This is the age of the alliance. A handful of Middle Eastern carriers apart, most airlines in the world don’t have unlimited budgets and fleets of spare aircraft with which to pursue their route development plans. It’s no longer a matter of putting planes onto a route, and hoping to fill them. Even if money was no object, in many airports and countries slot constraints and traffic right issues often prevent headlong expansion.
Instead, most of the world’s airlines have had to think smarter in order to extend their reach into new markets and territories. This is particularly true of some of the smaller carriers.
Take Royal Brunei, for example, which resumed services to Denpasar and Ho Chi Minh City in July and October 2014 respectively and is now codesharing with Malaysian Airlines on selected key domestic Malaysian cities, as well as having added a codeshare to Phnom Penh. It also sees new market opportunities in Australia, India and North Asia, and plans to add more flights to key capital cities in the latter two areas.
In its route development strategy, Royal Brunei takes into account traffic flow from feeder markets with additional codeshare points, particularly into the Indian subcontinent, helping to feed its own network. It will also use current special pro-rate agreements (SPAs) to expand its network reach. It adds that the upgrade of Brunei International Airport has come at a good time, with the ASEAN Open Skies 2015 on the horizon – which is expected to generate greater competition between airports in the region. The government of Brunei Darussalam has ratified all the main multilateral agreements associated with this, which opens up markets in the ASEAN region.
Another example is Turkish low-cost carrier Pegasus’s Pegasus Asia arm, born out of its partnership with Kyrgyz airline Air Manas. This deal has given Pegasus a useful second hub at Bishkek with which to develop into Central Asia and connect the region with Europe, the Middle East, Russia and the Far East.
The first new route for 2015 is a twice-weekly service between Bishkek and Delhi. And, following the granting of bilateral air transport agreements with Russia, other planned new routes in 2015 include Yekaterinburg and Novosibirsk, respectively twice weekly and once a week.
Pegasus Asia has also submitted applications for permission to further extend its flight network to include routes to Urumqi (China), Dushanbe, Khujand and Tashkent in 2015.
From Bishkek, Pegasus Asia already operates four direct scheduled routes to Osh in Kyrgyzstan, Moscow and Krasnoyarsk in Russia and Delhi in India. There are connections to 18 destinations in Turkey plus 39 other international destinations in Europe and elsewhere, making a total of 57 points in the network.
Lufthansa is another carrier that has found a partner with which to develop a remote hub and so open up a new region, without having to go to the expense and difficulty of laying on new direct flights from its home territory. It will offer year-round flights from Frankfurt to Panama City five days a week, from November 16, 2015. Part of the attraction is the German airline’s partnership with the Panamanian airline Copa, which will allow its passengers to reach a further 50 destinations in Central and South America and the Caribbean. Lufthansa service times will be coordinated with Copa’s connecting flights.
Finding a partner with a ready-made network like this is a much quicker and, arguably, lower risk approach than trying to do it all yourself.
For carriers with a limited home market, a hub approach is essential if there is to be any meaningful expansion. Like many airlines, Air Canada’s strategy is to look beyond the specific country market and consider the connectional possibilities. For instance, the Toronto/São Paulo service also offers some of the quickest travel times from many north-eastern US cities and is also timed for convenient connections over Toronto Pearson to many Asian cities, including Tokyo-Haneda, Hong Kong, Beijing and Shanghai, further expanding Air Canada’s global reach.
Air Canada has meanwhile started a three-days-a-week, year-round 767-300ER service between Toronto Pearson and Rio de Janeiro-Galeão International Airport. It complements the carrier’s daily non-stop service from Toronto to São Paulo and, Air Canada says, is evidence of its international expansion strategy and also reinforces its position as the only non-stop carrier between Canada and South America.
Deep pockets
Of course, there are still a handful of airlines with deep pockets, most of them in the Middle East. While they have been adding to their fleets and launching new services from their home hubs, the troubles of Europe and the rest of the world have also thrown up new opportunities.
