AIRPORTS Big hubs get bigger EGYPT How terror threat is VIRGIN Why Branson’s US baby

as passenger traffic soars taking its toll on tourism has so much Alaska appeal

STRATEGY FOR AIRLINE BOARDROOMS WORLDWIDE XXXXXX

MAY 2016
2014

flightglobal.com/airlines

INTERVIEW

SAAD
HAMMAD
Finding new
niches for Flybe
after the fightback
 CONTENTS
VOLUME 32 NUMBER 4

AB INTERACTIVE
AIRPORTS Big hubs get bigger EGYPT How terror threat is VIRGIN Why Branson’s US baby
as passenger traffic soars taking its toll on tourism has so much Alaska appeal

STRATEGY FOR AIRLINE BOARDROOMS WORLDWIDE XXXXXX

MAY 2016
2014

4 Routes to the world

flightglobal.com/airlines 6 Full-throttle Farnborough

BRIEFING
INTERNATIONAL
INTERVIEW
8 De Juniac to take controls at IATA
SAAD
HAMMAD AMERICAS
Finding new 10 Alaska starts California dreamin’
niches for Flybe
after the fightback
EUROPE
12 New base lines for low-cost carriers
Changes at the top for European airlines
ASIA
15 Investors set to call Virgin hands
FINANCE
17 Mesa move marks a financing first VIRGIN TERRITORY
page 10
COVER STORY SPECIAL REPORT
18 Back in black AIRPORTS
Having returned the UK regional 23 Runway leaders Snapshot of the booming airports
airline to profitability, chief 28 Global airport traffic The top 100 hubs
executive Saad Hammad is now 32 Private lives Half of Europe’s airports are heading
preparing Flybe to expand into towards non-public ownership
mainland Europe 34 Capacity changes US traffic recovery masks tougher
times for smaller airports as the big hubs forge ahead
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PASSENGER BOOM
44 The long haul to low-cost viability With Norwegian
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 AIRLINE BUSINESS INTERACTIVE

t may be a global village that

I comes to life for a week every

two years, but there is an
increasingly established feel to the
Farnborough show grounds.
Around the perimeter, housing,
smart offices and an upscale hotel
have replaced a clutter of redun-
dant buildings from its days as a
Cold War defence establishment.
And on the slope facing the mod-
ern hangars and terminal of Farn-
borough business airport on the
other side of the runway, perma-

Bombardier
nent exhibition buildings are
emerging.
The first to appear was Five, in The Bombardier CSeries should be one of the stars of this year’s show
recent years BAE Systems’ air

FULL-THROTTLE
show home but hired out as an An-178 transport will also appear
events venue the rest of the time. for the first time at Farnborough.
Then, in time for Farnborough This year’s show will also be a
2014, a permanent chalet Row A
was built, with exhibitors com-
mitting to long-term leases to
FARNBOROUGH stage for Boeing’s centenary cele-
brations. Although plans are
under wraps, both FIL and Boeing
secure prime spots overlooking hint at a spectacular event to mark
the flight line. Lockheed Martin, more comfortable home – with air some from China, which is dou- the occasion. In 2014, Boeing’s lat-
one of the biggest supporters of conditioning, wi-fi, catering and bling its presence from 2014, and est Dreamliner derivative, the
the show, is now building a year- meeting rooms – the benefits of the first representation from Iran’s 787-9 flew in the display. With its
round pavilion, ready for the the investment go beyond the aerospace sector in modern times. new programmes, the 787-10 and
show on 11-17 July. show, says Ormrod. The facility the 777X, not due to fly until later
The most significant permanent will compete with exhibition cen- SHOW STEALERS in the decade, expect the empha-
addition will be a new exhibition tres around the country, including Airbus, as ever, is expected to sis to be on Boeing’s heritage.
complex, on the site occupied by in Harrogate and Manchester, and have a major presence with an On a more sobering note, there
the temporary Hall 1 and 1A. provide valuable third-party reve- A350 and A380 flying. In addi- will perhaps be an increasing
Work will begin shortly after this nue for FIL and ADS. “It’s all tion, A350-900 launch customer emphasis on safety this year. Farn-
year’s show ends with the public about protecting Farnborough for Qatar Airways is likely to exhibit borough and the Royal Interna-
weekend on 16/17 July, with the the future,” he says. both types. FIL says it is “hope- tional Air Tattoo, which takes
intention of having the building As for the event itself, show ful” of having Bombardier’s place over the 9/10 July weekend,
open for Farnborough 2018, says director Amanda Stainer prom- CSeries for the first time. will be the first major air shows to
Shaun Ormrod, chief executive of ises “the most international Farn- On the military side, the Lock- take place in the UK since the
show organiser Farnborough borough yet”, with a “huge over- heed Martin F-35 will make its Shoreham disaster in August in
International (FIL), owned by UK seas presence” from small and debut outside the USA. Embraer which 11 people were killed. FIL
industry federation ADS. medium-sized enterprises as well too will display its KC-390 air- reaffirms its emphasis on safety,
Although the building will pro- as aircraft manufacturers. Among lifter for the first time at an air saying its “own set of regula-
vide some exhibitors with a much the 20 country pavilions will be show. Meanwhile, the Antonov tions… go above and beyond
those of the [UK Civil Aviation
T AND WEB
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Authority]”.
Partner
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PRINT AND WEB
Official Media Partner

DAY
But while the metal on the
14 JULY 2014

static and in the skies over the

4
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SHARING: TO STRIKE Avolon rises to cloud 9 CAPTION:

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sed hopes n
tllan-
atlan already flown with the weapon
event’s organisers
have
en up hope of the F-35B out.
making
order for five Boeing 737 Max 9s. “This order is consistent
a significant role in financing the next generation of
with Avolon’s objective to play
aircraft for its global airline customer was in
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type
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it here before the week
“Unfortunately the
F-35B
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aircraft as a result of the new agreement.
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approved a F-3
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will see thousands of global aero-
ing delivery 5 fl eett, but
fleet,
flee of the type. The order takes
the end of the week.” labels the disappoint- e F-35 -35
in Fernandes expresses order for the llimitati mittatio n
at oons. the nation’s total fleet to 20.
All F-35s remain grounded aircraft”, though he
choice. Qatar Airways remains in certain
under certa ain im
an engine having an engine pushing Air- edd a n newew iin- The new batch of aircraft
the USA following ment in not “an impasse” with Airbus include
These inclu uded
has been al fo ffor h Pratt
or tthe will be delivered to the Egyp-
fire late last month. For years, AIrAsiaA330, and was original
-
spection in nterrva
interva
Four of the US Marine
Corps’ e its w-
over the ongoing delay to its
135
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F1 nggi , and
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vertical land- bus to re-engin General Electric GEnx-po A380s, and chief executive & Whitney ght eenvelop e.
short take-off and for a out big d flflight nv
flig will follow 12 aircraft previ-
Akbar Al Baker is remaining a restricteed

space professionals converge to

to depart ly pressing
“I think GE
has missed ace u until the ously ordered – of which six
ing F-35Bs are ready ered version. there are a couple
of GE To remain n in n pplacela
NAS Patuxent River first
in
sure air-
tight-lipped about the likely
use ooff a la atee JJune fire
late are already in service. The
type’s time. I’m to do this delivery schedule. cause
root caus d the
ed, contract also includes a ser-
the actually wantedthink it’s a mis- fied
BillyPix

Maryland for been

has bee en id dent ntifi
identifi
guys who “I The airline was expecting ct veely made
transatlantic crossing. full- Fernandes. yce, and not effectiv
ess effe
ef ectiv vice support package.
has a craft,” says to have its first aircraft on measurres K iimpossible.
Lockheed – which And credit to Rolls-Roposition with display at the Farnborough the trip p too thhe U
the UK
the
In Egyptian service the

ENCE
F-35 on take. monopolistic
scale replica of the pow- Thee de ecis
decisio isioon to allow C295 will be used for mili-
hopeful abusing their o will be exclusively air show but had to drop air

make new contacts, entertain

show – says it is “still gov- .
F-35 ttoo retu turrn too tthe
return
re tary and humanitarian mis-
us.” The A330neyce Trent 7000 engines a

AKS SILR
the US plans at the last minute after eek after
Rich Cooper

they will appear if hreee w ee

weeks sions such as the transport

X-FILE RE-OPENS
to fly”. ered by Rolls-Ro the delivery slipped again. camee th three
pte as an
A- of civilian and military per-
ernment clears them fire w hiich
which ru
h eeruptedupt
to
Chief executive Marillyn the
The move prompted Airbus was on a take-

BAE BRE
would be applied del ai irccra
aircraft aft w .
sonnel, as well as support to
A320neo cabin to substitute its development model
mod

S
slightly on about AFB, Florida f

ANIS
Hewson will speak olll att EEglin glin nA remote areas or in emer-
a launch customer. accommodation A380 at the show. off rroll
-MORROW coming nufacturer er would be increase programme at the
show today.
ot a bort
aborte or d the take-of gency situations.
By DAVID KAMINSKI While the manufactur the A330neo. “We refused to take de- Thee pi pilot the

A
poised to vantage of the Farn- with the spec- fo exiting “We greatly appreciate

T customers and seal multi-million

irbus could be to take advantage One source familiar ttem
attemp
att mpt, bbefore
be
ptt,, befo

THY
livery of our three A380s
“A330- keen in-

A
the Egyptian air force’s con-
of a re- se, it would be aware the proposed aircraft
launch two versions These notably include which borough showcase, an ification of that are already ready in raft
aircraft
airircra t .
Compound rotorcraft technol
f and

ON STEAL
Farnbor- names. risk of unveiling Airbus would aim
to re- horrt take-of had fidence in our products
engined A330 at and “A330-900neo”, our sshort
ough as early as
today, as 800neo” of the publicity
by brand specialist A330neo programme mme without a
cus- dicates that
high A330 commonal
ity in Hamburg and were sup-
”, Garside says.
Four
Fo
erttica
vertica
v all la
cal and F-35Bs ramp
landing ogies bounce back based on their successful

A
were reserved tain posed to be delivered to us the
mounts that the span of top- entry into cross section ow-
d show- percch d” on irbus Helicopters is planning experience with the C295 to
alongside a broad ent.t. to achieve a 2018 on the radar ts of the trial include eeen “p
bbeen “perche in By KATE SARSFIELD
Pictures: BillyPix

tantalising evidence y modern- CSC

tomer commitmen the primary order
over the month of June,” usly at nt River a rapid return for the technol- in terms of performance, but date,” says Antonio Rod-
domains on 7 July. Rolls-Royce iss already A330 and, Key elemen ability to
autonomously at NNAS AS P Patuxe they also
airframer will significantl to take on level “A330neo” is and service. es- Al Baker says. ’s ng a 10 July, ogy employed on its record- ríguez Barberán, head of
said whether it A330neo would d since
s offer a high level of safety and

dollar deals.
HOYLE
ise its twinjet workhorse Airbus has not r to the Emergence of an By CRAIG the aircraft before detecti ary
Maryla
M ryllan nd
n 155h of flights to lead the development reliabili-
s, engine supplier r for ing

AIRBUS PITCHES NEO B

He declines to elaborate a a search area e sensors” and to the UK breaking
recent name reservation
sole-sourc
d towards sole-source 276-seat A350-800 the veil on ering directo navigate to eaddy to ddeploy t.craft demonstrator X3 compound rotor- a brand-new high-speed rotorcraft under
of ty,” said Airbus Helicopters commercial for Airbus
the Boeing 787. to behind the given the trend o
g op- sentially render the has yet on the reasons
AE System
lifted
fors the delay, with the BAE’s engine s, revealed that a “representativ valal by
ready
re chief execu-
tive Guillame Faury in a Farnborough Military Aircraft.
declines and European nd the diminishin , although Airbus flight tests , BA target using attack profile for approveased itth ta ankk suppor
tanker that flew off into the auspices
While the airframer which include French powerplants and be unnecessary saying “I think youofbetter air Garside system performed
with
w tional
graceful
Interna of the European Commis-
intentions for the the airframer he A350-800, would for the type. new series
ask Airbus.” unmanned combatTues- future comb combat air
flights were generating
an pleased
particularly of the rnbborough ation of retirement last month.
Farnbo
Farn
Fa sion’s Clean Sky 2 programme, briefing. “In hostile environments,
comment on its domains, although portunity on the to clarify its plans such
a prime position owns the equivalent ition to offer a version
versi Tinseth also dis- Taranis strator on series of test early 2014. These in-
second serie an operato
r. “We were ance scriribe
esc beed confirm During an almost three-year test cam-
given the green light last week.
which was as search and
rescue, coastguard and
show, it has reserved position
its re- in a prime 00 engine. Boeing’s Randy Airbusvehicle
says it demon ng and perform describ
de paignoint-
late 2013 and strator in a “fully

$130
l dis- already a and Qatar s that -s w as “disapp the X3, which features a pair
for a commercia associated with “To even have defence minis- n lat with the handli Garside, who adds all of he no no-sho
no- hopes ofmounted of border patrol and offshore
at Farnborough of its Trent 1000 missed the plans. Airways are French
“working on the tment to betwee flyi the demon virtually
the
th propellers The airframer has dubbed the operations,

AS DREAM-CRUSHER
coinciding with
the domains is also likely to feature
feat
of the A330neo
means to the UK and their
aselements commi cluded flying ration, making it aircraft,”
says ed to meet et g”. Itt h had held out on stubby wings LifeRcraft aircraft these characteristics
are vital.”

And as usual, Flightglobal will

ing”.
ing
in for
closure today – engined A320neo.
carriers that
The aircraft A350
A discussion has day,
final to
henedbe accom- .
trials have
continu in time
coupled with a set of
– or low impact fast and effi-
celebration of Bas- AirAsia is among derived from the me that their
A350 strategy also strengt operational
platform co
configu ny says. he F-3
tthe F-35-3 arriving s. Dauphin standard rotors on cient rotorcraft – and is targeting a cruise
Launched in 2008, Clean
Sky is a
prominent French a refinements wing-
wi Lightning tries
plished before delivery
study a future ed of first stealthy the compa as “flight objectives”. o-- a AS365
d’s display
Airbus to develop ncluding revised he said yesterday. MODEL: Replica Taranis was in invisible to radar”, ns antenn programme back in the UK underg ndergo he w e
weeken fuselage, captured nu- speed multi-year partnership involving
have pressed for programme, including for the failed,”
jointly
the aircraft”. communicatio vari- the
the
th of 220kt. Clean Sky 2 calls for the Eu-

billion
tille Day. classifi n are con- merousspeed records, with the rotor-
istration activ- while lessor Air strategies used The highly foreign locatio ry aircraft’s
The air control Taranis is
now
discussions to fur-
pre- ropean Commission
Internet domain-reg re-engined A330, in be- tips, while undisclosed ‘signature liminary studies, architecture and Europe’s avia-
Februa y replaced with boom installed on
the nance, and d r craft being taken to 255kt (472km/h) and speci-
fications this year, with development tion industry. It is designed to develop
ity also points to
a concerted behind- Lease has expressed interest flown at an but it was not until h were
repl
data of a ing mainte the MoD with regard 7 June last year.
on
to protect specific s – which and an air d in favour ys.
, BAE says. the technologies that will
the-scenes effort August 2013, its industry partner s- ants’, earlier tests remove tinuing with and testing of components and enable the
system. d flight testing It has since been handed

A
irbus catapulted its r Rolls- subsys- next generation
By DAVID KAMINSKI-MORROW aims to cut 800kg in weight. that BAE and 951 engine supplie ed nose
for gathering ther planne over to tems envisioned in the 2016-2018 of low-emission and worth of aircraft

be there to bring you all the news,

A330neo into the e limited flight data little impact France’s Musée de l’Air et de time- low-noise aircraft.
On a 4,000nm flight Airbus include Adourallowed to disclos conformal tion had “very
l’Espace at frame, says the airframer. Flight
BillyPix

frontline battle with of a derivative engine

Royce – were first series of flights. Chris latter installa
Paris Le Bourget airport. evalua- Clean Sky 2 is planned to run and engine orders
Avionics
– the intends to achieve an 11% fu- The latte s Airbus Helicopters tions could start in early 2019, from
the Boeing 787 yes- Rolls-Royce Trent a ay, hris But now
Upgrade it says. 2014 to 2023 with €4.05 billion over first three days
details about the show yesterd will utilise

