Too Much of a Good Thing: The transatlantic market, not performing to plan right now, is a victim of its own success
The question is no longer whether, but to what extent and why, transatlantic markets are not performing as well as major airlines hoped or expected. This comes as a surprise in a year that should have been the best yet: Delta and Virgin Atlantic finally combined their London networks into one formidable joint venture, and US Airways is now a part of American and its JV with British Airways/Iberia (and now Finnair), meaning 80% of all 2014 ASM capacity between Europe and North America (according to Diio Mi) is in the hands of four such JVs. Delta itself is in two of them.
Last week’s Air France/KLM profit warning, which cited the North Atlantic, was only the latest evidence that things aren’t going according to plan. Sure, American CEO Doug Parker told reporters last week he’s not worried about the market. But his airline’s five-point load factor decline across the Atlantic in June (the steepest such drop of any of American’s geographic segments), along with the fact that American ended some seasonal European flying from Charlotte earlier than it originally planned and that its JV partner BA/Iberia reported similar transatlantic load factor declines for June, suggest American is feeling some of the same pressure as its competitors, even if Parker expresses more of his characteristic optimism than they do. Load factor declines don’t automatically imply weaker profits: an airline wouldn’t mind lighter loads if the remaining passengers were paying much higher fares. But more often than not, more empty seats suggest an airline didn’t get enough takers at the fares it was hoping to collect.
Those most recent data points punctuate several weeks of evidence suggesting every major transatlantic player is feeling the pain—if a couple of airlines like United and Delta didn’t specifically say it, then their joint venture partners did. SAS is the only apparent potential exception, in that it not only expressed optimism but could back it up with higher load factors. But it’s hard to imagine SAS is filling those seats with high-paying passengers, considering all the longhaul expansion by its low-cost rival Norwegian.
To be perfectly clear, it’s not that things across the Atlantic are awful. In fact, Lufthansa Group CEO Carsten Spohr said last week the…
Click Here or the button below to sign up for a Free Trial.
This issue is not currently online. To inquire about purchasing a copy, please email firstname.lastname@example.org.