The most prominent example is Abu Dhabi’s Etihad and its major cash injection into ailing Italian state carrier Alitalia.
Naturally, the alliance gives Etihad a strong entry into Italy, but more importantly perhaps it helps reinforce the Middle Eastern presence in the wider European market.
As far as Italy itself is concerned, there will be a three-pronged strategy for long-haul routes based on hubs at Milan Malpensa, Milan Linate and Rome Fiumicino, all of which will see an increase in flights. Long-haul services from Venice, Bologna and Catania on the island of Sicily to Etihad’s main Abu Dhabi hub will also be stepped up to daily.
New routes available from Rome now include Berlin, Dusseldorf, San Francisco, Mexico City, Santiago (Chile), Beijing and Seoul and there will also be an increase in services to New York, Chicago, Rio de Janeiro and Abu Dhabi.
An extra 13 weekly flights from Milan Malpensa will include daily routes to Abu Dhabi, four flights a week to Shanghai and increased flights to Tokyo.
But by strengthening links via Italy into its home hub, Etihad can offer a whole host of onward connections available to other destinations in the Middle East, Africa, the Indian subcontinent, Southeast Asia, China and Australia.
The two carriers have also taken the opportunity to adjust their schedules to improve connections with each other and with their partners. As well as links with the Skyteam alliance, and in particular Air France–KLM and Delta, there are new partnerships with airberlin and NIKI and plans to work more closely with Air Serbia and Etihad Regional.
Both airlines will also increasingly operate a common fleet, which could include Etihad acquiring additional wide-body aircraft on behalf of Alitalia or Alitalia receiving aircraft from Etihad’s existing fleet order book. Alitalia, meanwhile, is relocating 14 Airbus A320s to airberlin.
Etihad Aviation Group president and chief executive officer and Alitalia vice chairman James Hogan said that, in an extremely tough southern European aviation market, “rapid, decisive change” was needed. “We’ve invested in the new Alitalia because we believe it can flourish again. The coming months and next few years will not be easy, but if everyone pulls together as one team, Alitalia can grow again.”
Etihad expects Alitalia to be profitable again by 2017.
In addition, Etihad has announced an increase in its Tehran service from three times weekly to daily. The new schedule will establish important connections to key markets in the US, including Los Angeles, which is home to the world’s largest Iranian population outside the country.
Qatar Airways, meanwhile, is using its codeshare with Bangkok Airways to reach 10 more destinations in Asia via Bangkok, together with Koh Samui to Singapore, Phuket to Kuala Lumpur and Phuket to Chiang Mai. The Arabian carrier already has quite a network of codeshares from Bangkok in Asia, including Chiang Mai, Phuket, Mandalay, Yangon and Phnom Penh.
European airlines don’t have the luxury of being able to take a major stake in a rival carrier and with the Eurozone financial woes set to continue most have had to take a very cautious approach.
The Air France–KLM Group has inched up its capacity for the 2014-15 winter season which runs from 26 October 2014 to 28 March 2015. Total capacity is scheduled to increase by 0.7%, but with an increase of only 0.1% for passenger operations (Air France, KLM and HOP!) but 13.3% for the Transavia low-cost leisure operation, with most of the growth concentrated on the French market (+56%).
Taking each region in turn, there are capacity gains for North America (+2.4%), Central and South America (+1.1%) and Asia (+0.7%).
In Africa, capacity is slightly down by -0.8% and the biggest fall, predictably perhaps, is in the Middle East (-5.2%).
Route highlights include KLM’s increase in capacity to Atlanta, from seven to 12 weekly flights, in response to market demand and to facilitate connections with partner Delta Air Lines. Services to Panama City will go up from three to five weekly frequencies by B777-200; again, the attraction is that the airport is a main hub for Copa with which, as in the case of Lufthansa, Air France–KLM has formed an alliance.
Like many carriers, Air France is showing increased willingness to flex services up and down, according to demand. It is increasing capacity to take advantage of seasonal travel peaks, for instance offering one flight per day to Bangkok (Thailand) between mid-December and mid-March, and adding a fourth frequency to Kuala Lumpur (Malaysia). Wuhan, China gains an extra weekly frequency while Guangzhou will be served by four weekly flights.
