30 July 2010

Airline Demand Strong, Now What?

This summer the airlines have shown a strong demand from the leisure sector. This has significantly reduced the availability of cheap seats and dramatically raised the pricing - at least in theory.

In practice that oh so subtle move towards ancillary revenues is beginning to pay off. Judging by Q2 profit announcements - the carriers doing not so well are few and far between. The ancillaries are powering many carriers - particularly the US and LCCs to greater profitability.

The weakest areas?

Asia Pacific with both JAL and ANA reporting losses is a prime example. But Chinese carriers are doing very nicely thank you.

And then there are BA and LH. LH has several carriers it is doing a good job on to reform. SN, OS, LX, BD. The core LH mainline we believe is doing better but a long way to go yet. LH still refuses to move at Ancillaries preferring to call itself a Premium Carrier. But still it has hedged its bets with control of German Wings. BA on the other hand is more of a basket case and Heathrow is increasingly becoming irrelevant. While the village of Sipson might be celebrating, the Gnomes of Whitehall must be fretting about how to avoid losing market share of International Traffic.

IF you take a peak at who has what - you have to think that the order books from Farnborough went largely to the lessors. Many of these guys must be betting that the US airlines will need to order new kit soon. But the long haul planes hardly took in any orders. Still 32+58 A380s flying around in EKs colours should scare the pants of just about any network planner.


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