Issue No. 879

An India Comeback Story

Air India Maps an International Revival Under Tata Ownership

Pushing Back: Inside the Issue

United and Emirates working together? The once unthinkable is now true, though the partnership of the two unveiled last week is limited in scope, at least for now. More significant for United is the sustained strength in travel demand right into the normally off-peak autumn. More U.S. airlines, along with Air Canada, gave their own bullish perspectives last week.

Also last week, Air India presented a new business plan, SAS is progressing in its bankruptcy restructuring, and Aegean Airlines reported its latest financial results. Expect to hear more from airlines this week, with several executives scheduled to present at the Skift Global Forum in New York City.

Airline Weekly Lounge Podcast

Is Indian aviation's moment here? Air India under Tata ownership has a deal for new airplanes, while the country's largest airline, IndiGo, keeps growing and several new startups are adding new competition to the market. Edward Russell and Jay Shabat discuss, plus the Tijuana Airport's U.S. bridge and how its changing California-Mexico travel. Listen to this week’s episode to find out. A full archive of the 'Lounge is here.

Weekly Skies

Emirates and United Airlines let bygones be bygones and unveiled a new partnership that will join their two global networks. The limited pact will see Chicago-based United return to Dubai with a nonstop flight from Newark from March, the airlines unveiled September 14. In addition, both airlines will place their codes on select flights operated by the other between the U.S. and Dubai, and on certain flights in the U.S. and beyond Dubai, beginning in November.

“Can you imagine this?” Emirates President Tim Clark said gesturing to an Emirates and United aircraft behind him at an event at Washington Dulles International Airport. “There was a time — and we all know this — that it was difficult.”

Clark referred to the long fraught relationship between the two airlines. In 2015, United joined American Airlines and Delta Air Lines alleging that the three big Gulf carriers — Emirates, Etihad Airways, and Qatar Airways — were essentially dumping capacity in the U.S. market under the auspices of open skies. The dispute was settled in 2018 but not before the three U.S. and three Gulf carriers had essentially severed ties. United, for one, was forced to cancel its nonstop between Washington Dulles and Dubai in 2016 after the U.S. government awarded its travel contract to Emirates via a partnership with JetBlue Airways.

Fast forward four years and the landscape has shifted significantly. American was the first to move with a Qatar Airways codeshare in 2020. The U.S. airline launched its first-ever nonstop flight to Doha from New York JFK in June. The United-Emirates deal is the second such move.

Emirates was the first to reach out two years ago, said United Senior Vice President of Global Network Planning and Alliance Patrick Quayle. What followed was a slow rebuilding of the tarnished relationship between the airlines that culminated in the partnership unveiled Wednesday.

As part of the new tie up, Emirates will sever ties with JetBlue, with which it has partnered since 2012. But the rationale is clear: Emirates will swap feed from the sixth largest U.S. airline for feed from the fourth largest, United, which also offers a national U.S. network that JetBlue lacks.

The pact also aligns Emirates closer to another Star Alliance carrier. In July, the airline and Air Canada — a United partner and Star member — unveiled a strategic partnership that will include a codeshare that also aims to extend both carriers’ networks. It will expand Emirates’ access to Canada, and Air Canada’s access to “certain markets that we don’t want to fly to,” as Air Canada CEO Michael Rousseau put it last week. Asked if the Air Canada and United deals with Emirates were somehow related, Rousseau said their pact was done “completely independent” of United’s.

For United, the carrier will gain new connectivity to India and Africa that it currently lacks, CEO Scott Kirby said Wednesday. Both are growth markets for United, which has added new service to Accra, Johannesburg, and Lagos during the pandemic. The airline plans to begin delayed new service to Bangalore in March 2023.

Emirates serves nine destinations in India, including second tier cities like Ahmedabad, Hyderabad, and Thiruvananthapuram, according to Diio by Cirium schedules. This compares to just four destinations by United partner Lufthansa. In addition, the closure of Russian airspace to U.S. airlines has hamstrung United’s ability to grow to India; the closure forced the carrier to suspend two routes, Newark-Mumbai and San Francisco-Delhi, and indefinitely postpone planned new San Francisco-Bangalore service.