And while Africa capacity is down overall, services have been increased on the most buoyant routes such as Abidjan (Ivory Coast), with the entry into service of the A380, and Pointe Noire (Congo) with a sixth weekly frequency.
In East Africa, KLM is reorganising its network to adapt it to the market with increased capacity to Dar es Salaam (Tanzania) and Entebbe (Uganda) now served direct three times a week and on other days via Kilimanjaro (Tanzania) and Kigali (Rwanda). KLM has suspended direct service to Harare (Zimbabwe) and Lusaka (Zambia) but these cities are still served by partner Kenya Airways via Nairobi.
Air France, like most carriers, needs to keep costs under control, especially on its medium-haul network. One way it is doing this is to maximise connecting opportunities and, again, adjusting capacity according to winter or summer demand. So, for example one daily frequency is being suspended to Munich, Bucharest, Moscow, Rome and Bremen.
Domestic flights from Paris-Orly to Bordeaux and to Toulouse have been trimmed back, as have several flights from the provincial airports of Toulouse and Marseille to Europe and North Africa.
In contrast, the low-cost Transavia arm will operate nine new routes in the winter season from Paris-Orly to Istanbul, Tel Aviv, Budapest, Madrid, Malaga, Barcelona, Athens, Pisa and Prague and there is also a new service from Lyon to Tel Aviv.
Geopolitical factors
Politics and economics also continue to shape the world’s air networks. Occasionally, routes are curtailed or altered as a result of direct government intervention – for instance, Etihad suspended all flights to Baghdad until further notice in late January to comply with the UAE General Civil Aviation Authority ban on operation to and from Baghdad on security grounds. Emirates also suspended its services to Baghdad due to “operational” reasons, along with those to Peshawar in Pakistan. Flights to Sana’a in Yemen have been halted due to increased security concerns.
More usually, though, political troubles lead to a fall-off in demand and it is this that prompts the carriers to cut back or curtail services. Reflecting the troubles in Russia and its neighbours, easyJet initially cut its London/Moscow services from 13 to 11 a week from 1 February, eventually decreasing to once daily from 29 March.
But other carriers managed to increase their services to this part of the world. Austrian Airlines actually added a new destination in Ukraine, flying to Odessa from 30 March, although the explanation is that Austrian Airlines still has a codeshare on flights from and to Odessa with Ukraine International, which is terminating its service on this route at the end of the winter flight schedule in 2015.
Despite the grim headlines, Ukraine remains an important market for Austrian, insists chief commercial officer Andreas Otto. “Ukraine continues to be one of the most important markets for Austrian Airlines in Eastern Europe, not to mention the fact that most of these passengers transfer to other flights in our network to destinations in Western Europe, the Middle East or on North Atlantic routes. Although the crisis has led to weakened demand over the past year, we continue to see considerable potential in this market.”
This isn’t the carrier’s only (perhaps apparently) unlikely destination. In response to growing demand, it expanded its flights to the Moldavian capital, Chisinau, from seven to 10 flights per week in November 2014.
Austrian Airlines’ route network is particularly dense in Central and Eastern Europe, with 39 destinations. The carrier sees its hub at Vienna International Airport as a gateway between East and West.
And another place it is willing to go where many others still fear to tread is Athens. From 20 April it will offer four additional night flights per week from Vienna, bringing the total to 11 services a week on this route.
Another new service to Athens comes from CSA Czech Airlines, one of a clutch of five additional European destinations for its 2015 summer schedule, in addition to another five which were announced last autumn. The others are Bordeaux, Porto, Stavanger and Liverpool – the latter marking the first time the airline has served the UK since withdrawing five years ago. Czech Airlines has already announced other new routes in the Autumn including Bilbao, Billund, Bologna, Cork and Oslo.
