Skift Airline Weekly Lounge

Hawaiian Airlines CEO Peter Ingram isn't too worried about increasing competition from U.S. and Japanese carriers on routes to Hawaii. During an an interview with Skift Airline Weekly Editor Madhu Unnikrishnan in Las Vegas on Aug. 26, Ingram said  Hawaiian has been competing fiercely on those routes for 90 years, so this is nothing new, Ingram said. What is new, at least since Aloha and Go went bankrupt, is competition on inter-island routes. Southwest recently began flying limited routes between the Hawaiian islands, but Hawaiian's deep routes in the community, its long history serving what Ingram calls "the neighbor islands," and the frequency of its routes will stand it in good stead. Ingram also admitted that he may be among the 717's last defenders, and argues that the airframe's engineering is perfectly suited to Hawaiian's needs. To hear more, listen to this week's episode of the Skift Airline Weekly Lounge.

AirBaltic was an early adopter of the Airbus A220, back when it was the Bombardier CSeries. The aircraft is perfectly designed for the Baltic carrier's missions, and CEO Martin Gauss is enthusiastic about the model. He took a few minutes to talk to Skift Airline Weekly editor Madhu Unnikrishnan and Skift Senior Aviation Business Editor Brian Sumers at the IATA Annual General Meeting in Seoul in June. Gauss said for now AirBaltic's focus is on its region of Latvia and neighboring countries, and the airline has no plans to establish bases in Western Europe. Gauss, however, pointed to the example of Finnair, which, like AirBaltic, has a small home population but outsize international traffic. This is the kind of operation he thinks AirBaltic can grow into. Listen for the full interview with AirBaltic CEO Martin Gauss:

Just before stepping down as CEO of British regional carrier Flybe, Christine Ourmieres-Widener took a minute to talk to Skift Airline Weekly at the IATA Annual General Meeting in Seoul. Ourmieres-Widener’s two years at the helm of Flybe were tumultuous, she acknowledged, and culminated with the carrier’s acquisition by Virgin Atlantic. But she noted that she focused on saving the airline and getting it back on its feet, even if that meant selling it. And she pointed out that her first priority was saving jobs, and of that Ourmieres-Widener said she’s very proud. With Ourmieres-Widener’s departure, the already small circle of women airline CEOs gets even smaller. She said the industry has to do better to attract and mentor young women as they rise through the ranks. She also said efforts have to begin earlier — at school, to encourage girls to study STEM (science, technology, engineering, and math) subjects. Listen for the full interview with Skift Airline Weekly Editor Madhu Unnikrishnan

Singapore Airlines CEO Goh Choon Phong said he envies American Airlines CEO Doug Parker for the scale and potential for profitability that U.S. carriers have from a large domestic market. Parker, the chief of the U.S.’s largest carrier, once famously said the era of airlines reporting losses is over. In its most recent quarter, Singapore Airlines reported profit margins lower than analysts expected and lower than the company had previously reported. Much of this is explained by the region in which Singapore operates. Unlike Parker, Goh said his company has no domestic market to provide a valuable feed of passengers to its long-haul routes. Speaking at the inaugural Skift Forum Asia in Singapore in May, Goh said he is confident that the company is headed in the right direction. The group is taking steps to keep so-called CASK (costs per airline seat kilometer) down by, among other measures, hedging against fuel price volatility and managing fleet leases. Listen for the full interview with Skift Airline W

  United Airlines President Scott Kirby issued a warning to potential new-entrant low-cost-carriers, including JetBlue founder David Neeleman’s Moxie: United will match your fares. Kirby, speaking on stage at Skift Forum Asia in Singapore in June, said he’s heard of about 50 airlines over the years that were supposed to be created but Virgin America, founded in 2004, was the last startup airline in the United States that actually became a reality. The low-cost airline model is predicated on the competition not matching prices, Kirby said, and unlike the situation over the last 30 years, United now has the capabilities with segmentation, including basic economy, to go tit-for-tat with the new entrants. Listen for the full interview with Skift Editor-in-Chief Tom Lowry. 

The latest edition of the Skift Airline Weekly Lounge contains an exclusive interview with Aireen Omar, AirAsia’s deputy CEO. There was no backtracking from AirAsia in its plan to branch out into selling other airlines on its platform, financial services, and more experiences. Asked at Skift Forum Asia in Singapore in May 2019 if becoming the Amazon of travel is overly ambitious, Aireen Omar, AirAsia’s deputy CEO, said it’s “ambitious, but I think it’s very doable.” Another AirAsia executive recently made the declaration that the airline could become the “Amazon of travel.” In this discussion, interviewer and Skift Airline Weekly Editor Madhu Unnikrishnan gets to the core of the boast.