When asked about the limited nature of the new partnership, several United executives instead spoke of the long time it took to rebuild a relationship with Emirates and the significance of any deal at all. At its start, the partnership will only cover three of Emirates’ routes to the U.S. — Chicago O’Hare, Houston Bush, and San Francisco — and United’s new nonstop to Dubai. Flights between Washington Dulles and Dubai — the route that Emirates forced United off of in 2016 — are not part of the initial codeshare agreement.

“After the years, decades of fraught relations, [we found] a way that we could come together in a way that’s good for each of our respective employee groups, [and] our respective regions of the world,” Kirby said.

Edward Russell

Delta Sees Little Autumn Demand Slowdown

A week ago, American and United both said leisure demand continues to remain strong into the fall, in defiance of the typical post-summer slowdown. It was Delta‘s turn to be bullish last week, at a Morgan Stanley investor conference, asserting essentially the same thing: “We are expecting a very, very robust demand for the holiday periods for Thanksgiving and Christmas,” Delta President Glen Hauenstein said. Business travel looks set to “have a very strong fall,” he added. Premium demand too, remains strong.

Hauenstein described an evolution of consumer buying habits, from a situation in which air tickets were viewed as a standardized commodity (just give me the low fare), to one in which travelers are presented with many options depending on what they’re looking for (i.e., just the low fare or additional amenities). He gave the example of new terminal and lounge facilities at New York’s LaGuardia airport, which makes traveling to New York on Delta an experience many people will pay extra for. Interestingly, the New York and Los Angeles markets — Delta is also building a new terminal at LAX — combined account for a fifth of Delta’s total revenue, said Hauenstein. But barriers remain in the distribution arena. Hauenstein mentioned both the Expedia and Concur as platforms where more work needs to be done in terms of selling tickets in a manner Delta feels is most effective.

Hauenstein and Delta Chief Financial Officer Dan Janki separately said that the strong U.S. dollar is helpful to the carrier since about 80 percent of its revenue is dollar denominated. With transatlantic demand strong and the autumn leisure drop-off seemingly nonexistent this year, the airline will be larger to Europe this October than it was three years earlier. They said operations are better this fall than they were this time just before the pandemic. On pilot negotiations, Delta, like American and United, hopes to reach a new deal by the end of this year.

Air Canada Chief Financial Officer Amos Kazzaz joined other airlines in highlighting ongoing demand strength, “through the end of [the third quarter] and into [the fourth quarter], and rolling actually also into [the first quarter] of 2023.” Some leisure markets, he added, are now booking ahead of 2019 levels. That said, Canada’s air traffic recovery has unfolded at a slower pace compared to the U.S. That’s because Canada was essentially locked down for two years during the pandemic, with much less freedom of movement both within the country and across borders. Kazzaz estimated that Canada is about six months behind the U.S. in terms of returning to 2019 traffic levels. As for the staffing shortages plaguing U.S. carriers, Kazzaz insisted: “We really don’t see any labor shortages whatsoever.”

JetBlue Chief Financial Officer Ursula Hurley naturally fielded questions about the Spirit Airlines takeover, reiterating the company’s key motivations, including being better able to compete with Southwest Airlines and the Big Three. Demand, she said, was “really strong,” surprisingly so for the fall. Latin America and transcontinental routes are the current standouts. In addition, people are taking longer weekend trips thanks to more work flexibility. JetBlue, separately, issued bullish financial guidance last week, citing “robust demand for travel in September and beyond.” Southwest, incidentally, in a filing of its own, essentially said the same.

Sun Country Airlines talked about its three-pronged business model featuring scheduled passenger flights, charter flights, and cargo flights. The key to making all three profitable, said Chief Marketing Officer Dave Davis, is cross-utilizing assets, using planes to move freight for Amazon, for example, when they would otherwise be idle due to low passenger demand. Sun Country is a “100 percent leisure” airline currently seeing sharp increases in unit revenues. Davis sees demand strength for the upcoming holidays and even into 2023. “I wish we had more capacity to fly right now,” he noted.

Boeing Chief Financial Officer Brian West made news at the Laguna event by disclosing the airframer’s decision to begin re-marketing some of the 737 Max aircraft built for Chinese airlines but never delivered. Chinese officials have yet to allow the Max back into revenue service following two fatal crashes in 2018 and 2019. “We have deferred decisions on those planes for a long time. We can’t defer that decision forever,” West said. However, he reassured attendees that “these customers are incredibly important.”