a ve Cockpit and
7000, el-burn saving over its A330- teggra ion and the technologies
Integrat
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BRIEFING INTERNATIONAL
MAX KINGSLEY-JONES LONDON
De Juniac to take controls at IATA
Air France-KLM chief swaps restructuring challenges for industry issues at crucial time for both the airline and association
fter months of speculation,
A IATA surprised the industry
on 5 April with the announce-
ment Air France-KLM chief exec-
utive Alexandre de Juniac will
succeed Tony Tyler as the associa-
tion’s director general.
IATA’s board of governors has
recommended the appointment of
de Juniac, which is subject to con-
firmation at the annual general
meeting in Dublin on 1-3 June. De
Juniac will take over from Tyler,
who is retiring, “after a short
handover period”, says IATA.
De Juniac’s departure prompted
a sharp fall in the Air France-KLM
share price in early trading after
the news. The stock price
dropped by more than 8% as the
market opened from around €8.30
($9.38). However over the week
following the announcement, the
price recovered to previous levels.
The airline group’s board says it
will appoint a successor by 1
August, but has not named any
potential candidates. It says it has
“initiated the process” of identify-
ing someone able to continue the
group’s business programme.
De Juniac has held the top post
at Air France-KLM for three years,
having taken over in July 2013
when the share price was around
€6.70. Before becoming head of
the group, he was chief executive
of Air France from 2011 and pre-
viously worked for Thales and the
French government.
The Frenchman has overseen a
restructuring plan, known as
Perform 2020, for Air France, but
faced substantial resistance from
unions over the implementation
the first in the world ! ! Wide field of view with flat surface
Passenger Convenience
8 | Airline Business | May 2016
IATA’s new boss may fly through turbulance from US/Gulf spat
of extensive cost-saving measures.
With the restructuring still a work
in progress, some observers were
surprised by de Juniac’s decision
to move on. What is clear is that
whoever succeeds de Juniac will
face the challenge of seeing
through his programme.
LEADING ROLE
As he prepares for his new role in
Geneva, de Juniac says he is
“excited”, adding: “IATA has a
critical role to play in supporting
the success of the aviation indus-
try – leading advocacy, safeguard-
ing the industry’s money, building
the standards that underpin global
connectivity, and partnering with
stakeholders and governments to
drive important changes.
“I look forward to leading IATA
as it supports safe, efficient and
sustainable global connectivity.”
Tyler, who is IATA’s sixth direc-
Shorten Aircraft Turns
the organisation feel more inclu-
sive to all its members and
smoothed IATA’s reputation with
the wider aviation industry by
being less-confrontational than
his predecessor.
“Under Tony’s leadership,
IATA has grown stronger,” says
IATA chairman and Aeromexico
chief executive Andres Conesa.
“This has been achieved by part-
nerships across the industry and
with governments, and by increas-
Action Press/REX/Shutterstock
ing the diversity of business mod-
els within IATA’s membership
that has grown to 264 airlines.”
A seasoned observer said of the
recent IATA leadership: “With
Giovanni we had a Ferrari and
with Tony a Rolls-Royce. Now we
tor general, leaves after a five-year want something in between.”
stint at the helm which started Whether de Juniac can deliver
with a bang when the former remains to be seen. He will need
Cathay Pacific chief executive to build on Tyler’s work in the roll-
took over from the enigmatic Gio- out of its New Distribution
vanni Bisignani at the fractious Capability project, while long-
2011 IATA AGM in Singapore. At running efforts to avoid a patch-
that AGM, Tyler witnessed first- work of climate change measures
hand the growing frustration by securing a global market-based
among some members – particu- scheme come to a head at this
larly the Gulf carriers – that IATA autumn’s crunch ICAO meeting.
was centred on the “old guard”. There is also the thorny issue of
He set about a reform to make the US/Gulf airlines subsidy spat
which Emirates Airline boss Tim
Clark described as creating ten-
sions “measuring 7.3 on the Rich-
ter scale” among members at last
year’s AGM in Miami.
“Alexandre’s aviation and gov-
ernment experience makes him
ideal to take our association to
greater heights,” says Conesa, who
will be succeeded as IATA chair-
BillyPix
man in Dublin by IAG chief exec-
Tyler: Smoothed relations utive Willie Walsh. ■
ŽƐƚ^ĂǀŝŶŐƐ͊͊
Saving %6,6WRZDJH%LQ
Non Productive Hour Komy Co., Ltd. www.komy.com
flightglobal.com/airlines
BRIEFING AMERICAS
EDWARD RUSSELL & JON HEMMERDINGER WASHINGTON DC
Alaska starts California dreamin’
Proposed Virgin America merger would provide Seattle-based carrier with opportunity for significant network expansion
A laska Air Group will use
Virgin America’s network to
gain a foothold in California and
acquire valuable gates and slots
at several of the nation’s most
constrained airports.
The planned acquisition by the
parent of Seattle-based Alaska
Airlines was announced on 4
April and requires shareholder
and regulatory approval. It values
the San Francisco-based carrier at
about $2.6 billion ($57 per share)
and was generally greeted with
support by Investment analysts,
though some suggest Alaska may
have overpaid.
Publicly-traded Virgin Ameri-
ca’s shares were trading at about
$30 a piece in mid-March, but
spiked to more than $55 each after
the merger news.
By acquiring Virgin America,
Alaska will also shoulder about
$1.4 billion of that company’s
debt and aircraft leasing expens-
es, bringing the total cost of the
deal to $4 billion, Alaska says.
The combined company would
be led by Alaska’s executive team
and based in Seattle.
Alaska chief commercial
officer Andrew Harrison says
Merger would give fleet
integration headache
While Alaska prefers to operate
only a single aircraft type, the
company’s executives stress no
decision has been taken on the
fate of Virgin’s line-up of Airbus
A320-family aircraft.
Alaska Airlines has been a
proud single-aircraft family
operator of the Boeing 737 since
retiring its last Boeing MD-80 back
in 2008.
Flightglobal’s Fleets Analyzer
shows that the airline operates
more than 150 of the type. By
contrast, Virgin America has
focused its fleet structure on
“brand A”, operating 60 A319/
A320s and with orders for 43
10 | Airline Business | May 2016
ALASKA AIRLINES/VIRGIN AMERICA ROUTE NETWORKS
Alaska Airlines Network
Virgin America Network
SOURCE: Alaska Airlines/Virgin America
90% of synergies will be
achieved by 2019 but the acquisi-
tion will improve Alaska’s earn-
ings during the first year after it is
approved. Combined, the airlines
will operate about 1,200 daily
flights using about 280 aircraft.
The merger will allow Alaska,
whose network is largely con-
strained to the Pacific Northwest,
more of the Airbus narrowbodies.
“We are acquiring a great fleet
of young, fuel efficient airplanes,”
says Brandon Pedersen, chief
financial officer of Alaska, during
an investor call about the
proposed deal. “We are big
believers in single fleets, in fact so
much so that we bought another
single fleet [airline].”
Alaska is not sold on keeping
the A320 family aircraft but will
weigh its options.
“Virgin America leases the vast
majority of its fleet, so we can
transition to a single fleet – if we
should chose to do that – starting
in 2020,” says Pedersen.
to expand eastward and begin fly-
ing highly-competitive transcon-
tinental routes.
“[Virgin America] comple-
ments our geography very well,”
says Alaska chief executive Brad
Tilden. “We have been strong in
the Pacific Northwest and
Alaska. But while California is
our second biggest state, we don’t
fly east from there. The California
market is around three times the
size of Alaska, Washington and
Oregon combined.”
STRONG PRESENCE
Though Alaska has a strong pres-
ence in the northwest USA, it has
been seeking additional routes
from tightly-constrained Los
Angeles International airport and
San Francisco International air-
port, including east-west routes,
says Harrison.
Alaska already flies to most
California cities, but does so pri-
marily from Seattle and Portland.
It operates a handful of transconti-
nental flights to restricted airports
on the US east coast, including
New York JFK International and
Ronald Reagan Washington
National airports.
Virgin, by comparison, holds
“really valuable” gates and slots at
all three New York airports – JFK,
LaGuardia and Newark – and at
Washington National, and operates
highly-competitive cross-county
routes from Los Angeles and San
Francisco to Boston, JFK and
Washington National, says Tilden.
He notes Alaska currently
serves only two of the top 10 des-
tinations from San Francisco but
will serve all 10 with the addition
of Virgin America.
Alaska executives dismiss any
notion that the deal is a defensive
measure aimed at heading off
increased competition from low-
cost rivals like Spirit Airlines and
mainline carriers like Delta Air
Lines. Instead, they insist that
Alaska has long had an eye on
California expansion.
A research note from invest-
ment banking company Stifel,
which says Alaska “appears to
have overpaid”, speculates that
the airline “placed a premium on
Alaska flies to most
California cities but
mainly from Seattle
and Portland
the strategic importance” of the
acquisition as a means to avoid
competition against a merged
Virgin-JetBlue Airways.
But Tilden is adamant Alaska
“just wanted more canvas to
work with”. Chief financial offic-
er Brandon Pedersen adds: “We
talked for a long time to grow the
business down in California.”
Executives say little about the
plans to integrate the companies’
differing brands. Virgin’s brand is
“likely driving a revenue premi-
um”, says Tilden. “There is a
chance we can use the Virgin
brand in some form.”
Analysts expect the US gov-
ernment to approve the merger
because Alaska and Virgin over-
lap on few routes, though they
caution the government has been
investigating possible collusion
after the last round of mergers. ■
flightglobal.com/airlines
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HAVE DISCOVERED
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your bottom line healthier. This is evolutionary engineering.

ELLIS TAYLOR SINGAPORE
Investors set to call Virgin hands
Air New Zealand ponders future of its stake after Australian carrier’s fresh loan and capital review
fter playing its part in a three-
A way airline shareholder
build-up supporting the reinven-
tion of Virgin Australia, Air New
Zealand appears ready to fold its
hand after revealing it was con-
sidering options including the
sale of all or part of its 26% stake.
The Star Alliance carrier
acquired a near 15% stake in
Virgin Australia in January 2011,
shortly after detailing plans for a
trans-Tasman alliance. It has
since steadily increased its stake,
most recently raising it to 26% in
the summer of 2014. Over the
same period, Etihad Airways and
Singapore Airlines, which also
have alliances in place with Air
New Zealand, have increased
their stakes to similar levels.
In March, Virgin Australia
secured a A$425 million
($323  million) 12-month loan
facility from the three carriers
and Virgin Group as the first step
of a major capital structure
review. But just over a week later,
Air New Zealand announced it
had appointed First NZ Capital
and Credit Suisse to advise it of
its options.
The New Zealand carrier’s
chief executive, Christopher
Luxon, also stepped down from
Virgin’s board, in the clearest sign
it intends to play no further part
in the Australian airline’s wider
board affairs.
BOARD LEVEL
Luxon had been content to rely
on management-level relation-
ships to keep the trans-Tasman
alliance with Virgin in check. But
as Air New Zealand raised its
stake above 25%, Luxon and his
counterparts at Etihad and
Singapore Airlines were invited
onto the board.
Air New Zealand says it is look-
ing at “possible alternative uses of
capital currently deployed in Vir-
gin Australia”. Some of that capi-
tal could be used for its large
delivery stream of Boeing 787-9s,
Airbus A320neos and ATR 72s,
due over the next four years. Capi-
tal expenditure on these aircraft is
flightglobal.com/airlines
Air New Zealand boss Luxon is losing patience with its investment
pegged at around NZ$2.3 billion
($1.58 billion).
Taking that into account, it
seems clear that the Star Alliance
carrier is keen to cut its losses
with the Australian carrier. Since
It seems clear that
the Air New Zealand
is keen to cut
its losses
taking its stake above the 25%
level in 2014, it has had to
account for Virgin’s losses, which
have taken some of the shine off
its own performance.
Although outwardly express-
ing support for Virgin chief exec-
utive John Borghetti and his
‘Virgin Vision’ strategy, Luxon
has reportedly been frustrated at
the slow pace of the Australian
carrier’s recovery from a brutal
capacity war with Qantas in the
domestic market.
Virgin returned to profit in the
six months to 31 December, but
generated only A$10 million in
cashflow from operations. That,
along with the loan and capital
review, show that it still has some
way to go before the carrier can,
financially speaking, stand on its
own two feet.
The fact Air New Zealand has
announced its intentions so early
BRIEFING ASIA
last year, Etihad chief James
Hogan indicated that the airline
was done with increasing its
Virgin stake, having gained a
board seat and an extension of its
alliance, which helps feed its
growing Australian network.
SIA’s Goh Choon Phong has
made no secret of his desire to
seek to expand the group through
acquisitions and strategic rela-
Law Kian Yan/Airline Business
tionships. It has also used share
swaps and other on-market pur-
chases to raise its Virgin stake
above 25%, albeit lagging behind
Air New Zealand and Etihad at
times. With large amounts of cash
at its disposal, and an already
into the review indicates that the strong relationship with the
prospect of being asked to put in Auckland-based carrier, it could
more cash – on top of its be in the market for more.
A$131 million portion of the loan The Australian media specu-
facility – is unpalatable to its lates that Etihad and SIA could
management and board. team up to mount a full takeover
A sale of Air New Zealand’s bid for Virgin, which would give
stake wholesale to SIA or Etihad, both greater control over their
or for the two carriers to split the Australian partner as well as
pie, appear possible scenarios. potentially presenting a greater
With only around 15% of the car- threat to Qantas. But regulators
rier free-floated, a bookbuild or would no doubt take a very close
open share sale on the market look at the potential competition
seem unlikely. issues involved.
How open the two sharehold- A takeover would also have to
ers are to take up more of a stake be attractive to Virgin Group,
is, however, debatable. which maintains a 12% stake in
Etihad has been the more the airline. While certainly not
active of the two carriers in recent appearing to be a core invest-
years, using “creep provisions” to ment, the group appears to be
up its stake to 25.1%. Neverthe- motivated to protect its brand
less, at a function in December position at the carrier. ■
Virgin Australia
Could Etihad and SIA mount a full takeover of Virgin Australia?
May 2016 | Airline Business | 15
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EDWARD RUSSELL WASHINGTON DC
Mesa move marks a financing first
Capital-markets deal breaks new ground as a regional airline EETC, but may be hard to replicate amid Republic’s travails
ebt financing levels at North
D
  American carriers fell by
nearly half to $2.61 billion in the
fourth quarter of 2015, but the
period brought the first enhanced
equipment trust certificate (EETC)
transaction from a regional carrier.
Mesa Airlines tapped the capi-
tal markets for the first time with
its $246 million 2015-1 private
EETC in December. The notes
financed 10 Embraer 175s that the
Phoenix-based regional carrier
operates for United Airlines under
a 12-year contract.
The notes are split into a
$171  million A tranche with a
4.75% interest rate, a $44.9 mil-
lion B tranche at 5.75% and a
$30.3 million C tranche at 6.25%.
The A tranche has an average life
of 7.6 years and an A- rating from
Fitch Ratings, sources say.
UNIQUE DEBUT
The deal was significant for a
number of reasons. It was the first
regional airline EETC and only the
second all-regional jet deal since
Northwest Airlines financed a
pool of 27 E175s with its
$454 million 2007-1 notes.
Deutsche Bank, Goldman
Sachs and Imperial Capital were
placement agents of the Mesa
2015-1 notes.
The uniqueness of the deal re-
quired additional investor educa-
tion, say advisers who worked on
the notes. This included on capac-
ity purchase agreements –
between Mesa and United for op-
eration of the aircraft – and the
risks within that structure.
Despite this, the Mesa deal was
popular with investors and there
was capacity to finance more air-
craft, they say.
“From a documentation stand-
point, it’s something that can be
replicated,” the advisers say.
However, Republic Airways’
Chapter 11 bankruptcy-protection
filing in February has created un-
certainty in the regional sector
and could impact capital markets’
appetite for additional regional
carrier paper during the short to
medium term, they add.
flightglobal.com/airlines
Air Canada, Allegiant Air,
American Airlines, Hawaiian
Airlines, Republic, SkyWest
Airlines, United and Virgin
America joined Mesa raising new
financing or receiving proceeds
from previously signed agree-
ments in the final quarter of 2015.
American raised $1.25 billion
in new debt during the fourth
quarter. The financing was split
between a $600 million increase
to $1.03 billion in its revolving
credit facility with Citi in October
and $600 million in secured
financing for “certain aircraft”
during the period.
The secured financing probably
includes commercial bank debt as
well as export credit financing for
the five Bombardier CRJ900s and
nine E175s it took delivery of dur-
ing the quarter. Brazilian
development bank BNDES and
Export Development Canada
(EDC) would be the providers of
the export credit debt.
The $1.3 billion in secured air-
craft financing that the Fort
Worth-based carrier raised during
2015, including the new debt in
the fourth quarter, has an average
interest rate of 1.82% and matures
between 2022 and 2027, an
annual financial filing shows.
American’s deal
includes export
credit financing for
CRJ900s and E175s
Air Canada issued its $537 mil-
lion 2015-2 EETC on 1 December.
The notes are split between a
$295 million AA tranche priced at
3.75% and due in 2027, a
$121 million A tranche at 4.125%
and due in 2027 and a $121 mil-
lion B tranche at 5% due in 2023.
The EETC is secured by five air-
craft deliveries. These comprise
two Boeing 777-300ERs and three
787-9s that the Montreal-based
carrier will take delivery of
through May.
NORTH AMERICAN AIRLINE FINANCING ACTIVITY – Q4 2015
Airline Amounts ($m)
Air Canada 537.0
Allegiant Air 84.0
American Airlines 1,225.0
Hawaiian Airlines 15.7
Mesa Airlines 246.2
Republic Airways 192.0
SkyWest Airlines 70.7
United Airlines 110.0
Virgin America 116.6
WestJet 12.6**
Total 2,609.8
NOTES: Some individual totals include combined value of multiple transactions. *Average life 7.6
years. **C$17.7 million. SOURCE: Airlines
Republic raised $192 million in
secured aircraft financing proba-
bly from an existing BNDES loan
agreement during the fourth quar-
ter. The debt financed the delivery
of six E175s it will operate for
United Airlines.
The Indianapolis carrier’s
Chapter 11 filing put all of its long-
term debt in technical default
despite continuing payments. It is
unclear whether it will continue
to draw on its BNDES facility for
future E175 deliveries.
United raised $110 million in
secured aircraft financing, proba-
bly from commercial banks, for
“several aircraft” deliveries during
the fourth quarter. The debt is
priced at a margin over Libor and
matures between 2025 and 2027.
The Chicago-based carrier took
delivery of two Boeing 737-
900ERs and three 787-9s for its
mainline fleet during the fourth
quarter, Flightglobal’s Fleets
Analyzer shows.
Virgin America received
$117 million in proceeds from a
secured aircraft debt agreement it
signed in April 2015. The debt
finances the deliveries of three
Airbus A320s the Burlingame,
California-based carrier took
delivery of in the fourth quarter.
The financing is split between
$101 million from a senior debt
facility due in 2027 with an aver-
age interest rate of 4.6% and
$15.6 million from a junior debt
facility due in 2021 with an aver-
age rate of 6.8%.
BRIEFING FINANCE
Maturity Proceeds
2023-27 Finance five 2016 deliveries
2017-20 Two A319 deliveries/corporate
2020-27 Certain deliveries
2027 A330 sale/leaseback
-* 10 E175s
N/A Six E175s
2027 Two E175s
2025-27 Deliveries
2021-27 Three A320 deliveries
2027 One Q400 delivery
Allegiant raised $28 million
from a new loan secured by two
Airbus A319s in its fleet and
signed a new $56 million revolv-
ing credit facility in December.
The loan is priced at 170bps over
Libor and matures in 2020.
PRICE MATTERS
The revolver is priced at 185bps
over Libor and matures in 2017. It
is secured by an undisclosed
number of A320s in the Las Vegas-
based carrier’s fleet.
Utah-based SkyWest received
$70.7 million in proceeds from its
existing secured credit agreement
with BNDES for two E175 deliver-
ies in the fourth quarter. The debt
is priced at 3.39-4.02% and
matures from 2025 to 2027.
WestJet borrowed C$17.7 mil-
lion ($12.6 million) to finance de-
livery of a Bombardier Q400 dur-
ing the period. The funds came
from an existing C$820 million fa-
cility with EDC for its Q400 fleet.
WestJet pays an average weighted
3.46% on the EDC debt, with a 12-
year tenor from draw.
Hawaiian received $15.7 mil-
lion in lease financing from the
sale and leaseback of an A330-200
during the quarter. The proceeds
were from a deal with Jackson
Square Aviation that the Honolu-
lu-based carrier signed in the final
quarter of 2014. ■
More finance articles available
on Flightglobal Dashboard:
flightglobal.com/Dashboard
May 2016 | Airline Business | 17
INTERVIEW SAAD HAMMAD
REPORT
OLIVER CLARK
LONDON
PHOTOGRAPHY
TOM CAMPBELL
BACK
IN BLACK
Having returned the UK regional airline to profitability, chief executive
Saad Hammad is now preparing Flybe to expand into mainland Europe
B
orrowing a famous line coined
by French philosopher and wit
Voltaire, Saad Hammad says
that if Flybe didn’t exist it would
be necessary to invent it.
It might equally be true to say that Flybe
would not exist today if it hadn’t undergone
a reinvention.
Hammad says there was a real danger of
Flybe collapsing before he took over as chief
executive at the Exeter, UK-based regional
carrier in August 2013, when there was only
three days’ worth of free cash left in the
corporate account.
“It was a business in deep crisis, facing
mortal danger, facing the abyss,” he tells
Airline Business, adding the airline was
“running out of cash very quickly and
needed immediate actions to sort it”.
Hammad describes a company that was
not just loss-making but had lost its sense of
direction, with “siloed” thinking and a
“fractiousness” in its management that went
all the way up to board level.
Pre-tax losses reached £40.7 million
($62.9 million) for the year ended March
2013, with the regional carrier weighed
down by the impairment it was incurring
from its joint venture with Finnair in
Finland as well as unprofitable routes and
bases across the UK.
“I had to move quickly,” he says. “I had
done my due diligence before but I didn’t
really appreciate some of the challenges I
would face when I got there. We needed
18 | Airline Business | May 2016
oxygen. We needed to get this business mov-
ing in the right way and gain the opportu-
nity to turn it around.”
Hammad’s first priority was to stabilise
the company, and he initiated an action
plan designed to reduce costs, remove leg-
acy issues and improve commercialisation.
An order for 22 Embraer 175 jets, repre-
senting an $892 million obligation, was suc-
cessfully “negotiated away”. Surplus air-
craft were grounded “pretty quickly,
because we weren’t even recovering the
variable costs on a lot of the flying”, he says.
“We needed to get
this business moving in
the right way and gain
the opportunity to
turn it around”
Hammad then determined an existing
cost-cutting programme “certainly wasn’t
sufficient” and doubled its targets.
Internal structures were streamlined, six
bases were closed and 40% of the operator’s
routes – 55 in total – were restructured. A
decision was taken to find new uses for the
carrier’s leased Embraer 195s, with the ulti-
mate goal of becoming an all-Bombardier
Q400 fleet operator.
This project was completed in 2015 with
five E195s returned to their lessors and the
remainder redeployed on publicly-
subsidied or airport-funded routes,
reducing the carrier’s liabilities for the jets
from £120 million to £80 million, and finally
£40 million.
Cost reductions included 1,000 job cuts,
representing a third of the workforce. It was
a “huge” move for the carrier, Hammad
says, and “quite traumatic” but, he says,
unavoidable: “It’s like cutting off an arm to
save a body. It’s necessary.”
Prior to joining Flybe, Hammad was com-
mercial chief of EasyJet from 2005 to 2009.
He used that experience to bring what he
calls “commercial muscle and analytics” to
Flybe’s internal processes.
“Not unlike many entrepreneurial busi-
nesses, you can run them by the seat of the
pants for so long – and then they get to a
level of scale and complexity when you
need proper analytics, proper process,
proper rigour,” he says.
“So I brought in some of the guys who
helped me build that at EasyJet, to build
these disciplines at Flybe. This included
mechanisms to select routes and assess
properly the performance.”
RESTORING BELIEF
The fruit of the team’s labours was seen in
November 2015, when the airline posted a
pre-tax profit of £22.9 million for the six
months to 30 September.
Hammad says that the biggest challenge
of the restructure was not reforming the
business, which involved logical steps, but
flightglobal.com/airlines
flightglobal.com/airlines May 2016 | Airline Business | 19
INTERVIEW SAAD HAMMAD
encouraging the staff to believe the carrier
had a viable future.
He describes the prevailing atmosphere
when he arrived as “almost a passivity – a
victimhood that gets built in when things go
wrong”. He says this was allied to a “very
patriarchal culture, a very traditional con-
cept in terms of the way the business was
run – people didn’t take full ownership and
accountability for areas of responsibility”.
A new ethos was introduced, “the purple
way”, encouraging staff to work in a more
proactive and inclusive manner.
A
t the same time, a new manage-
ment team was formed to give
the company fresh vigour.
Ex-Jetstar executive Vincent
Hodder was brought in as reve-
nue chief. Philip de Klerk arrived from
Unilever as finance chief; Hammad describes
him as a “really seasoned finance individ-
ual”. Ex-Wizz Air operations chief Luke
Farajallah joined in 2015, while London
Heathrow’s Kate Ledger was recruited as
general counsel.
Hammad says “hard graft” was necessary
to regain the confidence of Flybe’s stakehold-
ers – its employees, investors, the regulators,
banks and lessors – but the work paved the
way for Flybe to raise £150 million in new
capital in March 2014.
Despite his background, Hammad says he
did not want to “EasyJet-ify” Flybe, but
wanted to build on the regional carrier’s
strong position as a connector for UK com-
munities – a “great concept”, he says, but
one that had been “badly executed”.
“We link more communities than any air-
line – we connect Britain. One in every two
domestic customers travelling regional in the
UK is a Flybe customer and 53% of domestic
flights in the UK are Flybe flights,” he says.
In Hammad’s view, large swathes of the
UK’s communities are under-served by all
forms of transport, but particularly by air. By
connecting them Flybe not only carries out a
social obligation, he says, but serves a market
the low-cost carriers and network carriers
often overlook.
Hammad says 80% of Flybe’s routes are
uncontested. It has competition from
EasyJet, for example, on just 10 of its 190
routes. Most of Flybe’s competition comes
not from the air but from road and rail.
Rather than competing on thicker routes
where the low-cost carriers can leverage
lower unit costs, Flybe seeks to ply short sec-
tor lengths with higher frequencies than its
20 | Airline Business | May 2016
competitors can achieve with larger aircraft.
“We can really stand up to the big boys,
but you have to stay true to your sector
length, you have to stay true to your concept
of low-volume short-hop routes. The eco-
nomics are very different on the thicker
routes, where they can offer more frequen-
cies and then their unit-cost advantage can
really hurt you.
“We don’t want to stray: we want to stay
true to our model of connecting regions on
low, short-hop routes which mainstream air-
lines find difficult to operate,” he adds. On
routes where Flybe does compete with other
carriers, it offers higher frequencies of ser-
vice, attractive to the business passenger.
As part of its drive to connect communi-
ties with a “one stop to the world” concept
and – of course – boost revenues, Flybe has
APPLIED LEARNING entered nine codeshare agreements, includ-
ing with Cathay Pacific, Emirates, Aer
Saad Hammad is a passionate believer in Lingus and most recently Virgin Atlantic, as
the value of education and believes his well as 17 interline agreements.
degree in politics, philosophy and Today, the carrier operates a fleet of 72 air-
economics at Oxford University helped craft including 49 Q400s and several ATRs,
prepare him for his role leading Flybe. E175s and E195s. It operates 194 routes with
“The wonderful thing about Oxford is that 10 bases. Having sold its slots at Gatwick in
it really helps you develop a way of thinking. 2014, the UK carrier routes its London traffic
Analytical, empirical, data-driven,” he says. through London City airport.
“The tutorial system is a powerful way of But Flybe has not had it all its own way.
helping you articulate your ideas to other Although new routes have been created,
people because you are sitting there against others have been axed where they have
the world authority on that subject and you underperformed, and bases such as
have to present your arguments and get him Bournemouth have been closed.
to one: stay awake; and two: be persuaded
that what you are saying makes sense and CONTINENTAL EXPANSION
carries sway,” he adds. Hammad’s next target is to expand Flybe’s
“Education can transform lives. It gives presence in continental Europe, both in
people opportunities they wouldn’t otherwise terms of UK-to-Europe routes and continen-
get and it’s a great way of giving opportunities tal flights, where he sees a need for more
to everybody no matter what economic and regional connectivity mirroring the UK.
social background they come from.” “The exciting thing is that the issues that
affect regional communities in the UK also
affect regional communities in mainland
Europe,” he says, pointing to “unmet
FLYBE AT A GLANCE
demand” from 39 million potential custom-
Operating revenue $m 2014 867 ers on “thin routes” across the continent.
Change -4.7% Flybe will start flights from Hanover to
Change local -5.3% Milan and Lyon this summer, as a precursor
Operating margin -2.2%
to opening an as-yet-undisclosed European
base. Meanwhile, Hammad is targeting an
Net margin -6.2%
increase in Flybe’s total routes operating
Year-end 31 Mar 2015
from the UK to Europe, from 30% today to
AB 2014 financial ranking 116 more than 40% by the end of the 2016
AB 2014 traffic ranking 189 financial year.
RPK growth (2014) -1.7% He also signals the possibility that the UK
ASK growth (2014) -10.4% carrier could be “receptive” to acquisitions
Load factor (2014) 73.0% to grow its footprint. Noting that the regional
European market is very “fragmented”, he
flightglobal.com/airlines