Meanwhile Greek carriers, frustrated by the lack of opportunity at home, are looking beyond their home territory for new opportunities. Start-up carrier SkyGreece Airlines is starting a twice-weekly service between Budapest and Toronto from 21 May. This will complement Air Transat’s weekly service between the two cities set to begin later in the summer.
Room to grow
There is still plenty of growth potential in Asia and Africa and it is these regions of the world that have seen some of the most active route development lately. Singapore Airlines has a network planning team that looks after its new routes, with decisions made based on market assessment with a strategic and long-term view and affected by factors such as air traffic, routing rights and airport capacity.
For example, Asia is a fast-growing market and this is reflected in the changes to its network in recent years. The carrier increased the frequency of flights to Tokyo Haneda to 21 times a week in March 2014, compared with the previous 14 times a week. Its wholly-owned subsidiary SilkAir also launched daily services to Denpasar, Bali’s capital, in December 2014 and will launch services to Cairns in Australia in May 2015.
But it also suspended flights to Riyadh and Cairo in September 2014 as a result of the sustained weak performance of both routes.
Singapore is proving another magnet for foreign carriers. Qatar Airways announced in early February that it would launch an additional daily flight there, in addition to its existing twice-daily service. All services will be operated by its new A350 XWB aircraft, now coming into service with the Middle Eastern carrier.
As might be expected, Asia/Africa routes, linking two of the more dynamic areas of the world, have seen some activity. China Southern is to launch a thrice-weekly service between Guangzhou and Nairobi from 5 August using A330-200 aircraft. Air China will meanwhile take over the Beijing – Johannesburg route in June from South African Airways after a two-and-a-half-month suspension. It will operate three times weekly using a Boeing 777-300. Ethiopian Airlines, however, has shelved its planned service resumption to Singapore, due on 2 April. It had planned to operate three times a week to Addis Ababa with a Boeing 787-8.
Qatar Airways is also planning a major expansion of its South African services with the launch of flights to Durban in December and an increase in frequencies to Johannesburg. There will be four new weekly flights to Durban via Johannesburg bringing the total frequency to Johannesburg up from 10 weekly flights to double-daily. From 1 October, Qatar Airways will also up its services to Cape Town from five times a week to daily. All three routes will be operated with a Boeing 787 Dreamliner.
It has also announced a clutch of new services to Pakistan – starting in July-August to fly four times weekly to Sialkot, where it already operates dedicated freighter services three times a week. This will be its first new passenger route to Pakistan since 2004. From 1 August 2015, it will offer three flights a week to Multan.
In more mature markets, like North America, it is more a matter of adjustment and infilling than major development, though the occasionally new carrier can liven things up a bit. Branson AirExpress has introduced a clutch of new routes including services to Cincinnati, New Orleans, Orlando Sanford and Cancun served three times a week each, with an Orange Air MD83 aircraft operating on an Orlando Sanford – Cancun – New Orleans – Branson – Cincinnati and vice-versa circuit.
In the US, United Airlines says it continues to maintain and grow its domestic and global network. Recent initiatives include restructuring its Pacific entity to favour long-haul service, upgrading the short-haul network, and rebanking several hubs. United has a suite of industry-standard network planning and aircraft scheduling tools that are tailored to its specific needs.
Recently launched or announced year-round long-haul routes include San Francisco-Taiwan, San Francisco-Chengdu, Los Angeles-Melbourne, Houston-Santiago (Chile) – plus seasonal services connecting Newark-Venice, Newark-Newcastle, Chicago-Rome and Chicago-Dublin.
Nowadays, most airlines employ sophisticated market analysis techniques to try and gauge demand for new routes before launch. There is, though, still scope for a more direct approach. Developing services from small regional airports can be a hit-and-miss affair but pharmaceutical firm AstraZeneca has provided seat guarantees to get a new scheduled air link between Cambridge International Airport in the UK and Sweden’s Gothenburg Landvetter off the ground, operated by Scandinavian regional carrier Sun-Air. Sun-Air will operate the route from the end of March this year.