Raytheon, which owns Pratt & Whitney and Collins Aerospace, also spoke about China. The country represents about 19 percent of worldwide air traffic measured by revenue passenger miles. Chinese airlines, they explained, “continue to bring their engines in for overhauls [and] continue to keep their planes in serviceable condition, ready for the traffic when it comes back.” It sees Chinese air traffic normalizing very quickly once lockdowns and other restrictions are eased.

Jay Shabat

Frontier Prospects Improved

Frontier Airlines CEO Barry Biffle thinks his airline’s outlook is better than ever after JetBlue beat it in a bidding war for budget competitor Spirit.

“Ninety-five percent of U.S. capacity will be 30 to 80 percent higher cost than us,” Biffle said last week. One of his main foci at Frontier is using low costs as a competitive advantage and, by JetBlue buying Spirit and bringing it up to the former’s cost levels, many see the deal as an elimination of Frontier’s main low-cost competitor in the U.S.

In the second quarter, Frontier’s unit costs excluding fuel were 7.24 cents, Spirit’s were 6.96 cents, and JetBlue’s were 9.68 cents. Put another way, JetBlue’s costs are 33 percent higher than those at Frontier. The combination of JetBlue and Spirit will leave Frontier as one of the only airlines serving major markets with very low costs in the U.S. Allegiant Air and Sun Country, both of which also focus on low costs, are much smaller and have different strategies; for example, Allegiant targets limited-frequency flying between smaller airports.

Of course the JetBlue-Spirit deal is not done yet. Spirit shareholders will vote on the $3.8 billion merger on October 19, and then the U.S. Department of Justice must sign off on the combination before it can move forward.

Asked about potential cost pressure from new pilot pay deals at certain U.S. regional airlines, Biffle was unconcerned and said Frontier can offer cockpit crew members better pay over their career, as well as a better work-life balance than the regionals can. Frontier, he added, is in “good shape” when it comes to a supply of pilots.

With low costs in mind, Frontier is moving ahead with aggressive expansion plans. The airline intends to grow capacity by double digits annually through the end of the decade, Biffle said. Frontier aims to triple in size by 2030. The carrier has firm orders for 229 Airbus A320neo and A321neo aircraft.

Edward Russell

Transat Returns to Black

Transat returned to profitability in July. It made the revelation during its latest quarterly earnings call that covered the May to July period. Still, Transat lost money for the entire quarter, resulting in a negative 11 percent operating margin, adjusted for special items.

Following a scuttled deal to sell itself to Air Canada, Transat remains independent, hoping for post-pandemic success with a new hub-and-spoke business plan. Central to the plan are long-range narrowbodies, specifically Airbus A321LRs and XLRs. These aircraft are especially useful for transatlantic routes from eastern Canada, of which Transat serves many. The XLRs, executives said, will open new route opportunities including Barcelona, Rome, and Venice, all of which are major tourist destinations for Canadians. The XLRs are currently expected to begin arriving in 2024. “It will also allow us to offer European destination all year long,” said CEO Annick Guerard, “while reducing the risk compared to [the] A330 operation, specifically during the winter season.” Transat operated 12 A330s this summer, along with 12 A321LRs, and seven older-generation A321s.

During the winter, Transat pivots to a schedule that’s more focused on sunshine destinations like Florida and the Caribbean. Another aspect of the airline’s new strategic plan is codeshare agreements with Porter Airlines and WestJet, which are designed to generate more domestic feeder traffic for Transat’s international flights and to better compete with Air Canada and its leisure subsidiary Rouge. Also on Transat’s radar are several new airlines prowling the Canadian skies, like Flair, Jetlines, and Lynx.

Looking ahead, Transat continues to battle with high fuel prices, made higher by the strong U.S. dollar. But winter bookings look strong, both for European and southern sunshine routes. Pricing, meanwhile — and note that Transat sells many of its seats as part of tour packages — remains above 2019 levels. “After two years of deprivation, we believe that travel has become for many a necessity rather than a discretionary expense,” said Guerard. “The need to get away and reconnect with the world has become essential.”