says he “suspects” mainstream carriers that
are struggling in the short-haul market might
be looking to sell off their European regional
subsidiary operations.
If that was to happen, Flybe “would defi-
nitely be a receptive audience to listen to
what people have to say”, he says.
But could the UK’s June referendum on
EU membership scupper Flybe’s continental
expansion plans? Hammad thinks not.
“I think people confuse Europe with the
European Union. Whether we stay in the
European Union, we are still going be part of
Europe and we are still going to be hugely
dependent on Europe, so Flybe is a regional
airline that will serve the continent almost
independent of what the political union
arrangements are.”
WHITE LABEL
In 2011, under previous chief executive Jim
French, Flybe established a new airline in
Finland – Flybe Nordic – through a joint
venture with national carrier Finnair.
Flybe Nordic, initially 60% owned by
Flybe and 40% by Finnair, was the parent
company of Flybe Finland, which operated
both scheduled and white-label flights
within the Finnish market on behalf of
Finnair, using Flybe metal.
Hammad says the white-label portion of
the joint venture was profitable but the
scheduled business was haemorrhaging an
estimated €1 million a month by the time he
took over, and he sought a quick exit. That
opportunity came in 2014, when Flybe sold
its 60% stake to Finnair for €1.
H
ammad believes Flybe Nordic/
Finland was doomed because
the wording of the contract
underpinning it was “madness”
and “nonsensical”.
“People didn’t understand what the
model was. It had a white-label bit, which
worked and was profitable, but then we were
obligated under that agreement to operate
our own brand name – Flybe – and risk fly-
ing in the northern hamlets of Finland. I
mean who has heard of Flybe in Finland?”
Hammad says the fact that Flybe Finland
was averaging 40% load factors and operated
on Finland’s eight thinnest routes meant it
was “never going to make money”.
But the failure of Flybe Nordic did not put
an end to the UK carrier’s interest in white-
label operations or the Scandinavian market.
Flybe continues to operate flights on
behalf of clients such as Brussels Airlines,
flightglobal.com/airlines
INTERVIEW SAAD HAMMAD
RALLYING SPIRITS
In his spare time Saad Hammad enjoys a
game of tennis, a sport he has played from
an early age.
“I learnt as an 11-year-old to play tennis. I
kind of fell in love with it,” he explains.
Learning to play in Lebanon while growing
up, Hammad has nurtured his skills in
“sunny climes on clay courts” and says the
game allows him to stay fit while also
offering some respite from the demands of
running an airline.
As well as playing, Hammad likes to
watch tennis and attended both the
Wimbledon championships and the US
Open last year.
So does Hammad ever wonder if he could
have taken the sport to a professional level?
“Possibly, one thinks on how good could I
really have been if I had really done it
properly and seriously. I did play for my first
team at college and university. I played for
my university club here in west London, that
was before I joined the airline world. I am a
decent standard.”
However, despite considering himself to
be of a competitive club standard, the Flybe
chief was given a nasty shock when he
came up against a professional tennis
player recently.
“I was on holiday last year and I played a
woman player who was [ranked] 146 in the
world and I thought I might have a chance of
winning a few games but she blew me off
the court. Six-love, six-love.
“It was a very humbling experience but I
was so impressed by the standard now,” he
adds with a smile.
and signed a white-label agreement to pro-
vide capacity for Helvetic in 2014. Later that
year, the carrier also agreed a contract with
SAS, under which it would wet-lease four
ATR 72-600s on Finnish and Swedish
regional routes from winter 2015.
Unfortunately for Flybe, the joint venture
with SAS has not been without its chal-
lenges. In February, just months after start-
ing, the operation was disrupted by indus-
trial action by staff over pay and conditions.
Flights only returned to normal after SAS
agreed a new labour deal with cabin crew.
Hammad says Flybe was “very involved”
in the resolution of the dispute, but he would
not confirm what the material cost of the
industrial action was, or what the new
labour deal will be for Flybe. He does say:
“You always want to find the most economi-
cal way of doing things, and sometimes you
have to give and take, so in the final analysis
you will ultimately do what you need to do
to get the right result. And if it costs you
more, then you find ways to make sure that
you are efficient and effective so that it deliv-
ers as per your original expectation.”
By Hammad’s own admission, though,
Flybe’s initial enthusiasm for white-label
operations has cooled, and he said last year
that Flybe would be focusing increasingly on
its core “branded activity” rather than
contract flying.
But he points out that while outsourcing
regional flying is now the norm in markets
such as the USA – where regional carriers
perform what he estimates to be 80-90% of
such flights – in Europe the figure is much
lower, around 10-20%.
He believes legacy carriers, and especially
state-owned carriers, will come to see the
benefits of outsourcing over time. As he says:
“The trend is our friend.”
In June, Flybe will release full-year figures
that will give an indication as to whether
Hammad has managed to maintain the posi-
tive performance he has achieved in the past
six months. But there is no doubt that he is
happy with the progress that has been made
so far.
“We are on our way. It’s an exciting time,
it’s a difficult time, it’s a difficult revenue
environment,” he says. “We enter this new
financial year with confidence and momen-
tum, despite the challenges that we are
looking at.” ■
All Airline Business cover interviews and
videos can be viewed in our digital editions:
flightglobal.com/AirlineBusiness
May 2016 | Airline Business | 21
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SPECIAL REPORT
AIRPORTS

CONTENTS
24 Runway leaders Our snapshot of the
biggest and fastest-growing airports
28 Global airport traffic The top 100 hubs
ranked by traffic in 2015
32 Private lives Half of Europe’s airports are
heading towards non-public ownership
34 Capacity changes The US traffic recovery
is masking tougher times for smaller
airports as the big hubs forge ahead
36 International injection China’s
fast-growing hubs are looking to expand
business beyond the country’s borders

Imagine China/REX/Shutterstock

Passenger numbers across the world’s 100 biggest airports

rose by over 6% in 2015, according to data compiled by
ACI World. Indian and Chinese airports were among
those that witnessed the largest increase. Meanwhile in
the USA, the major hubs have been the big winners as All our special reports are
available online at :
airlines focus their network growth flightglobal.com/airlines

flightglobal.com/airlines May 2016 | Airline Business | 23

AIRPORTS TRAFFIC SNAPSHOT

RUNWAY
Strong demand for air travel amid low
fuel prices and a relatively stable, if
geographically mixed, economic

LEADERS
backdrop resulted in passenger
numbers across the biggest 100 airports
in the world increasing 6.4% in 2015

TOP 10 AIRPORTS PASSENGER TRAFFIC

Atlanta
Hartsfield
/ 101.5m B
allas orth Ca eijing
D tW
m
+5.5% 89 pital
For 64.1 % +4 .9m
.8 .4%
+0
de Ga harles

Intern m
65.8 ulle

Dubaional
78.0 %
+3.1 m

+10.
%
C

at
Paris

i
7

TOP 100
AIRPORTS TOTAL
3.86bn passengers
Ho ational
6 %

+9.9 m

+6.4%
ong
Intern8.3m

77.0 re
+8.2

O’Ha go
Chica
K

%
ng

L
Int os An yo al
er ge Tok ation
75 natio les
+6 .0m nal London ntern 5.3m
.0% I 7 .4%
Heathrow +3
75.0m
+2.2%

TON-UP FOR ATLANTA

Long the biggest airport in the world for passenger
numbers, Atlanta Hartsfield became the first in the
world to pass the 100 million annual passenger mark
in 2015. Passenger numbers increased more than 5%
last year to reach a new high of 101.5 million. Beijing
remains the second biggst airport in the world with just
short of 90 million passengers. While most of the
bigger hubs enjoyed stronger growth last year than in
2014, the big climbers in the top 10 were Dubai and
Chicago O’Hare, which now rank as the third and fourth
largest airports in the world. Passenger numbers grew
more than 10% at the United Arab Emirates airport,
in reaching 78 million, continuing its dramatic growth.
The figure is more than double the 37.4 million it
handled just seven years ago, when it ranked as the
20th biggest airport in the world. The third biggest
airport in 2014, London Heathrow increased
passenger numbers 2% to reach 75 million last year
but slipped to sixth largest in total as Chicago and
Tokyo Haneda overhauled it. Continued fast growth at
Los Angeles has also closed the gap between it and
Heathrow to just under 1 million.

24 | Airline Business | May 2016 flightglobal.com/airlines

 REGIONAL SPLIT – TOP 100 AIRPORTS

Middle East Middle East

0.18bn 5.4m North America
North America 13.1m
1.20bn
Europe South
11.7m America
1.7m
Total South America Total cargo
passengers: 0.15bn tonnes:
3.86bn Africa 62.4m

Europe
0.98bn
6.4% 0.02bn
0.8% Africa
0.32m
Asia-Pacific Asia-Pacific
1.32bn 30.2m

10-YEAR TREND:
TOP 100 AIRPORTS TRAFFIC

3.86bn
3.63bn
3.45bn
3.30bn
HIGH RISE

3.16bn
3.00bn
2.92bn
2.89bn
Indian and Chinese airports hubs of Delhi and Mumbai. The

were among those to enjoy the
biggest jump in traffic in 2015.
Passenger numbers were up
16% at Shanghai Pudong
airport, to 60 million, putting it
just outside the top 10 largest.
There was also double-digit
growth at Chinese airports
Chengdu and Kunming – both
of which feature among the top
50. Passenger numbers were
up around 16% at the big Indian
2.82bn
2.76bn
2.66bn
return to expansion at Iberia also
filtered through to its Madrid
Barajas base. After falling traffic
in five out of six years, it returned
to growth in 2014 and more than
doubled its rate of passenger
growth to 12% last year, to reach
46.8 million. The Spanish airport
still has some ground to make up
though, to get back to its
pre-global financial crisis peak of
52 million passengers.