The Skift Airline Weekly Lounge returns with an exclusive interview with British Airways CEO Alex Cruz. Since taking over as CEO and chairman of British Airways in 2016, Cruz has endured his fair share of criticism over some of the changes he made to the airline, particularly with regards to food on short-haul flights. But Cruz, speaking at Skift Forum Europe in London on April 30, 2019, said the changes were necessary in turning the carrier into a more customer-focused airline as well as one that is much more financially stable. “When we started this new phase of British Airways, there were many decisions to be taken with regards to the direction of the company, and some of those decisions that were made early on were indeed probably less welcome than others,” Cruz said.  

With a new year underway, we’re thinking about what will happen in 2019—always a dicey proposition. In this episode, we consider the prospects of airlines around the world. Some, like Aeroflot and Turkish Airlines, are facing huge opportunities. Others, like Jet Airways and South African Airlines, are facing grave challenges. Will the International Airlines Group make another offer for Norwegian? Will Alitalia find a partner? Will Lion Air cancel plane orders? Will Emirates and Etihad merge? In short, what will 2019 bring? In this episode, we reluctantly offer some predictions.

After pummeling each other for years, Icelandair and Wow Air agreed to a truce in the form of a merger. But the merger fell through. Now Wow Air may be finding comfort with serial airline investor Indigo Partners. What will that mean for both airlines? Aeroflot apparently finds comfort in being big. In fact, the Russian airline is looking to nearly double its fleet size in just five years. Meanwhile, Mexico’s airline industry nervously watches as it appears more and more likely that Mexico City’s one-third-built airport won’t be seen to fruition. What did Aegean do this summer? For one thing, it posted a Ryanair-like profit margin. Lastly, U.S. airlines are getting bullish about the fourth quarter.

More and more people are traveling by air in Mexico, but Mexico’s airlines continue to struggle. All four of its main carriers had a disappointing 3rd quarter, which is historically peak season. VivaAerobus at least made a little money. Aeroméxico and Volaris barely broke even. And, Interjet’s numbers were simply alarming. Fortunately, oil prices have dropped so much that the outlook for airlines everywhere has changed. In the U.K., easyJet posted earnings that were strong but not nearly as good as LCC rivals Ryanair and Wizz Air. Is that a problem? LATAM is navigating economic headwinds well. AirAsia X seems to be proving that “low-cost longhaul” remains a difficult business model. Lastly, Flybe’s ongoing struggles raise this question for some: Is an acquisition in order?

Of Europe’s “Big Three” airline groups, International Airlines Group (IAG) continues to significantly outperform the other two, namely Air France/KLM and Lufthansa Group. A big part of IAG’s success is simply British Airways’ coveted slot portfolio at Heathrow. But it didn’t hurt that pretty much everything else is working too. Still, Lufthansa navigated a difficult quarter operationally to deliver a respectable 14% operating profit margin. Air France/KLM, meanwhile, rode the seasonal strengths of its Transavia unit to a profit margin that outpaced Lufthansa’s by a fraction of a percent. Ryanair saw its Q3 profit margin drop by 7 points. But no matter—it still did better than every other European carrier reporting so far. Icelandair bought competitor WOW Air. Lastly, with Turkish Airlines looking fully mended, will it return to its fast-growth ways?

American Airlines truly set itself apart from its peers in the third quarter—and not in a good way. AA posted a dismal 7.5% operating profit margin, nearly half of Delta’s 13.9% margin. But, with good reason, management remains optimistic. United, on the other hand, has plenty to smile about right now as it offset 100% of its rising fuel costs with rising revenues. Southwest didn’t have trouble with fuel thanks to hedges, but non-fuel costs posed a headwind. Hawaiian Airlines posted the best Q3 margin of the major U.S. carriers. But Spirit might be the biggest winner of all, vaulting itself from the middle of the pack last year to nearly the front. JetBlue and Allegiant again stumbled. And although Alaska didn’t have a great result, there are plenty of reasons it should soon rejoin the leading carriers in the U.S.

Delta is doing a remarkable job keeping pace with rapidly rising costs. Sure, the airline’s third-quarter fuel bill rose 35% year over year. But rising revenues offset enough of those costs that Delta’s operating profit margin fell only two points. Meanwhile, what’s behind American’s recent troubles? Unfortunately, when American reports later in the month, it’s expected to be a much less happy affair. Alitalia looks like it will be restructured. Is this new direction the right direction? Canada’s WestJet announced its first Dreamliner routes, which were a little surprising—at least until you look at Air Canada’s network. Lastly, Russia’s Pobeda is proving to be an atypical success.