Jay Shabat

In Other News

  • Lufthansa and its pilots union, Vereinigung Cockpit, finalized last week the tentative deal they reached the week before. Pilots will receive two €490 ($491) monthly raises, one retroactive to August 1 and the second from April 1, 2023, that equals a roughly 20 percent increase for new pilots and a 5.5 percent increase for senior captains. The accord also bars pilots from striking until June 30, 2023. A strike by Lufthansa pilots on September 2 resulted in the cancellation of roughly 800 flights and cost the airline millions of dollars.

    And, in other Lufthansa news, the group reached a deal with Amadeus to include its so-called New Distribution Capability content. From the fourth quarter, travel agencies that use Amadeus will no longer need to use third-party tech providers, or Lufthansa’s own platform, to offer the fares. Similar deals with Travelport and Sabre are coming, Airline Weekly understands.
  • Virgin Australia reported an A$387 million ($259 million) annual loss during the year ending in June on A$2.2 billion in revenues. CEO Jayne Hrdlicka, speaking at an industry conference last week, said the current fiscal year “looks pretty bright” and forecasted an annual profit. Separately, Air New Zealand denied rumors of a potential merger with the Australian airline, saying it had “not been approached, and [was] not in discussions with any parties” on a potential transaction.
  • Aegean Airlines reported an 10.8 million ($11 million) net profit on 327 million in revenues during the second quarter. The airline was buoyed by the strong resurgence of Greece’s tourism industry, with the country one of just two in Europe — the other being Luxembourg — with airport traffic numbers above 2019 levels during the first six months of the year, according to Airports Council International-Europe data. Demand for the September quarter is also coming in strong, though Aegean Chairman Eftichios Vassilakis said the winter outlook was uncertain given high fuel prices, the strong U.S. dollar, and Europe’s energy crisis.
  • El Al reached an agreement with the Israeli government to repay its state aid by the end of the year, or two years early. The move will lift conditions that the government placed on the airline as a condition of the support, and allow El Al to move forward with plans to expand. The carrier said it will begin evaluating a new widebody aircraft order early in the new year as part of CEO Dina Ben Tal Ganancia’s ambitions to expand the number of transit passengers over Tel Aviv.
  • The U.S. International Trade Administration (ITA) said international air passenger volumes between the U.S. and the rest of the world (arrivals and departures) surpassed 20 million in August. That was still down 18 percent from August 2019, but up 80 percent from a year earlier. Mexico is the largest international market to and from the U.S. based on the August numbers. Next in the ranking are Canada, the UK, Germany, and the Dominican Republic. Asia was still down 61 percent from pre-pandemic levels, while Europe was down 19 percent, and Latin America and the Caribbean were just 7 percent. New York JFK, Miami, and Los Angeles handled the most U.S. international traffic. London Heathrow, Cancun, and Toronto, meanwhile, were the busiest international markets for passengers departing for or arriving from the U.S.
  • As the EU moves towards a sustainable aviation fuel (SAF) usage mandate beginning in 2025, the Lufthansa Group and Ryanair have signed significant new offtake agreements with Austria’s OMV. The former will take 800,000 metric tonnes (211 million gallons) over seven years, and the latter 160,000 metric tonnes over eight years from OMV beginning next year. The EU plans to mandate that 2 percent of fuel in the bloc be SAF by 2025 and 6 percent by the end of the decade.
  • Canadian startup Jetlines has applied for a U.S. Foreign Air Carrier permit. If granted, the airline plans to serve leisure destinations, potentially including the Melbourne Orlando and Sarasota-Bradenton airports in Florida. Jetlines plans to begin domestic Canada flights in September.

Edward Russell, Jay Shabat, & Matthew Parsons

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Sky Money

  • A U.S. bankruptcy court has approved $700 million in debtor-in-possession (DIP) financing for SAS. Funds will come from Apollo Global Management to carry the airline through its Chapter 11 restructuring. SAS has made progress reaching deals with its labor unions but has begun rejecting leases on some of its aircraft — 12 planes to date — due to what it claims is an unwillingness of lessors to agree to new terms.
  • The German Economic Stabilization Fund sold its remaining 74.4 million shares in Lufthansa, or 6.2 percent of the airline, last week. The stake was part of the German government’s pandemic aid to the airline. The sale means Lufthansa is again a privately-held carrier.
  • Porter Airlines secured sale-and-leaseback financing for 12 Embraer E195-E2 aircraft. Lessor TrueNoord will provide funds for six aircraft, and certain funds managed by Apollo Global Management and managed by Merx Aviation for the remaining six. With the latest deal, Porter has sale-and-leaseback financing in place for 26 of the 30 E195-E2s it has on order.