05 06 07 08 09 10 11 12 13 14 15

PASSENGER GROWTH AMONG TOP 100: 2015 LEADERS

Rank City Airport Change Survey ranking
1 Bangkok Don Mueang 40.6% 60
2 Osaka Kansai 19.9% 79
3 Istanbul Sabiha Gokcen 19.7% 66
4 Abu Dhabi International 17.3% 77
5 Doha
Clutura/Xinhua/Gloabl Warming Images/REX/Shutterstock

International 17.1% 58
6 Shanghai Pudong 16.2% 13
7 Mumbai International 16.1% 35
8 Kunming Changshui 16.0% 46
9 Delhi Indira Gandhi 15.7% 25
10 Dublin International 15.4% 72
NOTES: Rankings based on year-on-year change in passenger traffic for the Top 100
airports. Based on preliminary ACI World data for 2015.

Data for all graphics: ACI World

flightglobal.com/airlines May 2016 | Airline Business | 25

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AIRPORTS RANKINGS

DATA COMPILED BY FLIGHTGLOBAL INSIGHT

GLOBAL AIRPORT TRAFFIC

This year’s Airline Business airport traffic rankings, compiled using ACI World data, show that passenger numbers
among the world’s leading facilities grew more than 6% in 2015 and illustrate the continued rise of eastern hubs

TOP 100 AIRPORTS: PRELIMINARY PASSENGER RANKING 2015 (1-50) AND INNOVATA FREQUENCY/CAPACITY ANALYSIS (MAY 2016)
Rank City Airport Code Country Passengers Available seats per week Seats share by destination
2015 (2014) Number (000) Change (%) Number (000) Av change (%) Intercont’l (%) Regional (%)
1 (1) Atlanta Hartsfield Int'l ATL USA 101,491 5.5 2,541 0.2 8.8 91.2
2 (2) Beijing Capital PEK China 89,939 4.4 2,432 1.5 17.0 83.0
3 (6) Dubai International DXB UAE 78,010 10.7 2,349 11.7 75.0 25.0
4 (7) Chicago O'Hare International ORD USA 76,950 9.9 1,923 -1.6 12.6 87.4
5 (4) Tokyo Haneda International HND Japan 75,317 3.4 2,106 0.7 8.4 91.6
6 (3) London Heathrow LHR UK 74,990 2.2 2,091 2.6 56.2 43.8
7 (5) Los Angeles International LAX USA 74,937 6.0 2,083 4.5 22.1 77.9
8 (10) Hong Kong International HKG Hong Kong 68,283 8.2 1,725 3.9 49.9 50.1
9 (8) Paris Charles de Gaulle CDG France 65,767 3.1 1,666 2.8 51.8 48.2
10 (9) Dallas/Fort Worth International DFW USA 64,072 0.8 1,554 -2.4 7.7 92.3
11 (13) Istanbul Ataturk International IST Turkey 61,837 9.2 1,701 9.5 45.4 54.6
12 (11) Frankfurt International FRA Germany 61,032 2.5 1,692 0.2 47.1 52.9
13 (19) Shanghai Pudong International PVG China 60,053 16.2 1,745 11.2 25.6 74.4
14 (14) Amsterdam Schiphol AMS Netherlands 58,285 6.0 1,526 8.2 37.1 62.9
15 (18) New York JFK JFK USA 56,827 6.7 1,499 4.5 51.5 48.5
16 (16) Singapore Changi SIN Singapore 55,449 2.5 1,562 3.8 56.4 43.6
17 (15) Guangzhou Baiyun International CAN China 55,202 0.8 1,529 10.4 17.9 82.1
18 (12) Jakarta Soekarno Hatta CGK Indonesia 54,054 -5.5 1,782 5.7 10.7 89.3
19 (17) Denver International DEN USA 54,015 1.0 1,521 -1.3 1.5 98.5
20 (22) Bangkok Suvarnabhumi BKK Thailand 52,902 14.0 1,413 4.8 64.4 35.6
21 (21) San Francisco International SFO USA 50,058 6.2 1,386 3.1 19.3 80.7
22 (23) Seoul Incheon Int'l ICN South Korea 49,413 8.2 1,332 8.3 48.6 51.4
23 (20) Kuala Lumpur International KUL Malaysia 48,934 0.0 1,307 -4.3 37.3 62.7
24 (27) Madrid Barajas MAD Spain 46,815 11.9 1,208 3.0 29.7 70.3
25 (31) Delhi Indira Gandhi Int'l DEL India 45,982 15.7 1,439 16.0 22.3 77.7
26 (25) Las Vegas McCarran LAS USA 45,371 5.8 1,336 -0.2 3.7 96.3
27 (24) Charlotte Douglas CLT USA 44,877 1.3 1,131 3.4 6.2 93.8
28 (29) Miami International MIA USA 44,350 8.3 1,056 0.7 43.7 56.3
29 (26) Phoenix Sky Harbor PHX USA 44,010 4.4 1,201 -3.0 1.4 98.6
30 (28) Houston George Bush IAH USA 42,962 4.2 1,045 -9.7 16.5 83.5
31 (40) Seattle Tacoma International SEA USA 42,340 12.9 1,163 8.3 7.2 92.8
32 (38) Chengdu Shuangliu Int'l CTU China 42,245 12.0 1,138 5.2 6.5 93.5
33 (34) Toronto Pearson Int'l YYZ Canada 41,031 6.4 1,038 4.7 30.7 69.3
34 (32) Munich International MUC Germany 40,982 3.2 1,202 10.9 26.8 73.2
35 (47) Mumbai International BOM India 40,637 16.1 1,156 6.6 25.3 74.7
36 (35) Rome Fiumicino FCO Italy 40,422 5.0 1,087 -1.7 28.0 72.0
37 (36) London Gatwick LGW UK 40,271 5.7 1,024 6.6 21.0 79.0
38 (33) Sydney Kingsford Smith Int'l SYD Australia 39,914 2.7 1,046 4.1 30.3 69.7
39 (41) Shenzhen Baoan International SZX China 39,722 9.5 1,113 3.8 3.6 96.4
40 (39) Barcelona El Prat BCN Spain 39,690 5.7 1,100 7.6 16.1 83.9
41 (30) Sao Paulo Guarulhos Int'l GRU Brazil 39,214 -1.4 878 -9.4 24.0 76.0
42 (37) Shanghai Hongqiao Int'l SHA China 39,091 2.9 1,045 4.5 0.0 100.0
43 (43) Orlando International MCO USA 38,728 8.4 1,128 -0.5 10.0 90.0
44 (42) Taipei Taoyuan International TPE Taiwan 38,473 7.5 1,053 11.9 31.9 68.1
45 (48) Mexico City Benito Juarez Int'l MEX Mexico 38,433 12.2 999 3.4 15.1 84.9
46 (52) Kunming Changshui Int'l KMG China 37,523 16.0 1,140 6.3 4.4 95.6
47 (44) Newark Liberty International EWR USA 37,428 5.1 1,011 -3.2 25.5 74.5
48 (45) Tokyo Narita International NRT Japan 37,268 4.9 970 2.9 52.2 47.8
49 (49) Manila Ninoy Aquino Int'l MNL Philippines 36,583 7.3 990 4.8 39.4 60.6
50 (46) Minneapolis-St. Paul International MSP USA 36,556 4.0 923 1.9 3.9 96.1

28 | Airline Business | May 2016 flightglobal.com/airlines

 Frequencies per week Average seats per flight Proportion of flights/frequencies by three leading carriers
Number Change (%) Number Change (%) Carrier 1 Carrier 2 Carrier 3
18,206 -1.0 140 1.2 Delta Air Lines 64.3% ExpressJet Airlines 13.8% Southwest Airlines 9.7%
12,448 2.4 195 -0.9 Air China 39.5% China Southern Airlines 14.5% China Eastern Airlines 13.8%
8,088 8.0 290 3.4 Emirates 45.7% Flydubai 20.3% Qatar Airways 2.7%
17,200 -4.3 112 2.9 United Airlines 19.3% Envoy Air 18.6% American Airlines 15.9%
9,418 2.4 224 -1.7 All Nippon Airways 31.9% Japan Airlines 30.9% Solaseed Air 7.4%
9,824 1.2 213 1.4 British Airways 51.8% Aer Lingus 3.4% Virgin Atlantic Airways 3.4%
13,024 0.4 160 4.1 American Airlines 14.6% Southwest Airlines 14.4% Delta Air Lines 13.7%
6,988 4.8 247 -0.8 Cathay Pacific Airways 25.9% Dragonair 16.7% Hong Kong Airlines 9.5%
9,044 2.1 184 0.7 Air France 41.3% Hop 8.9% EasyJet 7.7%
12,790 -4.9 122 2.6 American Airlines 48.9% Envoy Air 16.4% Mesa Airlines 12.1%
9,208 5.8 185 3.5 Turkish Airlines 75.5% Onur Air 6.1% Atlasjet Airlines 4.9%
9,020 -0.8 188 1.0 Lufthansa 56.0% Lufthansa CityLine 9.8% Austrian Airlines 2.8%
9,342 10.6 187 0.5 China Eastern Airlines 29.3% Shanghai Airlines 10.6% China Southern Airlines 9.6%
9,236 7.0 165 1.0 KLM 28.8% KLM Cityhopper 22.0% EasyJet 8.5%
8,784 2.4 171 2.1 JetBlue Airways 25.9% Delta Air Lines 20.8% American Airlines 12.8%
6,972 5.2 224 -1.3 Singapore Airlines 23.4% Silkair 11.7% Tiger Airways 10.2%
8,920 9.6 171 0.8 China Southern Airlines 49.7% Shenzhen Airlines 8.4% China Eastern Airlines 8.2%
9,330 4.4 191 1.2 Garuda Indonesia 30.9% Lion Airlines 26.2% Batik Air 9.8%
11,982 -5.0 127 3.9 Southwest Airlines 24.4% United Airlines 22.5% SkyWest Airlines 20.7%
6,302 5.8 224 -1.0 Thai Airways 23.8% Bangkok Airways 16.4% Centurion Air Cargo 8.2%
8,958 1.5 155 1.6 United Airlines 29.3% SkyWest Airlines 19.2% Virgin America 10.1%
5,770 9.7 231 -1.3 Korean Air Lines 26.4% Asiana Airlines 20.4% Coyne Airways 6.4%
6,646 -3.4 197 -0.9 AirAsia 38.4% Malaysia Airlines 29.8% Malindo Air 7.8%
7,010 0.4 172 2.6 Iberia 24.7% Air Nostrum 14.7% Air Europa 13.4%
8,054 14.9 179 0.9 Indigo 26.7% Air India 19.5% Jet Airways 18.6%
8,402 -2.8 159 2.7 Southwest Airlines 44.0% American Airlines 8.9% Delta Air Lines 8.0%
10,566 0.9 107 2.5 American Airlines 40.2% PSA Airlines 34.9% Piedmont Airlines 7.7%
6,684 1.1 158 -0.4 American Airlines 57.5% Republic Airline 11.2% Delta Air Lines 6.4%
8,612 -3.4 139 0.4 American Airlines 32.7% Southwest Airlines 32.4% Mesa Airlines 11.1%
9,270 -11.6 113 2.2 United Airlines 36.1% ExpressJet Airlines 22.0% SkyWest Airlines 10.6%
8,432 6.9 138 1.3 Alaska Airlines 29.8% Horizon Air 20.1% Delta Air Lines 12.1%
6,854 5.7 166 -0.5 Air China 26.7% Sichuan Airlines 18.8% China Eastern Airlines 13.6%
8,334 -0.2 125 4.9 Air Canada 27.8% Westjet 15.7% Jazz Air 12.8%
7,692 10.5 156 0.4 Lufthansa 34.6% Lufthansa CityLine 17.6% Air Dolomiti 7.2%
6,306 4.3 183 2.2 Jet Airways 28.7% Indigo 23.4% Air India 15.0%
6,404 -4.1 170 2.5 Alitalia 36.4% Vueling Airlines 8.2% Ryanair 7.5%
5,612 5.4 182 1.1 EasyJet 43.2% British Airways 16.6% Djibouti Airlines 6.8%
6,160 1.9 170 2.2 Qantas Airways 34.7% Virgin Australia 23.1% Jetstar Airways 12.5%
6,754 6.0 165 -2.0 Shenzhen Airlines 30.0% China Southern Airlines 24.6% Hainan Airlines 10.3%
6,060 5.6 182 2.0 Vueling Airlines 37.6% Ryanair 13.8% EasyJet 8.0%
4,902 -11.5 179 2.3 Gol Transportes Aereos 28.8% TAM 28.6% Avianca Brazil 11.9%
5,824 5.1 179 -0.5 China Eastern Airlines 33.4% Shanghai Airlines 17.3% Juneyao Airlines 8.8%
6,950 -4.4 162 4.0 Southwest Airlines 29.2% JetBlue Airways 16.2% American Airlines 12.7%
4,328 15.7 243 -3.3 China Airlines 23.9% EVA Air 20.4% Cathay Pacific Airways 6.7%
7,634 2.5 131 0.9 Aeromexico Connect 26.3% InterJet 22.3% Aeromexico 19.6%
7,706 7.1 148 -0.7 China Eastern Airlines 42.5% Lucky Air 10.7% China Southern Airlines 9.2%
8,136 -4.0 124 0.8 United Airlines 36.5% ExpressJet Airlines 17.3% Republic Airline 9.3%
4,304 4.9 225 -1.9 Japan Airlines 15.2% All Nippon Airways 12.0% Jetstar Japan 10.3%
5,224 3.6 190 1.2 Cebu Pacific 34.5% Philippine Airlines 16.9% PAL Express 16.5%
7,810 0.3 118 1.6 Delta Air Lines 36.2% SkyWest Airlines 19.8% Endeavor Air 13.6%

flightglobal.com/airlines May 2016 | Airline Business | 29

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 AIRPORTS RANKINGS

TOP 100 AIRPORTS: PRELIMINARY PASSENGER RANKING 2015 (51-100)

Rank City Airport Code Country Passengers Available seats per week Seats share by destination
2015 (2014) Number (000) Change (%) Number (000) Av change (%) Intercont’l (%) Regional (%)
51 (54) Boston Logan International BOS USA 33,450 5.7 1,041 3.6 15.4 84.6
52 (51) Detroit Wayne County DTW USA 33,431 2.8 929 6.3 7.9 92.1
53 (53) Melbourne Tullamarine MEL Australia 33,102 4.3 824 2.5 23.8 76.2
54 (58) Xian Xianyang Int'l XIY China 32,970 12.7 1,007 10.6 2.9 97.1
55 (57) Chongqing Jianbei Int'l CKG China 32,400 10.7 929 10.3 3.9 96.1
56 (55) Moscow Sheremetyevo Int'l SVO Russia 31,612 0.1 782 7.5 61.7 38.3
57 (56) Philadelphia International PHL USA 31,443 2.3 844 -1.7 10.7 89.3
58 (64) Doha International DOH Qatar 31,009 17.1 1,021 21.1 65.8 34.2
59 (50) Moscow Domodedovo Int'l DME Russia 30,505 -7.9 648 -7.0 55.2 44.8
60 (82) Bangkok Don Mueang Int'l DMK Thailand 30,304 40.6 803 12.4 16.7 83.3
61 (61) Bogota El Dorado Int'l BOG Colombia 29,956 9.0 702 3.8 22.1 77.9
62 (59) Paris Orly ORY France 29,665 2.8 814 11.7 23.9 76.1
63 (63) Jeddah King Abdulaziz Int'l JED Saudi Arabia 29,010 9.2 788 11.2 50.3 49.7
64 (62) New York LaGuardia LGA USA 28,438 5.5 861 -0.3 2.6 97.4
65 (66) Hangzhou Xiaoshan Int'l HGH China 28,386 11.2 896 17.2 4.1 95.9
66 (70) Istanbul Sabiha Gokcen Int'l SAW Turkey 28,286 19.7 770 15.4 15.8 84.2
67 (60) Antalya International AYT Turkey 27,811 -2.4 360 -10.3 3.9 96.1
68 (68) Fort Lauderdale Hollywood Int'l FLL USA 26,942 9.3 766 5.5 13.1 86.9
69 (65) Copenhagen Kastrup CPH Denmark 26,578 3.9 760 12.5 16.5 83.5
70 (67) Zurich Zurich ZRH Switzerland 26,230 3.2 721 5.8 29.8 70.2
71 (71) Jeju International CJU South Korea 26,041 12.3 573 16.5 0.6 99.4
72 (80) Dublin International DUB Ireland 25,052 15.4 707 12.3 21.7 78.3
73 (69) Oslo Gardermoen OSL Norway 24,476 1.7 698 7.9 10.0 90.0
74 (75) Baltimore Washington Int'l BWI USA 23,817 6.7 803 -1.6 2.5 97.5
75 (72) Palma de Mallorca Palma de Mallorca PMI Spain 23,740 2.7 689 6.4 0.7 99.3
76 (78) Brussels National BRU Belgium 23,424 6.9 682 8.6 28.8 71.2
77 (91) Abu Dhabi International AUH UAE 23,293 17.3 604 5.9 79.8 20.2
78 (77) Manchester International MAN UK 23,206 5.2 628 13.8 24.9 75.1
79 (94) Osaka Kansai International KIX Japan 23,193 19.9 652 11.1 19.7 80.3
80 (74) Stockholm Arlanda ARN Sweden 23,173 3.2 672 12.6 14.1 85.9
81 (81) Seoul Gimpo International GMP South Korea 23,173 7.4 491 7.6 0.0 100.0
82 (87) Washington Reagan National DCA USA 23,007 10.7 709 -0.6 1.8 98.2
83 (73) Vienna International VIE Austria 22,775 1.3 665 4.6 30.2 69.8
84 (89) Riyadh King Khalid Int'l RUH Saudi Arabia 22,656 10.4 595 10.5 30.5 69.5
85 (90) London Stansted STN UK 22,504 12.8 559 6.0 18.0 82.0
86 (79) Dusseldorf International DUS Germany 22,477 2.9 659 11.7 17.2 82.8
87 (76) Brisbane International BNE Australia 22,392 0.6 561 -1.4 14.0 86.0
88 (85) Chicago Midway International MDW USA 22,221 5.5 719 -0.9 0.6 99.4
89 (84) Salt Lake City International SLC USA 22,152 4.8 569 0.7 2.9 97.1
90 (86) Xiamen Gaoqi International XMN China 21,814 4.6 754 14.7 4.4 95.6
91 (83) Washington Dulles International IAD USA 21,495 0.4 576 -10.5 30.8 69.2
92 (88) Berlin Tegel TXL Germany 21,005 1.5 582 9.4 12.6 87.4
93 (93) Fukuoka International FUK Japan 20,942 8.0 600 6.2 3.8 96.2
94 (92) Vancouver International YVR Canada 20,484 5.1 538 2.2 21.4 78.6
95 (95) Sapporo New Chitose CTS Japan 20,452 6.2 570 3.4 1.6 98.4
96 (100) Lisbon Portela LIS Portugal 20,090 10.7 543 10.7 19.1 80.9
97 (98) San Diego International SAN USA 20,081 7.0 619 -1.6 2.3 97.7
98 (96) Johannesburg International JNB South Africa 20,076 4.8 558 1.2 42.2 57.8
99 (103) Cancun International CUN Mexico 19,699 12.3 445 5.1 16.9 83.1
100 (99) Brasilia International BSB Brazil 19,504 7.5 470 -10.9 3.1 96.9

