Airline growth and matching Available seat kilometres (ASKs) to demand is the real trick behind running an airline operation aside from financing and so it is interesting to note who did what over the past 12 months. The airline that grew the most in percentage terms over the past year was Scoot with 160.9% ASK growth followed by Zest Airways on 80.8% growth and Juneyao Airlines, as each rolled out new services on the back of aircraft deliveries. Although in terms of sheer scale, ie seats added, the largest growth during 2013 was seen not in the Middle East but in fact by United Airlines which added a huge 25.563m ASKs to their network with the only airline coming close to this figure being the obvious Emirates with 25.501m additional ASKs in the network. During 2013AirTran (-18.3%) and Frontier Airlines (-16.9%) saw the largest cutbacks in terms of ASKs, both for sound business reasons but the former due to transfer of flights to Southwest operations and fleet harmonisation. But by far the largest fleet cuts in 2013 were seen at Iberia which saw 17.5% of ASKs cut from its network, some 11.857m seat kilometres lost as IAG tries to give the Spanish flag carrier a future.
It is easy to get lost in the 2013 ASK figures but also reasonably easy to point out worrying trends. For example some airlines that have balance sheets shouting cut back are still playing the market share war games. SpiceJet added a huge 22.9% of available seat kilometres to its network while the red ink was flowing, that is over 3m ASKs. This is before we consider the 50% discount war going on at the moment which SpiceJet instigated last week (as we reported here). SpiceJet figures will be most interesting indeed for this period.
The pick of the bunch from 2013 is all AirAsia Group airlines, which show good growth and other than AirAsia X the group airlines are doing very well indeed. Delta Air Lines and American Airlines have both more or less hit the ASK vs demand nail on the head and should be commended. Aeroflot is seeing strong ASK growth that is in line with demand. But the airlines that everyone is asking questions about are Lion Airlines and Norwegian Air Shuttle (NAS), both airlines saw rapid growth in 2013 as aircraft were delivered but both are not yet half way through their fleet expansion plans and thus it is hard to see how demand will keep pace with ASK growth.
In the here and now there is a low cost battle going on with NAS having increased ASKs by 46.2% for January 2014 over January 2013 with Germanwings having increased ASKs by 58.8% for January 2014 on the same month last year. Perhaps worryingly AirAsia X ASK growth continues to be very high indeed for January 2014 at 59.6% above the same period last year but as we already know, passenger demand seems not to be keeping pace, this is another airline that could do with slowing growth down right now. Also another airline to keep a watchful eye on is SunExpress, this airline is susceptible to political and economic upheaval going on in Egypt at this time and their 86.2% increase in available seat kilometres for this month on last year points to a leap in forward bookings, so there is no grey area here – either SunExpress have got it all wrong or they are seeing very strong demand for this current period. This brief summery would not be complete without looking at where the traffic is coming from. Available seats and ASK data show clearly that Emirates, Etihad and Qatar remain the global drivers of growth with year on year traffic growth for January showing ASKs from Asia to the Middle East up the most at 19.7% with Middle East to Europe next on 13.2% growth and Europe to Middle East after that on 12.9% growth as one would expect not all traffic is returning back to the Middle East and much of the Asia traffic is transiting direct out of the Middle East to global destinations. The Emirates and Etihad models are working well.
Intra-Asian airline traffic (not passenger traffic) overtook North American traffic by some margin a good while back but the gap is widening as aircraft are delivered and is now 3m additional seats clear of North America. All the while direct traffic between both North America and Asia and Europe and Asia remains all but flat. So does this indicate that European and US airlines can rapidly grow direct flights to Asia or does it mean that the Middle East airlines have grown capacity to a point where load factors are falling? The key will be to keep a close eye on Emirates and Etihad load factors for Asia/Middle East flights as if these turn out to be high then it indicates that Asian populations do indeed need more direct service offerings to the US and EU. The question then remains: Who is going to capture this business, the likes of PAL, MAS, AirAsia X even, or United, Delta, American, Air France , IAG and Lufthansa? The battle is an interesting one indeed.
Make sure you come to Airline Economics Growth Frontiers Hong Kong at the JW Marriott, Pacific Place, Hong Kong on the 3rd, 4th and 5th November 2014. Go to www.ae-hongkong.com for more information.