Edward Russell

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Air Lease Corp.’s founder and executive chairman, Steven Udvar-Hazy, at a Deutsche Bank event earlier in September, outlined a rosy environment for airlines, with demand strong and load factors in some cases at all-time highs. Global traffic, measured by RPKs, is still nearly 30 percent below what it was in 2019, mostly because of longhaul routes from Asia. But Asia is the exception, not the rule. Many routes elsewhere are even busier now than before the pandemic. And more than 80 percent of the global fleet is back in service. Udvar-Hazy acknowledged the industry’s operational constraints, including labor and maintenance bottlenecks. The result is more flight delays and cancellations, flight crews timing out, and schedule consolidation. “It’s not exactly a happy experience for the average traveler,” he said.

Udvar-Hazy separately criticized Airbus and Boeing for their “overaggressive, overambitious production rate projections … particularly on single-aisle aircraft.” He added: “It’s virtually impossible for them to get anywhere close to what they projected, say, 12 months ago … there’s just a lot of missing elements to be able to achieve those production rates, particularly in power plants, avionics, forgings, titanium, I mean I can give you a list of 30 different things that have impeded the ability of the primary OEMs [original equipment manufacturers] to achieve their targets.”

Demand for newer-technology aircraft is expected to exceed what Airbus and Boeing can produce over the next three or four years, Udvar-Hazy said. This gap between demand and supply, though, should help restrain capacity and boost airline profitability, not to mention the fortunes of aircraft lessors that have available aircraft. Udvar-Hazy mentioned Lufthansa’s recent decision to grab Boeing 787s built for but never delivered to China’s Hainan Airlines. The German airline also increased its Airbus A350 orders and reinstated its Boeing 777X orders. ALC will also provide additional A350-1000s to Virgin Atlantic.

Looking ahead, Udvar-Hazy sees “secular tailwinds” driving air traffic growth of 4-5 percent a year, even with annual worldwide economic growth of around 1.5 percent. These tailwinds include a growing middle class, expanding mobility, and the tendency for travel to become part of a person’s lifestyle. “It becomes something that’s normal rather than unusual … It’s become a form of mass transportation.”

Regarding future aircraft products from airframers, Udvar-Hazy expressed skepticism about a prospective Airbus A220-500, an aircraft Air France-KLM covets. The problem in his eyes is that the Airbus production facilities in Mobile and Montreal cannot handle an increase in A220 rates. In addition, a larger A220 could cannibalize orders for Airbus’ A320neo.

Jay Shabat

Air Canada, United Commit to Heart’s Hybrid-Electric 30-Seater

Air Canada and United Airlines are among the first customers for a new hybrid-electric airplane from Heart Aerospace. The aircraft, named the ES-30 for its 30-passenger capacity, replaces the Gothenburg, Sweden-based planemaker’s all-electric ES-19 airplane that United first committed to last year.

“The ES-30 is an electric airplane that the industry can use,” Heart founder and CEO Anders Forslund said. “We have designed a cost-efficient airplane that allows airlines to deliver good service on a wide range of routes. With the ES-30 we can start cutting emissions from air travel well before the end of this decade and the response from the market has been fantastic.”

Air Canada has signed for up to 30 ES-30s, while United reconfirmed its commitment for up to 100 aircraft. Heart aims to deliver its first plane in 2028, or two years later than its target for the ES-19.

Heart’s shift to hybrid-electric technology — think a Toyota Prius but for airplanes — appears a reflection of the limits of existing battery capabilities. The size of the battery needed to power an an all-electric aircraft increases significantly as the plane gets larger, and quickly becomes too heavy for an economically feasibly airliner. However, hybrid-electric technology allows for a smaller battery that can be supplemented by a traditional internal combustion engine.

The airframer’s hybrid-electric technology will be able to be used in-flight to allow for additional range on the ES-30, as well as to meet fuel reserve requirements. The proposed aircraft will be able to fly 200 kilometers (125 miles) under solely electric power, or 400 kilometers using the hybrid-electric technology.

