(The original post was published on February 19, 2015 with update on April 1, 2015 for Delta Air Lines (DL))
Today’s trending aviation news comes courtesy of Thai Airways, Virgin America, Emirates, Delta Air Lines.
Trending Aviation News
Virgin America – Full Year Results
Virgin America (VX) reported positive results in all key measures for fiscal year 2014. Refer to the following infographic for their key financial and operational results:
Net profit of US$60.1 million is a 600% increase from FY 2013. Load factor also increased to above 82%. The good financial and operating results brought a 5% increase in its stock price on NASDAQ trading on February 18, 2015. The stock is up over 20% since IPO (refer to Experience The Skies coverage on the IPO – link).
In its analyst call, VX announced that there are no plans to refresh its cabins or create new concepts to compete with domestic airlines offering lie-flat seats for transcontinental services (San Francisco (SFO) and Los Angeles (LAX) to New York (JFK)).
This may be a smart move has installing lie flat seats on specific Airbus A319/A320s would create higher maintenance costs, customer inconvenience when an irregular operation occurs and not consistent with its business model of offering the same product across all routes.
To compete more effectively, VX should continue to improve on its onboard experience, food offerings and consider introducing more promotions (e.g. extra miles) for routes where rivals have a better hard product (e.g. lie-flat seats).
Thai Airways – Thai Airways Trims Flights to Europe
Thai Airways (TG) announced today that it will be reducing its double daily from Bangkok (BKK) to London (LHR) to a single daily starting in July 2015. The airline will use an Airbus A380 to replace the passenger capacity from 2 Boeing 747s. The following is the infographic on the reduction:
There are currently 4 non-stop flights from BKK to LHR (operated by TG, British Airways (BA) and EVA Airways (BR) which combine to more than 19,000 seats a week between the two cities. After the capacity reduction, total seat counts would be down 18%. High margin first class capacity would be impacted the most as it will be down 24% in total. The reduction indicates that TG is not enjoying load factors that would sustain a double daily service (this may be the case especially on first and business class).
Unfortunately, this capacity reduction may not necessary have the effect of increasing ticket prices as there are many more than 10 airlines offering 1 stop connection from LHR to BKK. Of these airlines, the biggest problem for TG would be Emirates (EK) and Etihad Airways (EY) which have multiple flights to BKK from their Middle East bases. More daily options from them to LHR and BKK separately would balance out the additional time a one-stop connection may have as long as their prices are lower.
It is unlikely that BA or BR will add more capacity as they are already using a Boeing 777-300ER on this route.
The next step is what will Thai Airways do with the pair of London slots. Would it sell them like SAS did? Refer to Experience The Skies post for more details about the sale.
In another market shaking move, Emirates will be flying the double decker Airbus A380 from New York (JFK) to Milan (MXP) after the Middle East airline successfully overturned an earlier judgment barring itself from flying this route (refer to the news story from Reuter). It will replace the Boeing 777-300ER currently being used for this route. This aircraft substitution will increase Emirates’ weekly passenger capacity on this route by 44%.
There are three other airlines with non-stop service between JFK to MXP. They are American Airlines (AA), Delta Air Lines (DL) and Alitalia (AZ). From the infographic above, the overall effect to this aircraft change may seem less significant at 14% in weekly total passenger capacity. At closer inspection, the actual impact is a lot more damaging as most of increased capacity is derived from first and business class.
Emirates is adding 75% and 27% in this two classes which will majorly impact the yield of for these seats across all the airlines. This does not bode well for competitors relying on premium yields to sustain the route’s operations.
AA is the most affected as it is using an outdated aircraft and have the same schedule as DL. Its 6pm departure time from JFK may be too early for business travellers looking to finish more work in the city. With an already reduced schedule on this route, AA should monitor yields and decide whether this route is profitable enough to operate year round. It can transfer passengers to route through Miami (MIA) if that’s this route is cancelled.
Both DL and AZ are in the SkyTeam alliance and codeshare their flights respective flights. This provides more insulation with revenue sharing. Their business class product is also on-par with what Emirates is offering on the Airbus A380.
Economy class price is currently hovered at around US$650 roundtrip with advance purchase (this was down to US$500 earlier). Business class is selling at around US$5,400 for travel in March 2015 but dropped to USD3,500 for travel in May/June 2015. Experience The Skies will monitor pricing to see if the aircraft change will permanently suppress business class prices.
Delta Air Lines
Delta Air Lines (DL) announced through various social media outlets that it will guarantee all checked baggages to arrive within 20 minutes or less in domestic airports from now to March 31, 2015. Passengers reporting their late baggage within 3 days of their flight’s arrival will receive 2,500 SkyMiles. (Refer to this link to apply for extra miles)
Miscellaneous Exceptions – “Miscellaneous: Offer only valid on paid tickets for published fares; not valid for those traveling on employee pass privileges or employees of other airlines traveling on industry discounted tickets. Delta Air Lines reserves the right to suspend this baggage service guarantee at any time and without prior notice in the event of an airport baggage system malfunction, severe weather, or other conditions out of Delta’s control that would prevent timely baggage delivery. Delta reserves the right to deny fraudulent, suspicious or ineligible claims. All SkyMiles program rules apply to SkyMiles program membership, miles, offers, mile accrual, mile redemption, and travel benefits. To review the rules, please visit Membership Guide & Program Rules. Other restrictions may apply. Offers and benefits are subject to change without notice.”
This is a very similar promotion as the one Alaska Airlines (AS) is offering to its passengers on all domestic flights. Passengers will be offered a $25 Discount Code for use on a future Alaska Airlines flight or 2,500 Alaska Airlines Mileage Plan Bonus Miles for baggage delays over 20 minutes if reported within 2 hours of the flight’s arrival.
It is a smart move for Delta Air Lines to try this promotion and possibly expand the program if it is successful. However, note that there are many restrictions included. Passengers can only claim for extra miles if the baggage delay was not weather related.
Update – April 1, 2015
Delta Air Lines has extended the baggage delivery guarantee permanently for all passengers travelling within the U.S. 50 and Puerto Rico, marketed and operated by Delta Air Lines and Delta Connection® carriers. This is great news for passengers and also set up a good performance metric for Delta employees.