. “That would have been difficult to serve for us without the A350”, adds Goh.

The A350s 253 seats (42 in Business Class, 24 in Premium Economy and 187 in Economy) are just about the perfect size to establish new routes off the trunk routes or add more frequencies with extra flights to existing destinations. The first long-haul route for the new aircraft in the SIA fleet will be the service to Amsterdam from May 9th, replacing a Boeing 777-300ER.DSC_0039

SIA is so far the biggest customer for the A350-900 with 67 firm orders for the base version. Interestingly, the airline will deploy the type on any kind of route – from regional runs within Asia to long haul to ultra long haul. SIA is the launch customer for a new version, the A350-900ULR. “Strategically, the ULR is very important to us, as the US is such an important market and we plan to re-establish non-stop service in 2018 from Singapore to New York, Los Angeles and one more city we will announce later”, says Goh.

SIA had pulled the 18-hour-plus non-stop services from Changi Airport to Newark and the slightly shorter LAX-service in 2013, with fuel prices so high and the utilized four-engine A340-500s so inefficient that it was no longer viable. So the A350-900 will be part of the SIA fleet in three different versions, besides the current 253-seat base version for long-haul. “It’s obvious the ULR will have less seats than regular A350s, and then we will have the regional version with more seats, we still have flexibility to adjust the number of each version we need according to demand.” Interestingly, as Airbus’s A350 spokesman Arnaud de la Croix pointed out in Toulouse, the ULR model can be reconfigured back to the base 900-version, in restricting some fuel tank capacity. Unlike other ULR aircraft, the A350-900ULR variant does not physically contain bigger or more fuel tanks, the ULR just makes maximum use of the existing capacity.

But this is still kind of far off in the future, the current priority is to introduce the A350 into SIA’s fleet. Here, it will replace up to 29 Boeing 777-200ERs and 32 A330-300s, all of the latter are leased. “We currently have about 40 pilot trained to fly the A350, all converting from the A330 due to the common type rating”, explains SIA’s A350 chief pilot Paul Ho to AirwaysNews.

“By year-end, when we will have eleven A350s delivered, we plan to have about 100 pilots to fly them.” Singapore being Singapore, a city state with famously strict rules, the Civil Aviation Authority had to pre-authorize guests on the delivery flight to even visit the cockpit, and even then, photos of the cockpit in flight were not allowed.DSC_0037

There were about 70 passengers on flight SQ8895 from Toulouse to Singapore, a small media contingent, staff on duty and employees who won the trip as a prize in an internal raffle. After checking-in at the Airbus Delivery Center, each passenger and crew member had to stand on a scale to be weighed together with all personal luggage. Interestingly, several male fliers observed, including the pilot, brought it to 106 kilograms each.

The aircraft’s luxurious Business Class cabin, in 1-2-1 configuration, but forcing passengers to sleep diagonally when in full-flat mode, was almost fully occupied. The product is similar to that in the latest Boeing 777-300ERs, with some small enhancements. SIA plans to totally revamp its First and Business Class offerings with delivery of five new A380s from the second half of 2017. The CEO wouldn’t say if the airline would keep the diagonal seating, which fairly many passengers dislike.

The new Premium Economy Class has proven to be a success for SIA, while reducing the number of Economy seats, effectively leaving the cheapest segment of the market more to the Gulf carriers. “We respond to what our customers tell us”, comments the CEO. SIA’s Premium Economy, with seats supplied by the same German manufacturer ZIM that equips Lufthansa, is quite luxurious in appearance and boasts 38 inches of pitch and inflight service including French champagne. Catering on the delivery flight however included bubbly in plastic cups for everybody, as well as two meal choices supplied by Airbus. Nothing to write home about, but well presented. Apparently SIA did not want to make as much fuss as for example Qatar Airways does on delivery flights with guests, which includes a specially printed menu and an even higher class catering than what the Gulf carrier already offers on regular flights in Premium classes, often including caviar for all on board.

The route flight SQ8895 took from France to Southeast Asia was quite southerly, avoiding Iraq, for example, but not Egypt. After it got dark, most passengers used the various options of the Krisworld IFE offerings or simply slept. Once a French breakfast with croissants had been cleared, the delivery landed exactly 12 hours and 13 minutes after take-off at its new home base in Changi Airport.

DSC_0306A cheery reception event attended by Singapore’s minister of transport rounded out the premiere of the next-generation Airbus to one of the manufacturer’s most faithful customers since the early days of the Airbus A300 in the late 1970s. Before scheduled long-haul services to Amsterdam start, passengers can experience the new aircraft on short-haul legs between Singapore and Kuala Lumpur and Singapore and Jakarta, flown to enable newly trained A350-pilots to accumulate enough cycles.