The size and range of the ES-30 mean the aircraft could be used on existing airline route networks. For example, the additional range would make nonstop flights between New York and either Boston or Washington, D.C., possible for the aircraft. This differs from the rapidly expanding electric vertical takeoff and landing, or eVTOL, air taxi market that aims to replace ground-based trips to the airport with flights.

The ES-30s “are well, well positioned to replace existing planes to fly to small markets by the end of the decade,” Air Canada CEO Michael Rousseau said at an industry event on September 15. He added that the larger size followed discussions with Heart over “what’s commercially attractive” to airlines.

Heart is not alone building an electric, or hybrid-electric, airliner. Eviation is developing the all-electric Alice that would seat nine passengers for regional airlines. Cape Air already has commitments for the Alice that Eviation aims to certify by the middle of the decade. And Surf Air Mobility and Southern Airways Express want to be first to market with retrofitted hybrid-electric Cessna Caravans in 2024 or 2025.

Heart, in keeping with the ES-30’s sustainable bonafides, said the internal combustion components on the plane will run entirely on sustainable aviation fuel. However, the planemaker said nothing about the availability of the sustainable fuels, which today are available in very limited supplies and in only select locations.

In addition to Air Canada and United, Heart has letters of intent for the 96 ES-30s from Braathens Regional Airlines, Icelandair, SAS, and New Zealand’s Sounds Air, as well as Swedish lessor Rockton.

Air Canada and Saab have also both invested $5 million in Heart. Last year, United’s private equity arm United Airlines Ventures, along with Mesa Airlines and a clutch of other investors, participated in a $35 million Series A fundraising round by the airframer.

Edward Russell

Fleet Briefs

  • Wizz Air has confirmed options for 75 Airbus A321neos with deliveries in 2028 and 2029. The deal raises Wizz’s firm commitments for the plane to 369 aircraft, or 382 aircraft including its A320neo orders. The options were part of the order Wizz placed with Airbus at the Dubai Air Show in 2021.

Edward Russell

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Landing Strip

Drive down San Diego’s Otay Mesa Freeway and suburban development gives way to a landscape of warehouses and logistics centers along the U.S.-Mexico border. But in the middle of this anywhere-and-nowhere landscape sits a stucco terminal building with a busy curbside, full parking lots, and all the trappings of a contemporary airport. This is Cross Border Xpress.

Opened in late 2015, Cross Border Xpress is the only international bridge on the U.S. border that caters solely to air travelers. It has transformed the Tijuana Airport from a mid-sized Mexican facility into one of the country’s busier gateways if one takes into account the number of Americans using the bridge to fly to and from the airport. From 2015 to 2021, passenger numbers at Tijuana nearly doubled to 9.7 million from 4.9 million, according to data from airport operator Grupo Aeroportuario del Pacifico (GAP).

The pandemic has only accelerated the changes to California-Mexico travel driven by Cross Border Xpress. In 2019, U.S. Bureau of Transportation Statistics data show 1.6 million people entered the U.S. via the bridge, while only 150,760 people entered at the San Diego airport after flights from Mexico. That split appears to have only widened with Cross Border Xpress entries up nearly 28 percent compared to 2019 during the first seven months of the year, while U.S.-Mexico airline seat capacity at the San Diego airport was down 34 percent, Diio by Cirium and the latest BTS data show.

Cross Border Xpress is “really transforming the way of traveling from Southern California to Mexico,” GAP CEO Raul Revuelta Musalem said.

On routes to Mexican beaches popular with U.S. travelers, like Cancun, Los Cabos, and Puerto Vallarta, Alaska Airlines seats from San Diego are down 6 percent year-over-three-years and Southwest Airlines seats are down 88 percent, which includes the suspension of Puerto Vallarta flights, according to Diio. Conversely, Volaris seats from Tijuana to those same markets have nearly doubled, and those on Viva Aerobus are up more than 1,000 percent. The latter’s growth from Tijuana to Mexican beaches has been remarkable: the discounter flew a fifth of the seats that Alaska did from San Diego in 2019 but now flies roughly 2.5-times the number offered by the U.S. carrier.

This shift is transforming the Tijuana airport. GAP opened a new processor building this summer that allows arriving international passengers, for example from Asia, to transit through Tijuana to the bridge and the U.S. without clearing Mexican customs. The operator hopes the new facility will help the airport land new international flights, for example to Asia and Central America, said Revuelta.