Sun Country is largely missing out on the golden age that U.S. carriers have been basking in since 2015. In the past 12 months (ending with the second quarter, the most recent to be reported) all the U.S. carriers posted operating profit margins ranging from a healthy 9% to an excellent 16%—except for Sun Country, which delivered a distant 4% margin. Will Sun shine again? One airline enjoying the U.S. party is Frontier, which had a solid second quarter despite a 19% increase in operating costs. Talks of an Emirates-Etihad merger have heated up, according to a Bloomberg report. A merger might save Etihad, but who will save these other troubled airlines? South African Airways, Fastjet and Jet Airways are all facing dire straits. Lastly, JetBlue is adding a basic economy fare class. Will it be the last U.S. airline to do so?

Qantas continues to romp. In the first half of 2018, the flying kangaroo posted a 9% profit margin—one point better than in the same period last year. And with that, Qantas is working on its fourth consecutive calendar year with double-digit margins. Despite more exposure to rising fuel prices, Air New Zealand still mostly kept pace. Virgin Australia, meanwhile, continues to miss out on Australasia’s booming airline sector. Scandinavia’s SAS appears to be having a great summer, which of course it will need if it’s going to have merely a good year. In India, Jet Airways is facing severe pressure. Qatar Airways is enduring a blockade that’s now more than a year old. Lastly, we explore this question: Have airline loyalty programs peaked?

Revenues and margins improved for Cathay Pacific in the first half of 2018, and the second half is usually better for Cathay. Still, will it be enough to lift the Hong Kong carrier out of its malaise? Fuel costs dented Singapore Airlines’ Q2 results, which were similarly mediocre to Cathay’s. VietJet’s soaring growth is helping it control unit costs and deliver solid profits. Also delivering solid profits was Cebu Pacific, however, those profits came amid a huge margin decline. Turkish Airlines is now existing amid a currency crisis, but it’s weathering it surprisingly well. Ethiopian Airlines is making money and has plans to make more. Icelandair is feeling the chill of too much capacity in Reykjavik. And JetBlue is charting new territory in charging for bags.

Thanks to rising costs, it’s no surprise profits have declined at Air Canada and WestJet. But rising costs alone don’t explain how these Canadian carriers continue to consistently underperform their U.S. peers by a noticeable margin. Meanwhile in Europe, carriers like Ryanair, Aer Lingus, British Airways, Lufthansa, Swiss and others are putting up numbers very much like their U.S. counterparts. Unfortunately, Air France is not one of those carriers, as that airline nearly lost money in the usually healthy second quarter, and that reduced the Air France/KLM group result to a scant 5% operating profit margin. Meanwhile, the Lufthansa group is making great strides, posting an 11% second-quarter margin, which is quite comparable to IAG’s 13.5%.

So far all U.S. carriers have reported shrinking year-over-year profits in the second quarter. But nobody’s margin decline was worse than that of JetBlue, which posted a 9% operating margin, down from 19% the year before. Allegiant had the best margin of the bunch, narrowly besting Southwest and Delta, both of which had shining quarters. American’s quarter was marred by its mishandling of basic economy, plus it wasn’t helped by its domestic-heavy network. Alaska has been lacking the right product to take advantage of booming premium demand in the transcon market. Spirit, while still quite profitable, is learning to live in a world where big carriers now pay attention to it. Hawaiian couldn’t have been happy with its nine-point margin decline. Speaking of happy—that might describe United, which showed surprising resilience in Q2.

Rising costs aren’t keeping Delta down. Delta overcame a 33% year-over-year increase in fuel costs to produce more than $1.2b in net profits (excluding special items) and a handsome 16% quarterly operating margin. In fact, despite the increased costs, Delta almost matched last year’s 18% Q2 margin. And the airline thinks it can return to improving margins by year’s end. Meanwhile, it’s hard to imagine Norwegian’s results being more different. Norwegian chalked up a negative 3% operating profit margin, a ghastly result for the usually strong second quarter. JetBlue ordered CS300s—except now we’re calling them A220-300s. That deal surely made Airbus and its new partner Bombardier happy. In turn, Boeing is partnering with Embraer. What does this shakeup to the aircraft manufacturer space mean?

Frontier Airlines has had one of the most topsy-turvy histories of any airline, and its first-quarter earnings report was no exception. Sporting a wild animal on each tail, the airline has been soaring in recent years. In 2017, Frontier had the seventh best operating profit margin in the world. But something happened in Q1 2018, as its margin was cut in half. Meanwhile, Air France/KLM searches for a CEO. Also, how important is it that United Airlines—by a wide margin—gets more revenue from Asia than Delta and American? Norwegian continues to lose money and remains, for the moment, without a buyer to bail it out. But at least Norwegian isn’t Fastjet, which notched a negative 55% operating profit margin in 2017.