NOTES: The survey is primarily based on preliminary returns to the Airports Council International and Innovata schedule data; Xian and Chongqing sourced from Civil Aviation Administration of China.
Innovata data has been used for frequency and available seat statistics and is based on flight schedules files for the week of 10-16 May 2016 compared with the week 11-17 May 2015. SEAT SHARE
INTERCONTINENTAL/REGIONAL: Split based on the following Innovata areas: North America, Central America, South America, Eastern Europe, Western Europe, Middle East, Australasia, South Asia, East
Asia, Southeast Asia, Southern Africa. Frequencies are for passenger services only. SOURCE: ACI World/Innovata – part of Flightglobal

flightglobal.com/airlines May 2016 | Airline Business | 31

AIRPORTS EUROPE
REPORT
OLIVER CLARK
LONDON & VILNIUS
PRIVATE
LIVES
Over half Europe’s airports could be in some
form of non-public ownership by next year
if several planned deals are completed as
states continue to look to privatisation as
a tool to develop the businesses
P
lans for the sale of more state-
owned European airports this year
underline that the region’s govern-
ments retain an appetite to move
these assets into private hands.
The percentage of Europe’s airports that are
entirely in private hands or are operated
through various forms of public-private part-
nerships (PPP) has almost doubled over the
last six years, a study by airport body ACI
Europe shows.
The Ownership of Europe’s Airports report
shows 16% of airports in the region are pri-
vately-owned while more than a quarter are
operated under PPP contracts, leaving 60% of
airports in public hands. This is a rise on 2010
when 9% were privately-owned and 13%
were in mixed public and private ownership.
Several large airport privatisation projects
are ongoing, including the sale of Lyon and
Nice airports in France, moves by Lithuania’s
airport operating company and the transfer of
14 Greek regional airports from state owner-
ship to a consortium led by Fraport. These are
set for completion this year, after which ACI
Europe estimates a majority of Europe’s air-
ports will be in private hands.
Fraport’s deal for the Greek regional air-
ports – after it was first selected as preferred
bidder in November 2014 – was confirmed at
the end of last year and will be formally con-
cluded this autumn. The 14 Greek regional
airports served about 22 million passengers in
2014. These include the country’s third big-
32 | Airline Business | May 2016
SIPA/Rex/Shutterstock
Lyon is among the airports set for sale
NEW LONDON CITY OWNERS TO TAKE CHARGE
While Ryanair may be among the most vocal on
the subject of airport fees, it was not the only
European carrier recently to urge new owners to
adopt caution over airport charges. British
Airways parent IAG greeted February’s news
that a deal had been agreed to sell London City
airport to a consortium including a division of
the Kuwait Investment Authority and Canadian-
related investment firms, by saying it is pre-
pared to redeploy capacity elsewhere if fees
affect its profitability.
IAG chief Willie Walsh says, while BA has
maintained a presence at the airport through its
CityFlyer operation, the new owners of the down-
town airport “shouldn’t take that for granted”.
Walsh says, although the carrier’s financial
gest gateway, at Thessaloniki.
France’s government this year began pre-
paring the sale of the country’s third and
fourth largest airports, Nice and Lyon. The
French state owns 60% of the two gateways
and plans to sell its shareholdings. Other
shareholders include the chambers of com-
merce in the two cities and local authorities.
The government aims to select a preferred
bidder this summer.
CONTROLLING INFLUENCE
France’s finance ministry asserts the share
sale will enable private investors to control
what it has termed “airport exploitation”,
while the state will remain in charge of airport
concessions through its “prerogatives as regu-
lator and licensor”. Last year, the French state
sold a 49.9% stake in Toulouse airport to a
Chinese consortium.
Chief executive of state operator Lithuanian
Airports, Gediminas Almantas, says the gov-
ernment’s motivation to privatise its main
gateways is far from making money.
“The top priority of this concession is that
the government is expecting an operator that
could improve the connectivity, so the main
focus is not on money, the main focus is on
connectivity,” he told Airline Business during
an interview at the Connect conference in
Vilnius in March.
Almantas says the privatisation of Vilnius,
Kaunas and Palanga airports will not be “an
easy case” for any would-be investors because
“it’s not like an operator just needs to offer the
biggest amount [of money] up front, or just
offer the best financial deal”.
To succeed, he says, potential operators
performance at the airport is “encouraging”, it
will only expand at London City if such develop-
ment “makes sense” and is profitable.
Although the purchase price for London City
has not been disclosed, IAG is concerned
achieving a return on the investment will inevita-
bly require the airport operator to raise charges.
Walsh says the airline is prepared to carry
out a threat – made before the sale – to reduce
capacity at London City, and insists CityFlyer will
not submit to a position in which the new airport
owner can “jack up the prices” with impunity.
Global Infrastructure Partners took a control-
ling stake in London City airport in 2006 and, in
the past decade, passenger numbers have dou-
bled to 4.3 million.
flightglobal.com/airlines
TYPE OF AIRPORT OWNERSHIP IN EU 28 MEMBER STATES AND MONACO is not necessarily reflected in a change to
route development strategies.
Fully private Mixed Fully public
“No I wouldn’t say so because now fully
publicly-owned airports are mostly
corporatised and work as commercial compa-
Cyprus 100%
nies so I wouldn’t say that the private ones are
Hungary 100%
better at promoting or encouraging connectiv-
Portugal 100%
ity,” he says.
Slovenia 100% “We see all airports, whatever their owner-
United Kingdom 21% 26% 53% ship model, kind of behaving the same in that
Bulgaria 50% 50% regard now,” he continues, adding: “It’s clear
France 35% 23% 42% that for airports, route development, traffic
Belgium 60% 40% retention, traffic growth is a very high prior-
Ireland 60% 40% ity. They invest a lot of money, they have mar-
Croatia 75% 13% 13% keting teams etc.”
Sweden 86% 5% 9%
However, previous ACI Europe research on
Malta 100%
the topic has highlighted a trend of increasing
competition between Europe’s airports to
Spain 98%
seize new traffic, with more aggressive route
Italy 14% 86%
development marketing, with facilities not
Netherlands 25% 75%
just competing with airports in other coun-
Denmark 33% 67% tries but often within regions.
Germany 53% 47% Jankovec also says that, in limited circum-
Romania 73% 27% stances, privatisation of an airport can have a
Austria 83% 17% direct impact on its route development.
Poland 88% 13%
Greece 98% FREE REIN
Czech Republic 100% As an example, Jankovec says the break-up of
Estonia 100%
BAA’s UK airport portfolio and the sale of
London Gatwick airport to a Global
Finland 100%
Infrastructure Partners-led consortium in
Latvia 100%
2009 “freed” the airport to develop a new
Lithuania 100%
route development plan.
Luxembourg 100%
“Gatwick [was] part of a larger group and I
Monaco 100% think within that larger group there [have]
Slovakia 100% been choices made in terms of where to prior-
itise growth and that kind of traffic between
SOURCE: ACI Europe
the airports,” he says, adding: “All of a sud-
den Gatwick, by being out of that group, is
will need to commit to the government’s traf- lapse of Air Lituanica in 2015. While Latvian freed of that consideration and could think
fic forecasts for the airports, or better still national carrier Air Baltic has added some about its own fate.”
improve on them and Almantas adds the win- direct flights for Vilnius – including Jankovec says separate research by ACI
ning bidder will be given free rein in how Stockholm Arlanda and Berlin Tegel – it is Europe of its member airports also showed
they go about attracting new airlines and pas- also aiming to develop feed traffic from that in some cases governments are not ade-
sengers – whether by a route development Vilnius and Tallinn through its Riga hub as quately consulting airports during bilateral
scheme, marketing support or other incentive. part of its pan-Baltic carrier aspirations. traffic rights negotiations with other states.
This focus on connectivity by the airport’s “We found in certain Nordic countries air-
CONNECTING POINT owners will no doubt be welcome news to ports are not aware of the traffic rights availa-
To underline his point, the airport executive Ryanair’s chief commercial officer, David ble from their own location,” Jankovec says.
says connectivity is the government’s “main O’Brien. Duuing a March press conference to He expects further privatisation could
focus”, followed by capex investment, while disclose the opening of a new Vilnius base, he occur in Italy and Poland but says Europe is
the “fee” it extracts from the operator comes a took the opportunity to warn the government unlikely to see a “wave” of airport privatisa-
distant third. against awarding the airports contract to an tions on the scale experienced when Spanish
Almantas predicts the concessions for the operator that would be likely to hike up airport operator AENA – now called ENAIRE
three state-run airports will be completed by prices. Such a scenario, he adds, risks the – and Portuguese operator ANA were sold. ■
the end of 2017. low-cost carrier cutting routes and frequen-
Lithuania’s desire to strengthen its connec- cies out of Lithuania. The home of Airline Business on the web is the
tivity is understandable. The Baltic country ACI Europe director general Olivier Airlines channel of flightglobal.com:
has been without a state carrier since the col- Jankovec says the shift in ownership patterns flightglobal.com/Airlines

flightglobal.com/airlines May 2016 | Airline Business | 33

AIRPORTS USA

REPORT
EDWARD RUSSELL
WASHINGTON DC

CAPACITY
CHANGES
The recovery in passenger numbers witnessed in the USA since the global financial
crash continues but masks tougher times for smaller airports as the big hubs forge ahead

P
 
assenger traffic fell away during “Small airports are, in a majority of cases, nearby Silicon Valley and the growth of
the 2008 credit crunch, prompting highly concentrated in legacy carriers Virgin America, which began flying with a
US airlines to cut capacity across American Airlines, Delta Air Lines and base at the airport in 2007.
the board. No airport, big or small, United Airlines and those airlines have been In addition, JetBlue and Southwest, both of
was spared. constraining capacity,” the rating agency says. which flew to other nearby airports, launched
Capacity has climbed with demand during “Additionally, Southwest Airlines has been service to San Francisco that year.
the past eight years, with passenger traffic sur- reallocating air service to large and medium Scott Laurence, senior vice-president of
passing its 2007 peak of 838 million by notch- hub airports, while faster growing JetBlue and New York-based JetBlue, said in 2014 the air-
ing 848 million passengers in 2014, US Spirit Airlines concentrate on large and line can earn a higher unit revenue premium
Department of Transportation data shows. medium hubs.” at large hub airports like San Francisco than it
That rising passenger tide, however, has can from secondary airports, like nearby
not lifted all airports. LARGE GAINS Oakland or San Jose.
Airlines will fly more seats at only about The 10 airports that have seen the most capac- San Francisco is also a growth centre for
40% of airports across the USA in May than ity growth, in absolute terms, over the nine international carriers. Air Berlin, Air India,
they did the same month in 2007 – before the years since May 2007 are large, sought-after China Southern Airlines, Copa Airlines,
recession hit – Innovata data shows. hubs, with the exception of Dallas Love Field. Etihad Airways and Turkish Airlines have all
Some of the largest gains were seen at San The fastest growing, San Francisco, has added service to the airport while others, like
Francisco International and Los Angeles been buoyed by the technology boom in British Airways, have increased capacity in
International airports, two booming hubs and
ones with intense competition, while many of
the other airports with gains were large or US AIRPORTS WITH LARGEST SEAT-CAPACITY INCREASE: MAY 2016 V MAY 2007
medium-sized and are serving major Airport May 2007 May 2016 Change Change (%)
metropolitan areas. San Francisco 1,849,510 2,730,748 881,238 48%
The airports that remain way down from Los Angeles 3,310,473 4,080,404 769,931 23%
their May 2007 numbers are, as expected, Atlanta 4,656,835 5,222,333 565,498 12%
ones that have lost airlines hubs, like Seattle 1,714,984 2,271,139 556,155 32%
Cleveland and Memphis, but also include New York JFK 2,596,994 3,148,275 551,281 21%
major hubs like Philadelphia that have been
Charlotte Douglas 1,894,858 2,390,692 495,834 26%
impacted by shifts in the US industry.
Miami 1,757,311 2,146,002 388,691 22%
Moody’s Investors Service attributes the
Boston Logan 1,608,610 1,962,459 353,849 22%
concentrated growth of large US airports to
industry capacity discipline and the shift to Dallas Love Field 539,323 816,125 276,802 51%
fewer, larger regional aircraft, in its 2016 US Fort Lauderdale 1,167,580 1,400,185 232,605 20%
airport outlook. NOTES: Based on departing seats. SOURCE: Innovata – part of Flightglobal

34 | Airline Business | May 2016 flightglobal.com/airlines

 driver of the drop at Detroit Metropolitan
Wayne County airport. Traffic decreased
about 9% that year and has held steady since,
said Fitch Ratings in its latest review of the
airport’s debt, published in December.
The rating agency does not expect signifi-
cant further capacity cuts at the Michigan air-
port due to its geographic importance to
Atlanta-based Delta’s network, especially as
the carrier has shrunk its Cincinnati hub and
has few nearby competitors for passengers.
Philadelphia International airport is a large
hub for American, which it gained in its merg-
er with US Airways in 2013. While the com-
bined American and US Airways capacity is
down just slightly at 4% in May compared to
nine years ago, Southwest capacity is down
nearly 74%, Capstats data shows.

FRESH FOCUS
Southwest was in the midst of building a
focus city at the airport in 2007 but pulled
down the operation to just 21 flights in 2012,
says Fitch. The cuts are even greater if seats

Max Kingsley-Jones/Flightglobal
flown by AirTran Airways, which Southwest
absorbed from 2010 to 2015, are included.
Phoenix Sky Harbor International airport is
also a large hub for American by way of the
US Airways merger, and a large base for
Concentrated growth at larger US airports has been driven by airlines like Southwest Southwest. Both airlines have shrunk seat
capacity there, by 5% and nearly 26%,
the past two years, Innovata FlightMaps “It’s very clear that the demand is much respectively, while maintaining large con-
Analytics shows. greater than 20 gates.” necting operations, Capstats shows.
Dallas Love Field is a unique case. Capacity In January, Southwest chief financial offic- Beyond these 10 airports is a long list of
jumped at the airport following the removal of er Tammy Romo said Dallas Love Field con- small and medium-sized US airports that
the Wright Amendment, which limited tinued to “outperform the system on margins remain below pre-recession capacity.
nonstop flights to within Texas, bordering and return”. For example, airlines will fly nearly 40%
states and to Alabama, Kansas, Mississippi The airports that have lost most capacity fewer seats into Reno-Tahoe International air-
and Missouri, in October 2014. Southwest since 2007 tell multiple stories. There are the port in May than in the same month nine
immediately jumped on the opportunity, former hubs – Cincinnati/Northern Kentucky, years ago, Innovata shows. This comes de-
increasing its schedule to 180 daily flights by Cleveland, Memphis and Pittsburgh – and spite strong local economic data and major
August, from 118. ones in multi-airport regions – Oakland, recent investments, including Tesla’s plans to
In addition, Virgin America opened a focus Ontario and Washington Dulles – that have build a $5 billion battery factory.
city at the Dallas airport that October and now seen traffic shift to other nearby facilities. Fitch attributes the capacity drop primarily
operates 20 daily flights to five cities. Detroit, Philadelphia and Phoenix stand to Southwest’s market dominance. The Dallas
“It’s been a raging success and it has a out as hubs that remain well below pre- carrier has cut capacity as it shifted towards
20-gate cap,” said Gary Kelly, chief executive recession capacity. serving more larger markets over its former
of Southwest, on the growth at Love Field in The merger of Delta Air Lines and bread-and-butter small and medium-sized
April 2015. Northwest Airlines in 2009 is probably the ones – including Reno. It carries about 50% of
the traffic from the northern Nevada airport.
Capacity discipline at the US mainline
US AIRPORTS WITH LARGEST SEAT-CAPACITY FALL: MAY 2016 V MAY 2007 carriers has also allowed them to focus
Airport May 2007 May 2016 Change Change (%) growth in the largest markets, like Los
Cincinnati/N.Kentucky 861,631 357,787 (503,844) (58.5%) Angeles and New York, while growing little at
Memphis 681,228 224,488 (456,740) (67.0%) airports like Reno across the country,
Philadelphia 1,912,296 1,656,448 (255,848) (13.4%) Moody’s notes in its 2016 outlook.
Oakland 873,300 636,603 (236,697) (27.1%) Reno is seeing some gains. JetBlue will
Cleveland 656,966 434,145 (222,821) (33.9%) begin new service to Long Beach in August
and Alaska began Orange County flights in
Ontario 440,770 230,637 (210,133) (47.7%)
March. Southwest will also resume flights to
Washington Dulles 1,363,155 1,164,098 (199,057) (14.6%)
Oakland in June after a three-year hiatus. ■
Phoenix 2,422,846 2,225,850 (196,996) (8.1%)
Detroit 2,009,548 1,827,917 (181,631) (9.0%)
The home of Airline Business on the web is the
Pittsburgh 613,105 443,030 (170,075) (27.7%)
Airlines channel of flightglobal.com:
NOTES: Based on departing seats. SOURCE: Innovata – part of Flightglobal flightglobal.com/Airlines

flightglobal.com/airlines May 2016 | Airline Business | 35

AIRPORTS ASIA

REPORT
MAVIS TOH
SINGAPORE

INTERNATIONAL
INJECTION
Fast-growing Chinese traffic means the country accounted for 11 of the 100 biggest
airports by passenger number last year, and an emphasis on building international
traffic will help drive further expansion of these hubs