Tijuana had nonstop flights to Beijing and Shanghai, as well as Guatemala City and San Salvador, in the years just before the pandemic, Diio schedules show. San Diego had a nonstop to only Tokyo. So far, only the San Diego-Tokyo flights have resumed.

Tijuana is not the only airport in GAP’s portfolio undergoing significant growth. The operator, which manages 12 airports in western Mexico plus the Kingston and Montego Bay airports in Jamaica, is seeing strong growth across its business. In fact, during the pandemic, GAP surpassed the operator of Mexico City’s airport as the busiest airport operator in the country.

GAP’s busiest facility is the Guadalajara airport, which serves Mexico’s third most populous region. Work is underway there on a second runway and new terminal that will double its passenger capacity by 2026, Revuelta said.

“Guadalajara really has a great opportunity to be the second biggest hub in Mexico after Mexico City,” he said citing, for example, Aeromexico‘s new nonstop flight to Madrid that began at the end of last year. The airport also lacks the capacity constraints that are hampering operations at Mexico City’s main airport, Benito Juárez. Nor does Guadalajara have the fragmented market that airlines face in the capital where Mexico City’s two reliever airports, at new Felipe Angeles and Toluca, are miles — and who knows how many hours in traffic — away from the main international facility.

Given Guadalajara’s own growth, Revuelta does not expect Tijuana to surpass it as the busiest airport in GAP’s portfolio anytime soon. Both facilities are expected to continue growing at a “great pace,” he said. From January through August, Guadalajara handled 9.9 million passengers compared to Tijuana’s 8.1 million, GAP data show.

“We see promise for increasing our 98 daily flights from Guadalajara and our 95 daily flights from Tijuana, markets with metro populations of 5.3 million and 2 million, respectively,” Volaris Executive Vice President of Airline Commercial and Operations Holger Blankenstein said in July. The airline is, by a wide margin, the largest at both airports.

Across GAP’s 12 Mexican and two Jamaican airports, passenger numbers were up nearly 14 percent to 37 million from January through August compared to the same period in 2019, according to company data. Tijuana was, by far, its fastest growing with passenger numbers up 37 percent year-over-three-years.

Despite all the optimism, Revuelta’s job is not all easy. International arriving passenger screening capacity at many of GAP’s airports, including in popular beach destinations like Los Cabos and Puerto Vallarta, was “challenged” during the summer months, he said. He attributed this to airlines flying larger planes and limited customs staffing. In addition, flight delays and other issues at the congested Benito Juarez airport in Mexico City ripples out and affects operations at GAP’s airports, he added.

“I expect for the winter, everything will be more normal,” Revuelta said. And that’s a good thing to hear as GAP’s 12 Mexican airports are scheduled to handle 23 percent more seats in the fourth quarter than they did in 2019, according to Diio.

Edward Russell

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Routes and Networks

  • The New York-Washington market is hot. Delta will begin four-times daily flights between New York LaGuardia and Washington Dulles on November 9, per Diio by Cirium. The route has been the sole domain of United since 2014 when Delta ended its last nonstop in the market. But Delta is not the only newcomer; seaplane operator Tailwind Air, which was due to begin flights from Manhattan’s East Side and the D.C. suburb of College Park, Md., on September 13, has moved its D.C. gateway to Dulles and postponed the launch to September 26 at the earliest. The airline blamed “unforeseeable” security considerations for passenger flights to the D.C. area’s restricted airspace for the switch and delay. But anyone familiar with the strict rules governing flights into and out of the airspace around the U.S. capital would immediately be reminded of that famous scene from Casablanca: “I’m shocked! Shocked to find that gambling is going on in here.” “Your winnings, sir.”
  • Several routes are also coming out of U.S. airlines’ networks. Delta has pulled nonstops between Salt Lake City and Milwaukee, and Detroit and Monterrey, Mexico, per Diio. Both routes were previously flown and due to resume in December. And American Airlines has cancelled planned service to Ocho Rios, Jamaica, from Miami that was due to launch in November.
  • JAL budget subsidiary Zipair has named San Jose, Calif., its third U.S. destination. The airline will land at the Silicon Valley airport with three weekly flights from Tokyo Narita on December 12. All Nippon Airways will join Zipair on the route when it resumes flights in March after a pandemic hiatus.

