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Welcome to our Monday Briefing for the week beginning 13 May 2019.
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There’s Trouble Ahead
It’s been more than ten years since the aviation industry experienced a major crisis, which was of course the collapse of Lehman Brothers and its impact on the global financial system.
Since then, in Europe there’s been a clear delineation between the three major airline groups (Air France-KLM, IAG, Lufthansa), low cost carriers (easyJet, Ryanair) and smaller airlines, many of whom such as Air Berlin and Monarch, have gone out of business.
The larger airlines and groups have certainly had individual challenges to deal with, but they have been aided by buoyant demand and the absence of a single major economic or geopolitical shock.
There are signs of trouble ahead. Last week, International Airlines Group reported a fall in profits for the first quarter of 2019. Whilst IAG can claim to be the only big three European group to be profitable in the quarter, that profit came only from BA. Other IAG airlines such as Vueling reported very sharp falls in profit. Demand in mainland Europe appears to be softening and there is industry-wide over-capacity. There are also tensions in the Middle East and the prospect of a growing trade war between China and the US bubbling under.
Not even Emirates is immune from challenges. It reported a sharp fall in annual profits last year and yesterday Reuters reported yesterday that its Chief Commercial Officer has resigned from the airline.
On Saturday, The Times reported that easyJet is expected to unveil its worst half-year losses on Friday in the region of £275m. The Sunday Times also reports that Thomas Cook will report half year pre-tax losses of around £227m this Thursday.
Virgin Atlantic has expressed an interest in buying Thomas Cook’s long-haul UK airline business. It’s far from unusual for Virgin to make its interest known when an airline is up for a sale. However, Virgin is in expansion mode and buying part of the airline would give it a much stronger position in Manchester. The one big the risk factor is the age of Thomas Cook’s Airbus A330 fleet which is around 20 years’ old.
BA Fleet News
A few items of BA fleet news in the past week:
As reported last week, Boeing 787 Dreamliner issues are not going away for BA. There are blanket cancellations over the coming months to Abu Dhabi, Doha and Mumbai and many more tactical cancellations up to the end of August. Full details are here.
BA is now around two-thirds of its way through its Gatwick Boeing 777 refurbishment programme. A ninth aircraft is currently in Singapore for refurbishment. Full details of the routes on which refurbished aircraft are operating are here.
BA has taken delivery of its fifth Airbus A321 Neo aircraft at London Heathrow. There are two ten Airbus A320 Neo and five Airbus A210 Neo aircraft at London Heathrow.
In case you missed it:
Cathay Pacific unveils a refreshed brand identity with the strapline “Move Beyond”. There’s nothing particularly groundbreaking here, but as a historically conservative with a small c airline, Cathay is clearly trying to shout a little louder. (London Air Travel)
Also of note this week:
The Airline Insolvency Review, established following the collapse of Monarch in 2017, proposes a Flight Protection Fund, financed by a fee of up to 50p on passenger tickets issued in the UK, to pay for the repatriation of UK passengers when airlines fail. This has drawn short shrift from airlines. (Gov.UK)
Finnair, which has previously expressed a desire to play a part in European consolidation, foresees remaining an independent airline. (Financial Times)
A Boeing 787 pilot and train driver swap simulators and compare notes. (Virgin Atlantic)
Monocle magazine, through the prism of its editorial worldview, selects its annual Travel Top 50. (Monocle)
Late post publication updates:
Qantas launches “Points Plane” – – a one-off flight from Melbourne to Tokyo in October which will be available solely to frequent flyers redeeming frequent flyer miles. (Qantas)
Air France plans to cut domestic short-haul capacity by 15% by 2021 and will cut 500 jobs through voluntary redundancy. (Financial Times)
WestJet has announced it is to be acquired by private equity firm Onex Corporation. (WestJet)
Our Monday Briefing is published every Monday at 06:00 BST. If you have any comments, suggestions or tips then please drop us a line at mail [@] londonairtravel.com