C
hinese airports are not only shift-
ing gears but also stepping on the
accelerator to drive international
traffic and expand their networks,
after decades of relying on domes-
tic traffic for growth.
While large tier-one airports such as Beijing
Capital International are working to restruc-
ture networks and cater for more international
flights amid slot constraints, smaller gateways
such as those in Chongqing and Haikou, are
going all out to woo airlines for new
international launches.
Last year, Chinese airports handled 914.8
million passengers, up 10% from 2014. While
the number of domestic passengers rose 9%,
international passenger numbers jumped
more than a fifth, data from the Civil Aviation
Administration of China shows.
said the airport’s former president Shi Boli,
adding the Chinese capital is geographically
ideal to connect Southeast Asia to Europe and
the USA. It is also aiming to improve connec-
tions to Central America and Africa.
Like many of its peers, the airport is
working with home airlines to add interna-
tional destinations, and also to facilitate tran-
sits and shorten connection times to make
long-haul travel more convenient and com-
fortable for passengers.
This comes at a time when not just the
nation’s big four carriers – Air China, China
Southern Airlines, China Eastern Airlines and
Hainan Airlines – but even smaller operators
are setting their sights on high-yield opportu-
nities in the international market. This is
LEADING CHINESE AIRPORTS BY PASSENGER NUMBER: 2015
driven by fierce competition in the domestic
market, as well as the growing desire among
locals, with their growing disposable
incomes, to travel abroad.
Over the last year, at least five domestic air-
lines – the likes of China United Airlines and
West Air – have also applied to expand their
business scope beyond domestic operations.
FAR-FLUNG AMBITIONS
In second-tier cities, airports like Chengdu
Shuangliu International have seen rapid
growth in international traffic in recent years.
In the first eight months of the year, while
overall passenger numbers climbed 15%,
international traffic shot up more than 30%.
The airport, which has 83 international

SCRAMBLING FOR THE WORLD 2015 ranking City Airport Pax (000) Change

Beijing airport says it is no longer chasing 2 Beijing Capital International 89,939 4.4%
growth in passenger numbers and is instead 13 Shanghai Pudong International 60,053 16.2%
placing a priority on expanding its 17 Guangzhou Baiyun International 55,202 0.8%
international network. 32 Chengdu Shuangliu International 42,245 12.0%
The airport – which grew 4.4% in passen- 39 Shenzhen Bao’an International 39,722 9.5%
ger numbers to just shy of 90 million – is 42 Shanghai Hongqiao International 39,091 2.9%
already the second biggest in the world 46 Kunming Changshui International 37,523 16.0%
behind Atlanta. Around a quarter of its traffic 54 Xi’an Xianyang International 32,970 12.7%
is international. The goal is to have 30-40% of
55 Chongqing Jiangbei International 32,400 10.7%
traffic from outside China, with an aim to
65 Hangzhou Xiaoshan International 28,386 11.2%
build it into a reputable international hub.
“In the whole of China, if Beijing is not the 90 Xiamen Gaoqi International 21,814 4.6%
SOURCE: ACI World/Civil Aviation Administration of China
international hub, where else should it be?”

36 | Airline Business | May 2016 flightglobal.com/airlines


With domestic passenger numbers booming, airports like Bao’an, in Shenzhen, are looking to international traffic for new growth
routes, is working to expand its connections
to Europe, North America and Africa. The
aim is to become the largest airport in central
and western China, says Sichuan Province
Airport Group board chairman Li Wei.
He adds the city will open a second airport
in 2019 becoming the third Chinese city, after
Shanghai and Beijing, to have two commer-
cial airports. Plans call for the new terminal to
handle more international traffic.
Joanna Lu, head of advisory for Asia with
Flightglobal’s Ascend consultancy, says more
secondary Chinese airports want interna-
tional routes, not just in Asia, but to longer-
haul markets.
“In the past, the local market of a Chinese
secondary airport often just was not substan-
tial enough to support a new long-haul route,”
she says. “The situation has, however,
changed significantly because these airports
have improved the connection to the China
domestic market.”
In 2015 there were 26 Chinese airports
which handled more than 10 million
passengers, two more than the year before,
CAAC data shows. Those that saw more than
a million passengers numbered 70, six more
than in 2014.
flightglobal.com/airlines
Shenzhen Bao’an International airport, for
one, is working to drive more international
traffic, and to transform itself into a hub.
In 2015 the airport handled 39.7 million
passengers, 9.5% more than the year before.
International traffic, however, accounted for
less than 5% of the total. The airport’s deputy
general manager Sun Zhengling says
Shenzhen’s air traffic development has not
kept pace with the growth of the city, which is
“We want to focus more
on the Middle East,
Europe and Africa”
PATRICK CHANG
Chongqing Jiangbei International
strong economically and focused on the high-
tech industry. The majority of its passengers
are business travellers and city dwellers are
seeing their incomes grow, increasing their
ability to travel, he adds.
Shenzhen faces stiff competition from
neighbouring hubs such as Hong Kong
International and Guangzhou Baiyun
International. Sun says the airport can play a
Shenzhen Airport
bigger role, considering the congestion at
Hong Kong. He argues the Pearl River Delta
region can support another hub.
The airport saw the opening of direct inter-
national services to Tokyo and Sydney in
January, and expects at least another 10 inter-
national routes to be launched this year.
Ascend’s Lu notes Chinese airports are
starting to proactively market themselves to
airlines. To stand out they need to understand
their market potential for international long-
haul connections, and to be more engaged in
airline strategies.
In the northwest, Chongqing Jiangbei
International is targeting growth for its inter-
national network as construction of a third
terminal and second runway near comple-
tion. It saw 32 million passengers last year but
international traffic accounted for just 7%.
The target is to drive an international expan-
sion to more than 50 global destinations.
“Going forward, we want to focus more on
connections to the Middle East, Europe and
Africa, because geographically we have an
advantage,” says the airport’s deputy general
manager of marketing Patrick Chang, adding
there is also strong economic growth in
western China. ■
May 2016 | Airline Business | 37
FOCUS CONNECTIVITY
REPORT
GRAHAM DUNN
LONDON
MAKING THE
CONNECTION
Onboard wi-fi is expected by passengers on long-haul flights,
but it’s far from available on every European short-haul route.
Now that situation seems set to change
R
ecent developments suggest a tip-
ping point is being reached in
European airline interest in
onboard connectivity for short-
haul aircraft, although how and
when this will arrive remains to be seen.
Wi-fi connectivity has become so standard
on board US carrier domestic operations that,
mirroring what has happened on the ground,
expectations are now about speed of connec-
tivity rather than availability.
This was highlighted by American Airlines
filing a lawsuit in February against the pro-
vider of wi-fi services for a portion of its fleet
– around 200 older Boeing 737-800s, MD-80s
and 757-200s under a 2012 contract with
Gogo – arguing the system is not competitive.
American dropped the lawsuit and said it
would consider Gogo’s proposed improved
2Ku inflight service. Around 10% of Gogo’s
11,000 connectivity solution equipped air-
craft feature its broadband 2Ku solution.
If onboard connectivity is becoming the
norm on North American domestic flights,
and is increasingly apparent on widebodies in
Europe, it is far from common yet on short-
haul flights in Europe.
“The tipping point was probably two years
ago on long-range,” says Panasonic vice-pres-
ident for global communications services,
David Bruner. “You still have lots of people to
make decisions, but for every carrier, it is now
more in their thought process.”
That is underlined by a recent wave of con-
38 | Airline Business | May 2016
imageBROKER/REX/Shutterstock
Air Berlin offers wi-fi on its narrowbodies
nectivity announcements for European long-
haul fleets, latterly including Air France’s
plan to start rolling out wi-fi on its long-haul
fleet from 2017 and Air Europa’s move to
deploy Panasonic’s connectivity solution on
its Airbus A330s and 787s.
“For narrowbodies [in Europe] I think we
are at the tipping point,” adds Bruner, “but
things are more fuzzy about business models.”
The pioneer in the European short-haul
market remains low-cost carrier Norwegian.
The airline debuted its service, which uses
Row 44’s connectivity solution, just over five
years ago and offers the service free onboard.
Over the last five years it says more than 19
million passengers logged in and 18,000 pas-
sengers access its onboard wi-fi daily. The
biggest demand is on Spanish routes and
flights to Malaga, Barcelona, Alicante and
Madrid – with Tromsø – have most users. It
says a third of passengers log onto social
media within five minutes of the flight.
It expanded the offering last November, by
launching a 12-month trial to cover live tele-
vision. It is providing free onboard access to
Bloomberg TV and Norwegian channel TV 2
news on mobile devices under an agreement
with Global Eagle Entertainment.
Several airlines in Europe have made tenta-
tive moves in the short-haul network. Air
Berlin, Icelandair, SAS and, until its collapse,
Transaero, all offered in-flight connectivity on
narrowbodies in the region.
SATELLITE NETWORK
Interest continues to grow. Spanish low-cost
carrier Vueling a year ago unveiled plans for
onboard connectivity. It teamed with Spanish
telecoms giant Telefonica to provide the new
service, working with Live TV over the Eutel-
sat Ka-band satellite network. But having done
the technical work, the carrier is yet to launch
the service. “We’re still waiting for all the civil
aviation authorisations, but we’re expecting to
announce it soon,” says the carrier.
Air France, alongside its widebodies con-
nectivity plan, has teamed with mobile opera-
tor Orange to trial wi-fi onboard a pair of
A320s. It launched the activity this year.
Alitalia, which is installing Panasonic’s
wi-fi service on its long-haul fleet, last
autumn announced plans to roll-out connec-
tivity across its whole fleet. Air Berlin has a
pair of A320s equipped with the Panasonic
flightglobal.com/airlines

Online access is now demanded by airline passengers as a given with the speeds available now the priority
connectivity service.
European budget carrier Ryanair, which
had a brief dalliance with OnAir’s onboard
mobile phone service in 2009, continues to
ponder connectivity. “We’re looking at a
near-fi product, where customers would log
on to a near-fi network on board, and access
content such as inflight movies or a digital
inflight magazine,” the carrier says. “We hope
to trial it on board soon.”
It sums up the variety of approaches – both
in technology and business model – Europe’s
carriers are following. “Europe is one of the
markets with the messiest battlegrounds,”
says Bruner.
“We’ll see what happens, but it’s a very
fragmented market. I’m sure we’ll go through
some sort of shake-out. Right now it’s a bit of a
frenzy in the marketplace.”
One of the latest developments has come
from Inmarsat and its planned European
Aviation Network which, as the name sug-
Norwegian
Wi-fi is increasingly the norm for long-haul
flightglobal.com/airlines
gests, is focused on the short-haul European
sector. Inmarsat has joined Deutsche Telekom
on the initiative, unveiled last autumn,
through a combination of satellite connectiv-
ity and ground-based mobile phone network.
PILOT PROGRAMME
Deutsche Telekom, in a recent update, says
the roll-out for the European flight network
will see the first LTE stations ready for the end
of the year in southern England. Six test
flights are planned, the first of which will take
place this year. This will be followed next
spring with the first commercial pilot for the
network, also in England. Coverage over Ger-
many and Western Europe’s other most
highly-populated areas is set for mid-2017.
Lufthansa has agreed to take part in a flight
trial programme of the European Aviation
Network next year and will this summer
begin offering satellite broadband-based ser-
vice on European flights using Inmarsat.
“This underlines again that we are
pioneers when it comes to digital service
onboard,” said Lufthansa boss Carsten
Spohr, announcing the move last year. The
German carrier has been arguably Europe’s
most committed airline to onboard connec-
tivity, having pioneered the Connexion by
Boeing solution a decade ago, followed by its
subsequent agreement on long-haul connec-
tivity with Panasonic.
British Airways in the summer of 2014 said
it was in talks with Inmarsat over using its sat-
Norwegian
ellite/air-to-ground network for broadband
services, initially on domestic routes.
“Across the board with Global Express and
in particular the new solution we’ve got for
Europe, I think the timing is perfect. We are
coming at a time when all airlines in Europe
are interested in connectivity,” says Inmarsat
vice-president aviation David Coiley.
He notes this is coming at the same time
that connectivity and entertainment are con-
verging, through the use of mobile devices. “It
is as much the convergence in this parallel
track [driving demand]. We are all consuming
more content on the move.
“It’s a question of how to do it – whether it’s
connectivity, content and IFE, what the retail
model is,” he adds. “Some of the modelling
may be different – it may be about ancillary
revenues, operational improvements or ser-
vice enhancement, but they all play into the
same end result.
“I think there is demand. The model may
need to evolve,” he says, noting that flexibility
is one of the key requirements being called
for. “They might be trying to find a way to ini-
tially package and price the service – but we
do expect over a long-term project to repack-
age and find new ways of working, potentially
with other commercial partners. So the one
key element is flexibility.” ■
Read all the news from this year’s Aircraft
Interiors Expo in Hamburg at:
flightglobal.com/Interiors
May 2016 | Airline Business | 39
FOCUS INTERIORS

REPORT
GRAHAM DUNN
LONDON

MIDDLE
GROUND
Premium economy is taking hold in the market with more
carriers adding the class to long-haul aircraft, notably
American Airlines which is leading the US charge

T
 
he continued rise of premium
economy among airlines was fur-
ther underscored late last year
when American Airlines detailed
plans making it the first US carrier
to introduce a formal offering in the sector on
long-haul services. The carrier plans to debut
the new cabin on its Boeing 787-9 aircraft this
year, installing 21 premium economy seats in
a two-three-two configuration.
“Our customers tell us they want a class of
service between business class and main
cabin [economy], and this feedback provided

the genesis for our new premium economy
service,” said chief marketing officer Andrew
Nocella, announcing the move in December.
The airline will install a premium economy
cabin on all its Boeing 777-200 and 777-
300ER and Airbus A330 aircraft by 2019, it
says. New Airbus A350-900s will be deliv-
ered with the cabin from 2017.
US carriers have so far only dabbled in pre-
mium economy. American offers an extra-
legroom product – main cabin extra – for a fee
as a step up from its standard economy seat,
between economy and business class. Delta
Air Lines and United Airlines both offer simi-
lar products for a fee on their aircraft. Indeed,
Delta will from May make its Delta Comfort+
product available for direct booking on US
and Canadian flights.
American will keep main cabin extra on its
widebodies, offering four classes on the 787-9:
business class, premium economy, main
American will have premium economy on all its 777s by 2019
cabin extra and economy. Its 777-300ERs will
also have first class.
It was not the only US carrier to announce
an upgrade to economy seating in December.
Alaska Airlines detailed a plan to outfit its
fleet with extra-legroom seats by the end of
2017, with 60 aircraft to have the product by
the end of this year. This will cover the
carrier’s entire mainline fleet of Boeing
narrowbodies – a combination of 737-800s
and -900s, as well as its SkyWest Airlines-
operated Embraer E175s.
Hawaiian Airlines already operates an
James D. Morgan/Rex/Shutterstock
enhanced economy product, Extra Comfort,
and is adding another 28 seats in this class on
its A330s as part of a wider cabin refurbish-
ment. It will this spring complete the first of
its A330 cabin overhauls, which will increase
this seating on the type to 68.
Hawaiian chief executive Mark Dunkerley
says it will take a break from the project over
the summer. That hiatus will enable
Hawaiian to keep all its A330s in service dur-
ing the summer travel season. In addition,
during summer Hawaiian will review the first
aircraft’s overhaul and seek efficiencies.