Editor’s note: What are the benefits of subscribing to our weekly newsletter? You’ll get a summary of our top stories of the week, along with our exclusive Weekend Reads column and a Photo of the Week from the extensive AirwaysNews archives. The newsletter comes out every Saturday morning. Click here to subscribe today!

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JetBlue says ¡Hola, Ecuador!

By: Roberto Leiro / Published: February 25, 2016

As previously announced, JetBlue is starting today its service from Fort Lauderdale to Quito, Ecuador. The South American country becomes the 22nd country served by the airline. The service comes to compete with Ecuadorean carrier Tame, which already offers flights between both cities.

RELATED: JetBlue to Take Off to Quito, Ecuador

RELATED: JetBlue Announces Mexico City and Quito Service

“Quito is one of the fastest growing destinations in Latin America and a world-class tourism destination. We are thrilled to bring our award-winning service and low fares to this underserved market,” said Dave Clark, vice president network planning at JetBlue.

B6FLLFlights from Ft. Lauderdale will depart at 19:00 local, with arrival to Quito at 22:30. Departures from Quito will be at midnight and an early arrival to Ft. Lauderdale at 05:17, all local times. Although the flight will primarily serve an ever growing O&D traffic between South America and Florida, the schedule is flexible enough to allow connection to JetBlue’s network. JetBlue will operate the route using its 150-seat Airbus A320s.

“JetBlue will soon offer more than 100 daily flights to destinations across our network. Whether travelers are coming from South Florida, the northeast or the west coast, it’s never been easier to visit Ecuador’s historic capital city” Clark said.

From Fort Lauderdale, JetBlue also offers direct services to Bogotá, Cartagena and Medellin in Colombia, and to Lima in Peru. Last year, JetBlue added Mexico City as well. Quito is the fifth Latin American destination of the New-York based low-cost carrier.

“The arrival of JetBlue will have a positive impact on the development of tourism from and to the United States and it will offer Ecuadorian passengers greater connectivity from Fort Lauderdale” said said Andrew O’Brian, president and CEO of Corporación Quiport, the concessionaire of Quito’s Mariscal Sucre International Airport. Since its inauguration in 2013, the new Quito International Airport serves more than five million passengers per year.


5k7s85PpRoberto Leiro is the Executive Editor at AirwaysNews.com. An aviation passionate since early childhood, Roberto started with other fellow enthusiasts Venezuela’s first aviation photography / news organization svzm.aero. Follow him on twitter @rleiro and reach him via e-mail at roberto.leiro@airwaysnews.com.


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Boeing South Carolina’s 100th 787 Delivered to American Airlines

By: Staff / Published: February 16, 2015

As Boeing’s centennial anniversary approaches this summer, the company is also celebrating the number 100 for a different reason today, as its Charleston, South Carolina plant is delivering to American Airlines the 100th 787 built there. This milestone was reached in less than four years after the rollout of the first Dreamliner from the site on April 27, 2012.K66513-1“Reaching this milestone is a testament to the hard work and dedication of our entire team,” said Beverly Wyse, vice president and general manager of Boeing South Carolina.

Today’s delivery marks the first 787-8 for American coming from Boeing South Carolina and the 14th overall. To date, the airline has 28 more Dreamliners on order, including the larger -9 variant to be delivered in the third quarter of this year. This delivery follows last week’s of N° 99 to Saudi Arabian Airlines.K66513-2RELATED: American Airlines’ 2016 Fleet Plan

RELATED: Saudi Arabian Welcomes its First Dreamliners

“The 787 has quickly become an important part of our fleet, allowing us to fly profitably to new places like Auckland, New Zealand,” said Chuck Schubert, Vice President of Network Planning, American Airlines. “When we’re trying to match the right plane to each route, the 787 is a great aircraft to have.”

RELATED: American 787 Opens New Zealand Routes with Qantas, Jetstar

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RELATED: American Air Takes Delivery of its First Boeing 787-8 Dreamliner

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Boeing’s South Carolina plant will be the exclusive assembly site for the forthcoming 787-10, the largest variant of the Dreamliner to be built. Last December, Boeing completed the design work and the company expects to start the assembly of the 787-10 this year, followed by the first flight in 2017.

First deliveries are scheduled to be in 2018 to United Airlines. The largest operators of the variant will be Singapore Airlines and Etihad Airways, with 30 aircraft each.