40 | Airline Business | May 2016 flightglobal.com/airlines


European carriers including Lufthansa are have led the way in introducing premium-economy cabins
From autumn, Hawaiian will resume work
at “nose-to-tail” pace, with one aircraft modi-
fied at a time and no break, Dunkerley says.
At that rate, Hawaiian will overhaul all of
its A330s by the middle of next year,
Dunkerley says. The carrier has 22 of the type,
plus another on order.
While US carriers have been reluctant to
turn to premium economy, across the border
Air Canada debuted premium economy on
its 777s in 2013 and began taking 787s con-
figured with 21 seats in premium economy
the following year. WestJet, meanwhile, last
year brought in a no-middle-seat premium
economy product on its Boeing narrowbod-
ies and its first long-haul aircraft, Boeing
767-300ERs.
Premium economy has been far more
prominent in other regions and continues to
be rolled out by new operators. Figures from
Flightglobal’s Fleets Analyzer database show
almost 30 different European carriers –
including several sister brands – offering the
choice of either a dedicated premium econ-
omy section or an enhanced economy prod-
uct on their widebodies.
The region’s biggest network carriers,
British Airways, Air France-KLM and
Lufthansa all have premium economy offer-
ings – the latter debuting it in 2014. Virgin
Atlantic – one of the premium economy pio-
neers, and which has the product across its
39-strong fleet – has the largest premium
economy section of any European operator,
flightglobal.com/airlines
with the 66 seats on its Boeing 747-400s.
Spanish carrier Iberia will become one of
the latest European carriers to bring in pre-
mium economy, joining fellow IAG airline
British Airways in offering the product.
“We are going to implement premium econ-
omy in the [Airbus] A340-600s, the A350-900s
will arrive with it, and the A330-300,” says Ibe-
ria chief executive Luis Gallego. He notes it
“More people are
going from economy
to premium economy”
LUIS GALLEGO
Chief executive, Iberia
will not introduce the option on the A330-200s
it deploys on denser routes. Iberia will begin
retrofitting its A330-300s this year, replacing
seven business-class seats with 21 premium-
economy seats.
“We did an analysis, there will be a per-
centage of people that can go from business to
premium economy, but when you do the
numbers, you are going to have more people
going from economy to premium economy,
because the product we give in business is
very good and people are ready to pay the fare
for business to receive that service,” he says.
European leisure operators are also active
in the premium segment and Italian leisure
carrier Neos has replaced the business-class
Lufthansa Technik
section on its 767 long-haul fleet with pre-
mium-economy seats while management
finalises interior plans for its on-order 787s,
scheduled for delivery in 2018.
The airline abolished business-class on its
767s in favour of a higher number of Weber-
built premium-class seats through an interior
project completed in December.
The aircraft’s total seat number remained
unchanged at 284, but the Milan-based air-
line’s technical director, Marco Brusa, says 21
premium-economy seats were installed in
place of the 12-strong business-class section
as a response to demand from tour operators.
Across Asia-Pacific, Fleets Analyzer shows
14 carriers offering premium economy or
enhanced economy products.
Singapore Airlines is among the network
carriers in the region to embrace premium
economy and having begun the process of
rolling it out across its 777-300ERs and Air-
bus A380s, it in March took delivery of its first
A350-900 which also features a premium-
economy cabin. The carrier’s A350 features
253 seats in a three-class configuration,
including 42 business class and 24 premium
economy seats.
SIA now expects to complete retrofit of its
19 A380s with premium economy during the
second quarter. ■
For Aircraft Interiors Expo news and our
premium economy data snapshot, visit:
flightglobal.com/Interiors
May 2016 | Airline Business | 41
ANALYSIS TOURISM

MICHAEL GUBISCH LONDON & BERLIN

Egypt battles with rebuilding task

As the key summer season begins with reduced capacity, in particular among European leisure carriers amid the security
concerns following last year’s MetroJet bombing, authorities are looking to fresh incentives to boost country’s tourism

hough the hijacking of an

T EgyptAir Airbus A320 on

29 March was not a terror-
ism-related incident, it can only
have intensified concerns about
Egyptian airport security – five
months after the downing of a
MetroJet Airbus A321 – and the
challenges in rebuilding the
North African nation’s reputation
as a tourist destination.
Airlines have sharply reduced
capacity and suspended services
to Egypt in response to the
Russian A321’s suspected bomb-
ing shortly after take-off from
Sharm el-Sheikh on 31 October.
That came after last year’s
high-profile terror attacks on
tourism targets in Tunisia had

already hit North African travel
demand. With many of these
travel restrictions still in place,
Egypt enters its key summer sea-
son with significant challenges.
Egyptian government figures
show that the number of tourists
arriving in February was almost
half the level from the previous
year. The figures, which were dis-
closed by the country’s Central
Agency for Public Mobilisation
and Statistics, show tourism
arrivals in February down 45.9%
At the ITB travel fair in Berlin
on 10 March, Egypt’s tourism
minister Hisham Zaazou high-
lighted the central role the indus-
try played in the national econ-
omy. Tourism, he says, generates
11.5% of Egypt’s GDP and
directly employs around four
million people. When several
countries – including Germany,
Russia, the UK and USA – imple-
mented travel restrictions after
the crash, it was “like closing the
tap overnight”, adds Zaazou.
Flightglobal’s Innovata sched-
ules show that airline seats to and
from Egypt in April 2016 are
down nearly 6% on the same
month last year, while the
number of flights has been
reduced by 3.7%.
That has largely affected
capacity to key tourism points in
Egyptian data shows the number of tourists almost halved in February, compared with 2015
FLIGHTS PER MONTH TO AND FROM EGYPT BY REGION OF ORIGIN
Region
Middle East
Africa
Europe
Asia
North America
TOTAL
SOURCE: Innovata – part of Flightglobal
the country. Seat capacity has
tumbled at tourist hotspots:
down 45% at Sharm el-Sheikh –
where travel restrictions have
focused on the airport area itself
– and 35% at Hurghada com-
pared with April last year. By
contrast, seat capacity is up over
6% at Cairo airport, where
demand is broader than tourism
and which is largely served by
network carriers.
Capacity developments are not
uniform across regions. Whereas
capacity between Egypt and the
Middle East – the largest segment
– has actually been increased, the
numbers of seats in the next two
largest segments – Europe and
Africa – have fallen by a nearly a
Paul Brown/Rex/Shutterstock
notably on Sharm el-Sheikh.
April 2015 April 2016 Change Change (%)
Indeed, Europe’s network car-
3,419 4,139 720 21% riers have largely maintained
their operations. Lufthansa and
3,114 2,564 -550 -18%
Swiss did not reduce capacity,
2,084 1,607 -477 -23%
while British Airways and Air
93 72 -21 -23%
France made only minor sched-
34 36 2 6% ule adjustments. Air France’s sib-
8744 8,418 -326 -4% ling KLM actually increased
flights to Egypt by a third. Air
Berlin, however, has cut its num-
third and 27%, respectively. ber of flights by a similar propor-
The European figure reflects a tion, with reductions at almost all
13.6% reduction in seats from German airports, though Leipzig
and to Germany and a halving of is an exception.
UK carriers’ Egyptian capacity. Thomas Cook’s German leisure
Russian airlines, meanwhile, subsidiary Condor cut flights to
suspended flights to Egypt alto- Egypt by 29%.
gether as a result of restrictions Lufthansa’s leisure joint ven-
imposed by Moscow. Capacity ture with Turkish Airlines,
from Turkey – another country SunExpress, says it “stands by
that has generated a high volume Egypt as a destination” as the
of traffic to Egypt – has been country is a “touristic jewel”, but
trimmed 12.6%. schedules data shows it sus-
pended flights to Egypt from
LEISURELY PURSUITS seven German airports and
Much of this trend has been halved services from Frankfurt.
driven by cuts from European The carrier is adding routes and
leisure and low-cost sector capacity to destinations such as
operators, reflecting a stronger Bulgaria, Greece and Spain.
focus on tourism destinations – Germania has reduced its over-

42 | Airline Business May

| 2016 flightglobal.com/airlines
all capacity to Egypt too, sus- EasyJet used to serve Sharm FLIGHTS PER MONTH TO AND FROM EGYPT BY SELECTED AIRLINES
pending services from Frankfurt, el-Sheikh from Gatwick, Luton, April 2015 April 2016 Change Change (%)
Friedrichshafen and Paderborn. Manchester and Stansted, but Aeroflot 8 0 -8 -100%
However, the picture is not the these routes have been Air Arabia 113 126 13 12%
same across all German carriers. suspended since November. It
Air Arabia Egypt 70 95 25 36%
Hannover-based TUIfly has does though, still operate
Air Berlin 69 44 -25 -36%
significantly increased its twice-weekly flights to Hurghada
Air France 26 25 -1 -4%
number of flights to Egypt and from Gatwick.
introduced services from addi- In a bid to encourage airlines Alitalia 44 60 16 36%
tional airports, such as Karlsruhe in general to raise capacity even Austrian Airlines 30 22 -8 -27%
and Nuremberg. further, Egypt’s government has British Airways 30 30 0 0%
announced plans to implement a Condor 89 63 -26 -29%
RESTRAINING ORDER financial support scheme for the EasyJet 102 14 -88 -86%
The UK’s Monarch Airlines, winter 2016/2017 season sched- Egyptair 4,670 4,564 -106 -2%
meanwhile, has scaled down ule, says Zaazou. Emirates 60 73 13 22%
Egyptian services by 29%. The The country has historically Etihad Airways 78 120 42 54%
carrier flies to Hurghada, but has supported tour operators, he Flydubai 60 44 -16 -27%
extended a suspension of Sharm notes. But as holidaymakers Germania 56 49 -7 -13%
el-Sheikh flights until 30 October. increasingly book flights directly
KLM 13 17 4 31%
These will be resumed “when with airlines – rather than
Kuwait Airways 87 73 -14 -16%
there is a change in travel advice through tour packages – support
Lufthansa 75 77 2 3%
from the UK government and for carriers is central to restoring
hopes to resume services from tourist traffic, Zaazou asserts. Monarch Airlines 98 70 -28 -29%
the beginning of the winter sea- Incentives will be calculated Qatar Airways 116 125 9 8%
son”, says the airline. on a seat rather than passenger Saudia 451 553 102 23%
The UK Foreign and basis in order to guarantee sup- SunExpress Germany 49 4 -45 -92%
Commonwealth Office says its port even if load factors are low. Swiss 17 17 0 0%
advice to avoid “all but essential The core problem is “a percep- Thomas Cook Airlines 66 26 -40 -61%
travel” excludes several tourist tion that our airports are not safe Thomas Cook Airlines Belgium 0 18 18 -
resorts – including Hurghada and and secure”, Zaazou argued at Thomson Airways 161 55 -106 -66%
Sharm el-Sheikh – but covers air ITB. But this is a “wrong percep- TUIfly 76 119 43 57%
travel to the latter resort’s airport. tion”, he contends. Turkish Airlines 180 154 -26 -14%
TUI’s UK subsidiary Thomson Egypt’s government has set up SOURCE: Innovata – part of Flightglobal
Airways has slashed two-thirds a committee to improve airport
of its capacity to Egypt. While the security with support from UK- MONTHLY FLIGHTS TO AND FROM EGYPT BY COUNTRIES OF ORIGIN
airline’s schedule spanned 161 based consultancy Control Risks Country April 2015 April 2016 Change Change (%)
flights from 14 UK airports in and advisers from international Egypt 2,512 1,987 -525 -21%
April 2015, its timetable for the airport operators. Saudi Arabia 1,864 2,297 433 23%
same month this year comprises Zaazou says the initiative is
UK 513 252 -261 -51%
only 55 flights spread across about introducing “additional”
Germany 478 425 -53 -11%
Birmingham, Bristol, London measures to existing “good”
UAE 443 556 113 26%
Gatwick and Manchester. safety and security standards. ■
Kuwait 351 435 84 24%
Turkey 266 242 -24 -9%
Jordan 222 267 45 20%
Lebanon 178 159 -19 -11%
Italy 172 219 47 27%
Russia* 162 0 -162 -100%
Qatar 158 197 39 25%
Switzerland 76 65 -11 -14%
France 63 79 16 25%
Netherlands 43 47 4 9%
Spain 42 48 6 14%
Belgium 38 43 5 13%
Thomson

NOTE: *In Nov 2015, Russia suspended scheduled and charter flights by the nation’s carriers to
Egypt as a result of the MetroJet crash. NOTES: List includes countries with significant changes in
Thomson Airways has reduced capacity to Egypt by two-thirds scheduled traffic to and from Egypt. SOURCE: Innovata – part of Flightglobal

flightglobal.com/airlines May 2016 | Airline Business | 43

ANALYSIS MARKET OUTLOOK

The long haul to low-cost viability

With Norwegian examining network expansion, opportunities in the long-range budget sector should not be ignored

CHRIS TARRY seats – but the premium economy EUROPEAN MAJORS (AEA MEMBERS) TRAFFIC: FEBRUARY
CTAIRA
cabin should be significantly larg-
Region Pax traffic RPK Capacity Load factors Freight FTK
ANALYSIS BY er than that offered by legacy or
millions change change percent change million change
FLIGHTGLOBAL mainline carriers.
INSIGHT Domestic 2,829 10.7% 9.6% 73.6% 0.7 1 9.0%
A new entrant to any market
Intra-Europe 11,341 9.5% 10.9% 69.8% -0.9 20 3.7%
GRAPHIC BY aims to build traffic from a num-
PAUL RIGNALL ber of sources: by cherry-picking, NorthAtlantic 8,793 12.2% 17.8% 73.2% -3.7 519 -3.9%
opening up new segments with MidAtlantic 3,595 8.3% 10.1% 87.0% -1.5 102 -12.6%
lower fares and accommodating SouthAtlantic 3,026 5.4% 1.7% 83.7% 2.9 136 3.5%

T
wo recent stories have
brought the low-cost long- natural growth of the market. This FarEast/Australia 11,083 5.3% 7.1% 81.0% -1.4 640 -11.1%
haul segment into focus. is already evident in the develop- SubSaharanAfrica 4,121 13.3% 8.4% 76.6% 3.3 169 1.2%
First, the revelation by Norwegian ment of the short-haul low-cost N.Africa/M.East 2,414 7.0% 10.2% 69.5% -2.1 67 20.0%
chief executive Bjorn Kjos of plans segment, but it is important to rec- TOTALMONTH 47,212 8.8% 10.3% 75.7% -1.0 1,741 -4.9%
to dramatically expand long-haul ognise how each of these factors YEAR-TO-DATE 98,592 7.4% 7.8% 76.7% -0.3 3,555 -1.8%
operations against the background differs by market. In the final anal- SOURCE: Association of European Airlines
of a second runway at London ysis, of course, there need to be
Gatwick, basing 50 Boeing 787s enough passengers willing and ARAB AIRLINES (AACO MEMBERS): FEBRUARY*
there and second, the conƂrma- able to pay the fares at the levels
Passenger traffic RPK Capacity Load factors
tion by Ryanair’s Michael O’ Leary you need.
million change change percent change
of talks with Norwegian about Usually, success comes
Intra-Arab World 4,652 0.4% 12.2% 47.0% -5.5
feeding each other’s networks. through a process of evolution
With Other Regions 37,712 5.9% 14.2% 64.9% -5.1
Questions are often asked of the and we believe that, just as in the
sector in terms of its viability. low-cost segment, this will also be TOTAL MONTH 42,364 5.3% 13.9% 62.3% -5.1
Inevitably the answer is it the case in the long-haul arena. YEAR-TO-DATE 92,116 6.0% 11.8% 65.1% -3.6
depends, as there conditions for We need to be clear what we mean NOTES: *Estimates. **Includes domestic. SOURCE: Arab Air Carriers Organisation.

success that must be satisfied. here, as in some markets we have

Some are common across airlines seen charter operators – perhaps increasingly clear that attempting by a stepped approach. This was
but a number are sector specific. now best described as leisure air- to reset the economics of an air- perhaps a surprise set against
At the simplest level, for an air- lines – operating long-haul profit- line to profitably open up a lower- O’Leary’s statements about an
line to have any chance, its reve- ably at low cost. The key is to fare segment of the market is inevitable fare war and the level to
nue per available seat-km (RASK) know what market you are fraught with difficulty – and likely which Eurowings will need to
must be greater than its cost per focused on and stick to that, at to fail to meet objectives, both stra- reduce its costs if it is going to be
ASK. To compete effectively we least initially. This was a key tegic and financial. profitable. There is an obvious ele-
believe that a successful low-cost point made by Kjos recently, Eurowings boss Karl Ulrich ment of pre-emptive movement
long-haul will offer a mix of pre- when he clearly stated which seg- Garnadt recently commented on a here, but the extent to which any
mium economy and economy ment of the market his airline was materially slower-than-expected airline in a truly competitive mar-
focused on and whom he did not pace of growth in the long-haul ket can be anything other than a
JET KEROSENE SPOT PRICES view as competitors. business, saying that reducing “price taker” remains unclear.
costs in the short-haul business to The recently-confirmed discus-
Month Fuel price Change over period
PROFITABLE SEGMENTS EasyJet levels was being reached sions to extend “Ryanair’s reach
¢/US gal 1 month 1 year
Although adaptation is always
April 172.6 3.0%-40.6%
necessary in a mature market –
May 186.1 7.8%-35.8%
and here low-cost, long-haul rep- Traffic growth trend
June 178.4 -4.1%-38.9% resents an adaptation – there is
July 158.8 -11.0% -44.7% also a need to stick to what you do
20
Aug 140.5 -11.5% -50.5% best. It is still possible to address
Sep 142.2 1.2%-47.8% profitable segments that represent
15
Growth rates (%)

Oct 141.1 -0.8%-43.0% significant opportunities outside

Nov 135.1 -4.3%-42.0% your main business through team-
Dec 111.4 -17.5% -40.4% ing or acquisition, of course.
10
Av.15 155.5 -42.8% In this column a few months
Jan 92.1 -17.4% -40.2% ago, we considered how some air-
line groups are adopting a “portfo-
Feb 98.6 7.1% -44.8% 5
lio” approach to tap the greatest
Mar 111.6 13.2% -33.4%
number of profitable segments,
NOTES: Prices are world average = median
while recognising a “one-size-fits-
of Europe/Singapore cargo and US pipeline
0
spot prices in US¢/gallon. all” model will not work. While Jul Aug Sep Oct Nov Dec Jan Feb
SOURCE: ICIS
this is nothing new, it is becoming

44 | Airline Business | May 2016 flightglobal.com/airlines

 SH
3
01
TS
V2

%
NO
MORE ONLINE

40
For more market indicators,

%
including expanded traffic,

15

%
capacity, fuel and share price

10
data, download our digital
Airline Market Outlook in

%
%
Flightglobal Dashboard’s

10
25
Reports section

over the Atlantic… and to help US MAJORS (A4A MEMBERS) PASSENGER STATISTICS: FEBRUARY*
feed more short-haul customers to
Norwegian’s network” is a par- Usually, success Region Pax traffic RPK Capacity Load factors Freight FTK*

ticularly important development, comes through million change change percent change million change
Domestic USA 48,420 10.3% 12.1% 81.2% -1.4 1,388 -1.9%
irrespective of whether the two in a process
North Atlantic 4,920 -6.0% 1.8% 60.5% -5.0 643 -1.1%
fact become partners, as it gives a of evolution
very clear statement of intent in Latin America 8,788 11.3% 11.3% 78.0% 0.0 142 -7.8%
terms of future development. Trans Pacific 5,820 6.7% 9.2% 78.0% -1.9 805 -6.8%
All international 19,528 5.1% 7.7% 72.7% -1.8 1,590 -4.7%
ASIA GROWTH markets will only result from deci- TOTAL MONTH 67,949 8.7% 10.7% 78.6% -1.4 2,978 -3.4%
Notwithstanding the growth at sions by airline managements YEAR-TO-DATE 140,396 6.1% 6.2% 79.4% -0.1 2,978 -3.4%
Norwegian and stated objectives located in emerging economies. NOTE: *Freight data is January as February n/a. SOURCE: Airlines for America.
in respect of long-haul expansion The potential offered by the intra-
– where growth will depend on a Asian market on the demand side, US MAJOR PASSENGER YIELD: A4A AIRFARE REPORT
series of substitution effects as and the attractive operating eco- Route 2015
well as increasing demand from nomics on the supply side, means Unit Mar Apr May Jun Jul Aug Sep
lower-fare segments – the reality is a real opportunity for the develop- Domestic ¢/RPK 10.54 10.47 9.94 9.77 10.47 9.94 9.77
that the main engine for growth ment of the low-cost long-haul change -5.5% -3.5% -6.8% -5.6% -3.5% -6.8% -5.6%
for the low-cost long-haul seg- segment – that over time will North Atlantic¢/RPK 9.61 9.28 8.55 8.81 9.28 8.55 8.81
ment will be Asia, and intra-Asian increase its sector length.
change -6.4% -6.1% -8.5% -8.8% -6.1% -8.5% -8.8%
routes in particular. This is where However, as AirAsia X illus-
there is underlying market expan- trates, for profitable success there ASIA-PACIFIC AIRLINES (AAPA MEMBERS) INTERNATIONAL TRAFFIC
sion and where growth is driven has to be enough traffic willing
more by an increase in the size of and able to pay the fares required. Month Passenger traffic RPK Capacity Load factors Freight FTK
million change change percentchange million change
the “middle class” and a wider There is a very simple descrip-
range of affordable options. tion of a successful strategy, Dec 89,777 7.6% 7.1% 78.6% 0.4 5,593 -0.3%
Even a reasonably high-level whether at a company or industry Jan 91,491 9.9% 7.1% 79.6% 2.1 5,122 -0.7%
analysis of the traffic trends and level – and that is to “copy and Feb 83,855 9.5% 9.9% 78.2% -0.3 4,331 -12.1%
the reasons to travel shows this. improve”. To say that because YEAR-TO-DATE 175,346 9.8% 8.4% 78.9% 1.0 9,453 -6.3%
While politicians in Western something didn’t work in the past SOURCE: Association of Asia Pacific Airlines.
nations extol the need for connec- it is unlikely to work in the future,
tions with emerging markets, without recognising what has LATIN AMERICAN AIRLINES (ALTA MEMBERS): FEBRUARY
many appear to neglect the impor- been happening with both supply Pax traffic RPK Capacity Load factors Freight
tance of causality and the reason and demand, is to bury your head Region million change change percent change millionchange
for travel – and in this respect the in the sand and hope that the chal- Total Intra-LatAm* 15,759 -1.1% 0.9% 78.9% -1.6 117 -8.9%
significant kicker to growth will lenge will go away. In the case of Total Other International 7,150 13.3% 11.4% 80.6% 1.3 252 8.2%
be outbound leisure traffic. Mar- the low-cost long-haul business, TOTAL SYSTEM 22,909 2.9% 3.9% 79.4% -0.7 369 2.1%
ket access and economics means those who downplay or ignore YEAR-TO-DATE 49,738 3.9% 4.0% 81.0% -0.1 743 0.4%
growth in volumes on particular that challenge appear to be doing NOTE: *Domestic and international flights. SOURCE: ALTA
routes and between particular so increasingly at their peril. ■

Capacity growth trend Freight growth trend

20 10
A4A
5
15
Growth rates (%)

Growth rates (%)

AEA
0

10 -5 AAPA

-10 AACO
5
-15
ALTA
0 -20
Jul Aug Sep Oct Nov Dec Jan Feb Jul Aug Sep Oct Nov Dec Jan Feb

flightglobal.com/airlines May 2016 | Airline Business | 45

ANALYSIS MARKET OUTLOOK

Capacity Snapshot
A monthly breakdown of airline capacity across the different
regions using data from Flightglobal’s schedules specialist
April Capacity:
164.0bn ASKs/wk 6.2% vs Apr 2015
Innovata, illustrating the fastest-growing regional markets.

Focus on: North America

Capacity
between the USA
Africa and China has
increased by more
Airports along the US
than 30,000 seats
West Coast have
ica compared with April
experienced big er
m 2015, with over
A

increases in intra-
rth

60% of these being

No

regional capacity.
added by China
Seattle, San Francisco
Eastern and China
and Portland have all
Southern. That
seen almost double-

Asia
includes China
digit seat growth, partly

-Pac
Eastern’s recently
due to extra focus from
launched Shanghai–

ific
Delta Air Lines,
Chicago service.
American Airlines and
Alaksa Airlines.
Middle

Emirates and Qatar

Airways have added
East

almost 90 weekly
flights between North
America and the 41.0bn ASKs/wk
Middle East compared 4.6% YoY
La

with the same period in

tin

2015. Boston now sees

Am

ica
er

an extra daily flight

Weekly capacity ASK
from each of the
Region Millions Change
carriers, Emirates has
introduced service to Intra-region 26,260 4%
Europe 5,723 3%
Orlando, and Qatar now Europe
joins Emirates in Asia-Pacific 4,651 9%
serving Los Angeles. Latin America 2,918 1%
Middle East 1,258 12%
Africa 198 3%

Asia-Pacific Europe Latin America Middle East Africa

Africa Africa Africa Africa Africa

ica ica ica ica ica

er er er er er
m m m m m
A
A

A
rth
rth

rth

rth

rth
No
No

No

No

No
Asia
Asia

Asia

Asia

Asia
-Pac
-Pac

-Pac

-Pac

-Pac
ific
ific

ific

ific

ific
Middle
Middle

Middle

Middle

Middle
East
East

East

East

East
La
La

La

La

La
tin
tin

tin

tin

tin
Am
Am

Am

Am

Am

ica ica ica ica ica

er
er

er

er

er

Europe Europe Europe Europe Europe

55.3bn ASKs/wk 39.5bn ASKs/wk 11.6bn ASKs/wk 11.5bn ASKs/wk 5.1bn ASKs/wk
9.4% YoY 3.6% YoY 2.7% YoY 12.4% YoY 3.0% YoY

NOTES: Data based on one week of schedules data, April 2016 against April 2015.Figures reflect airlines operating nonstop unrestricted scheduled passenger services.

46 | Airline Business | May 2016 flightglobal.com/airlines


BETTER WHERE IT MATTERS
Getting customers to come back is not just about top-end hardware, it’s about
the personal touch, writes Dylan Stuart of brand consultants Lippincott
It has never been more
important for airlines to
achieve brand differen-
tiation. Customer num-
bers continue to grow as competitive
pressures intensify due to innovative
market entrants, deregulation and mas-
sive infrastructure investment, particu-
larly in the Middle East and Asia.
To succeed, airlines need to look at
the customer experience more broadly,
spanning soft product, service behav-
iours, ground services and digital expe-
rience. When it comes to building emo-
tional connections with customers, it is
these elements that have more impact
than flying the “latest and greatest prod-
uct” — an arms race few can sustain.
But today’s airlines need to deal with
a highly complex and distributed array
of brand touchpoints, which makes
determining the moments that matter
difficult. With the lines between full-
service, hybrid and low-cost carriers
blurring, the key for any airline is to
ensure they are investing in the experi-
ence people want, and will pay for.
A brand shouldn’t attempt to excel in
every way if it wants to deliver an expe-
rience that aligns with what customers
value. It’s unachievable and more
importantly, unsustainable.
The key is to create an experience
that is selectively excellent — choosing
where to innovate and excel to offer
value, and where to compromise to
ensure passenger value for money.
This “tacit agreement” with custom-
ers follows the logic of leading brands
from other sectors, such as retail and
tech, as they create clear value proposi-
tions that excel in some areas and sat-
isfy in others – a bargain to which cus-
tomers are willing parties.
The home of Airline The starting point is building from a
Business on the web clear brand idea that helps distinguish
is on the Airlines between experience elements that are
Channel of “generically good” and those that con-
flightglobal.com: nect people to what is authentic and
flightglobal.com/ different about a brand. Cathay Pacific’s
airlines brand idea of “life well travelled” is not
flightglobal.com/airlines
Lippincott
“Air Berlin focuses on
the personal touch
with its famous
chocolate hearts. It
creates an emotional
connection”
DYLAN STUART
Partner, Lippincott
just a line but a guiding idea it seeks to
infuse into all it does. Cathay uses the
idea to design experiences such as
lounges focused on personal comfort
and signature onboard catering.
While being brand-led is important,
having a clear understanding of the cus-
tomer mind-set is key to guiding invest-
ments across the experience. This
requires a detailed understanding of the
elements customers value and areas
where compromising the customer
experience could be advantageous.
Combining this with the right analyt-
ics can demonstrate how investing in
experience innovation doesn’t neces-
sarily incur higher costs. Many “experi-
ence innovators” actually reduce costs
by creating better ways of connecting
with customers and uncovering new
opportunities to promote self-service.
EasyJet, for example, has focused on
developing its digital experience to
eliminate customer hassles and differ-
entiate from the competition. From
searching for flights and providing
price transparency, to offering an intel-
ligent app that auto-populates across
FORUM FEEDBACK
channels, EasyJet optimises the experi-
ence in a way that thoughtfully
enhances the customer experience
while reducing the cost to serve.
It is a fallacy that great experiences
that connect with customers always
cost more. While product upgrades, e.g.
better seats, food or new aircraft, require
significant investment, many don’t.
When Virgin Atlantic set about defin-
ing a differentiated customer experi-
ence, it recognised its people as a great
strength. It focused on providing a
uniquely Virgin brand of hospitality
and service personality that would con-
nect with customers on an emotional
level, rather than relying on the hard
product to provide differentiation.
In contrast, Air Berlin focuses on the
personal touch with its famous choco-
late hearts. The gift, while small, repre-
sents a touchpoint that creates an emo-
tional connection. It only takes a quick
search on social media to see its impact.
Rather than creating a point-in-time
solution, the most effective experience
innovators blend a short-term view of
immediate opportunities with an holis-
tic view that guides the experience in
the long run.
Delta Air Lines used this approach to
get ahead of the competition in solving
customer hassles such as device-charg-
ing at the gate area and inflight wi-fi.
Selective excellence helped Delta
decide where – and where not – to
innovate the customer experience. In
doing so it ensured it came back from
Chapter 11 to become a leader in profit-
ability and customer satisfaction among
US carriers.
Innovating the experience is a
creative process, and selective excel-
lence can provide a
tight, business-focused
brief where the process
can truly thrive. ■
Based in London, Dylan Stuart is a partner at
global creative consultancy Lippincott and
works in its brand strategy group
lippincott.com
May 2016 | Airline Business | 47

CRISIS INTERVENTION
SimpliFlying’s Shashank Nigam explains how hard work and collaboration helped
Brussels Airlines respond to March’s terrorist attacks in the Belgian capital
At 6pm on Good
Friday, a muted sense
of achievement was
evident in a large room
at Brussels Airlines’ headquarters in
Belgium. Here a team of airline staff
had managed to answer all the ques-
tions on the airline’s Facebook feed,
which had ballooned in the aftermath
of the Brussels attacks. The team had
replied to more than 12,000 customer
queries in the past week.
When I first met Claudia Tluk at a
SimpliFlying workshop in Geneva,
she explained she was usually the
only person handling social media at
Brussels Airlines, with a second per-
son occasionally available from the
call centre.
When Tluk first received the news
of the bombs, she thought it was a
hoax. But then she saw the images cir-
culating on Twitter and immediately
rushed to the office to take charge.
Typically, the airline would receive
fewer than 300 queries via social
media. On Tuesday, the day of the at-
tacks, it handled 2,700 requests. That
became more than 4,000 on
Wednesday, and 5,000 on Thursday.
That’s certainly not a volume two
people can handle. She asked col-
leagues in marketing – young, digital-
savvy people – to help. She found a
room for five people and got to work.
Very soon, the volume of incoming
queries on social media swelled to
unprecedented levels. At that time,
Tluk started receiving offers of help
from other departments, since the air-
line had shut down operations and
staff were on standby. She managed to
get a team of more than 45 people
together, from all departments and of
all ages and experience, to help out.
Tluk says: “We had volunteers
from all departments – pilots
answering tweets, the legal team re-
plying on Facebook and cabin crew
engaging in many languages.”
48 | Airline Business | May 2016
SimpliFlying
“Airlines are run by
humans after all.
And humans are
there for one another
in times of need”
SHASHANK NIGAM
Chief executive, SimpliFlying
Since 70% of the queries were on
two or three key issues, like re-
booking and when flights would be
restarting, the team created templates
of answers in English, French and
Dutch. Airline staff then used these
templates on social media to answer
passenger queries promptly. Cabin
crew who spoke multiple languages
further translated these into Italian,
German and Spanish.
Staff of all ages, from multiple
departments, chipped in. Those who
had never used Facebook or Twitter
were learning by diving into the deep
end of the social media stream.
The new team was handling a lot of
queries, and were working from 8am
until midnight daily. They were soon
exhausted. Brussels Airlines needed
help for overnight queries – and this
arrived from the Swiss.
Nadja Griehl, social media manager
at Swiss International Air Lines in
Zurich, offered help. Tluk recalled
Swiss had a team in Suva, Fiji, ena-
bling 24/7 customer service – some-
thing discussed by the airlines as both
are part of Lufthansa Group.
FORUM FEEDBACK
Tluk replied to Griehl’s offer,
exploring the potential of help during
evening hours. The only challenge
was Swiss used another engagement
tool. So Tluk obtained a new license
for the Brussels Airlines tool for
Swiss’s Fiji team and sent over reply
templates. Soon enough, the airlines
were collaborating in replying to
Brussels Airlines’ passenger queries
via social media around the clock.
SCALING UP
Within hours of the attacks, Brussels
Airlines had scaled up its social
media team to handle more than 15
times its usual volume. At one point,
more than 50 people from multiple
departments were involved, while a
24/7 operation was established with
help from Swiss. Ultimately, call cen-
tre volume fell by almost 50%, as the
social media team scaled up to help.
“Most people [in the airline] didn’t
really understand what I did until
that week,” says Tluk. “Now, they
have renewed appreciation of the
power of social media.”
This experience will probably be a
watershed moment for the airline, just
as the Icelandic volcano was for KLM
in 2010, prompting management to
start thinking social-first. While most
airlines can’t expand like KLM has on
social media – it now has a dedicated
team of more than 150 people – it is
critical to have a scale-up plan for cri-
ses, and templates ready.
The offer of help from Swiss and
the collaboration between the airlines
is also a sign of hope. Despite compet-
ing most of the time, airlines are run
by humans after all.
And humans are there The home of Airline
for one another in Business on the web
times of need. ■ is the Airlines
channel of
Shashank Nigam is chief executive of airline
marketing strategy specialist SimpliFlying. His
flightglobal.com:
new book Soar explores what makes the best flightglobal.com/
airline brands tick simplisoar.com Airlines
flightglobal.com/airlines
flightglobal.com/airlines May 2016 I Airline Business I 49
COMMENT
THE CONSOLIDATION GAME
Mergers are making headlines again in the USA following Alaska’s bid to take over
Virgin America. As Richard Branson rues the nation’s ownership rules that prevented
him from blocking the deal, who could be next to walk down the aisle?
J
ust two weeks before the
Alaska Air Group’s bid to
acquire Virgin America
emerged, a renowned US
analyst declared that any
sale involving the San Francisco-
based carrier to another airline would
be illogical.
When “illogic” prevailed and Alas-
ka’s $2.6 billion bid was confirmed on
4 April, investment analysts were gen-
erally in support of the deal, though
some felt Alaska may have been over-
generous. What the deal also confirmed
is that – clearly to the surprise of some
informed observers – the US consolida-
tion music hasn’t stopped yet.
What was also a surprise were the
players involved in the activity. When
Virgin America’s appetite for acquisi-
tion began to emerge, JetBlue was seen
as the must likely suitor.
But until a few weeks ago, people
had been looking in completely the
other direction for the next move in US
consolidation. Following the leader-
ship change at Spirit earlier this year,
there had been rumours that the ultra-
low-cost carrier was headed for a get-
together with Frontier. Allegiant has
also been mentioned in the merger mix.
Despite denials all round, nothing
should surprise us now. And there is
an argument that – despite anti-trust
concerns – the environment is ripe for
more consolidation, particularly in the
low-cost arena where there are several
natural pairings. Here, mergers would
bring the promise of significant cost
savings and a sharper competitiveness
to take on the US big guns.
While unexpected, the proposed
Alaska/Virgin marriage would gener-
ate some transcontinental stability in
the US airline scene. The merger
would create a business that mirrors
New York-based JetBlue, in terms of
fleet size and passenger capacity, on
the US West Coast. Although the two
suitors’ fleets align dreadfully – Virgin
is an all-Airbus operator while Alaska
50 | Airline Business | May 2016
Airbus
Branson overcame
big legislative
hurdles to make his
dream of a US
carrier a reality.
Now, a decade later,
the business will
disappear into
another airline
flies Boeing 737s – their networks
complement each other. And of
course Alaska’s deal prevents that net-
work from falling into the hands of
JetBlue – which would have fleet har-
mony with Virgin.
While Virgin America is seen as the
winner in this deal, not everybody is
happy about the situation. Virgin
founder Sir Richard Branson overcame
significant legislative hurdles to make
his dream of a US domestic carrier a re-
ality. And now, less than a decade after
its launch, Branson faces the prospect
that this now profitable business will
disappear inside another airline.
“I would be lying if I didn’t admit
BUDGET REPORT
Next month’s Airline Business
includes our annual survey of the
world’s low-cost carriers, ranking the
biggest operators by passengers and
revenues, plus analysis of the latest
trends playing out across the global
regions. Read our digital edition at:
flightglobal.com/AirlineBusiness
sadness that our wonderful airline is
merging with another,” says the Brit-
ish entrepreneur. “There was sadly
nothing I could do to stop it.”
Before Virgin America could get off
the ground, Branson had to run the
gauntlet of the US Department of
Transportation, which rejected the ini-
tial ownership structure as it would
have meant it was effectively under his
financial control via a series of US-
based subsidiaries.
Branson regrouped, and a few
months later, the DOT accepted Virgin
America’s revised ownership struc-
ture, under which Branson’s Virgin
Group would hold only 22% of the
shares and little influence on corporate
decision-making.
Branson’s inability to stop the deal
highlights the fallacy of linking citi-
zenship to any sense of patriotic gov-
ernance. Since the late 1930s, the
USA has required that American citi-
zens own at least 75% of the voting
shares of a publicly-traded airline. As
in many other countries, that protec-
tionist rule has survived the airline
industry upheavals caused by deregu-
lation and consolidation.
Although very much a niche player,
Virgin America has established itself
in true Branson fashion, offering a
unique product which makes it a valu-
able alternative to its US-based compe-
tition. Unfortunately, ownership re-
strictions can have unintended
consequences, allowing hedge funds
to hijack governance structure over an
otherwise committed foreign owner. ■
The home of Airline
Business on the web
is on the Airlines
Channel of
flightglobal.com:
flightglobal.com/
airlines
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