RELATED: Boeing Completes Detailed Design for the 787-10 Dreamliner


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Airbus Readies A350 XWB Final Assembly Line to Ramp Up Production

Story by: Roberto Leiro / Published: February 16, 2016

Airbus has completed the extension of its Roger Béteille Final Assembly Line (FAL) in Toulouse, ahead of the production startup of its A350-1000. The extension comprises three additional assembly stations that will help the airframer to ramp up the production and reach the proposed goal of at least 50 A350s built in 2016.A350_XWB_RAMP_UP_01Interestingly, the Toulouse FAL is able to produce both the A350-900 and its stretched variant, the A350-1000, in the same streamlined assembly process. This allows teams to work in parallel, reducing assembly times, and at the same time providing enough flexibility to the company  to adapt the production while keeping optimal operational costs.

A350_XWB_RAMP_UP_02The additional stations include a new “Station 50,” where the three sections of the fuselage are mated as these arrive from external production sites. This station is also where the nose landing gear, the front crew rest area and the rear galley are installed.

Airbus has also incorporated a fourth “Station 40” in this production line, where the wing mating, and the installation of the empennage, main landing gear and engine pylons take place.

A350_XWB_TAM_02 Finally, Station 30 is focused on the initial ground testing of the aircraft systems. Once this is completed, the aircraft is moved out of the FAL to undergo complementary tests. Final operations in the assembly process include installation of engines and passenger cabin fittings, painting, engine run-up and flight testing prior to customer acceptance and delivery.

Recently, this FAL received the first A350-1000 fuselage sections, thus starting the final assembly of the first aircraft last February 9. According to Airbus, the first A350-1000 one of three flight test aircraft to be built, will take to the skies for its maiden sortie before the end of the year, with deliveries expected to occur in mid-2017.

RELATED: Airbus Starts A350-1000 Final Assembly


5k7s85PpRoberto Leiro is the Executive Editor at AirwaysNews.com. An aviation passionate since early childhood, Roberto started with other fellow enthusiasts Venezuela’s first aviation photography / news organization svzm.aero. Follow him on twitter @rleiro and reach him via e-mail at roberto.leiro@airwaysnews.com.


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Brazil’s GOL Suspends Flights to Venezuela

By: Roberto Leiro / Published: February 12, 2016

Brazilian carrier GOL Linhas Aereas has suspended its Sao Paulo – Caracas service after unsettled repatriated funds in foreign currency, arising from the sale of passenger tickets and cargo space during 2013 and 2014, and the intention of Venezuelan authorities to charge airport services, taxes and fuel in US Dollars.

During the last three years, the possibility of international carriers of retrieving their income has become literally impossible. Airlines such as Air Canada and Alitalia have opted to suspend their flights to the troubled Latin American country, whereas others have drastically reduced their frequencies or closed destinations, such as US-based American Airlines (AA) and Delta Air Lines (DL).

Last year, GOL dropped its Aruba and Punta Cana flights to Caracas, routes exploited under 5th freedom traffic rights, and limited to a weekly service its Sao Paulo – Caracas route. At that time, it warned about the possibility of putting the operations to an end. Despite the attempts of the Brazilian government to solve the situation by bringing the topic to diplomatic levels upon petition of GOL and TAM, negotiations never came to a fruition.

RELATED: Foreign Airlines Serving Venezuela Await a Solution

Last June, during the Annual General Meeting of IATA in Miami, Peter Cerda, IATA’s Regional Vice President, admitted that the Association “Hadn’t had any relevant progress in the negotiations so far and, to be honest, we don’t believe we will see any advances in the coming two years.”

In the meantime, seat availability and frequencies for traveling overseas from Venezuela are still limited for Venezuelans. They are facing a myriad of obstacles, namely the unavailability of tickets, blocking of travel dates, additional surcharges and commercialization of tickets in foreign currency.

These measures are intended to decrease the exposure to risk of foreign carriers serving in Venezuela, given the deteriorating, economic, political and social conditions of the country, and the measures that Nicolas Maduro’s government may eventually take (especially in the matter of foreign exchange policies).

Given the grim scenario ahead, especially now with the drop in oil prices, both American Airlines and Delta Air Lines opted to write-off their remaining cash in Venezuelan Bolivars, totaling $592 million and $75 million, respectively, in the fourth quarter of 2015.

ANALYSIS: American Airlines Shrugs off Revenue Challenges


5k7s85PpRoberto Leiro is the Executive Editor at AirwaysNews.com. An aviation passionate since early childhood, Roberto started with other fellow enthusiasts Venezuela’s first aviation photography / news organization svzm.aero. Follow him on twitter @rleiro and reach him via e-mail at roberto.leiro@airwaysnews.com.


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