Edward Russell

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Feature Story

The following two statements are both true: One, India was a pheromonal growth market for airlines last decade. And, two, India’s airline market barely grew at all last decade.

Two words explain the contradiction: Domestic and international. Domestically, the number of available seat kilometers scheduled within India grew 166 percent from 2010 to 2019, according to data from Diio by Cirium. Impressive. But internationally, ASKs to and from India grew just 58 percent over the entire decade. The story gets even more interesting when looking just at longhaul international ASKs (which includes journeys exceeding 3,000 miles). ASKs for this segment grew a mere 21 percent. Compare that to China, whose intercontinental market grew nearly 200 percent during the past decade.  

What’s wrong with India’s longhaul international market?

It’s not that people aren’t traveling overseas to and from India. They are, and in significantly greater numbers over time. But most are flying via an offshore hub, most importantly Dubai but also other Gulf hubs, as well as hubs in Europe (i.e., Amsterdam, Frankfurt, and Istanbul) or East Asia (i.e., Bangkok, Singapore, and Tokyo Narita). Pre-pandemic, even Moscow and other-ex Soviet cities handled sizable volumes of traffic into and out of India. Search online for flights between India and any point in North America or Australia, for example, and what you will mostly see are itineraries offered by foreign carriers through their home hubs.

Indeed, India’s homegrown airlines have failed to develop competitive intercontinental networks. Air India has come closest. By 2019, it was offering nonstop service to 20 airports overseas, not including nearby markets like the Gulf and ASEAN regions, which can be flown with narrowbody aircraft. Of these 20, 11 were in Europe, and six were in North America (New York JFK, Newark, Chicago O’Hare, San Francisco, Toronto Pearson, and Washington Dulles). The other three were Tokyo, Sydney, and Melbourne. Currently, Air India is flying to just 14 longhaul destinations, having dropped several European cities. The airline has, however, added new service to Vancouver.

But, Air India wasn’t exactly winning any awards for good service over the past decade. And it certainly wasn’t leading any lists of world’s most profitable airlines. On the contrary, it was a state-owned basket case for many years, chronically troubled by overstaffing and labor strife. It briefly looked like the airline might have had a chance to evolve into something better around 2005, when India signed an open skies agreement with the U.S. and authorized Air India to renew its fleet with state-of-the-art planes including Boeing 787s. It looked then like the carrier might be having an Air France moment, referring to the French carrier’s evolution from taxpayer albatross to global champion. It was not to be.

Hoping to displace Air India and become the country’s overseas champion were multiple challengers. But all proved unfit for the task. One of them, Kingfisher Airlines, thought it wise to order every plane in the Airbus catalogue: A320s, A330s, A340s, A350s, and yes, even A380s. Unsurprisingly, it did not survive long. Somewhat more rational was Jet Airways, based in Mumbai. But amid financial distress in the early 2010s, it saved itself by selling itself — or at least part of itself. The buyer was Abu Dhabi’s Etihad, which used Jet to funnel Indian longhaul travelers through its own hub. Alas, there went Jet’s chances of developing a global hub in India. As Airline Weekly wrote in 2019:

“India’s largest airline was now essentially a feeder operation for an airline offshore. Partnering with Etihad also precluded it from joining a global alliance or partnering closely with airlines in key markets like Europe or North America. Its intercontinental network would remain greatly underdeveloped, ending 2018 with service to just London, Manchester, Amsterdam, Paris and Toronto — New York JFK and Newark flights via Brussels were ended years earlier, as were flights to San Francisco, Milan and Shanghai.”

Jet would follow Kingfisher to the grave in 2019, leaving Air India as once again the only Indian carrier operating widebodies. That would change in 2020, just as the pandemic began, when a new entrant backed by Singapore Airlines called Vistara received its first 787s, sending them to London, and later Paris and Frankfurt. IndiGo, meanwhile, which grew to dominate India’s domestic market, seriously considered buying Air India’s intercontinental franchise when Delhi was looking to sell around 2017. That July, IndiGo even delivered a presentation to investors outlining its intercontinental ambitions (the presentation is still accessible on the carrier’s website). SpiceJet, too, had an overseas itch, flirting with 787s that it ultimately never ordered.

And so, with the post-pandemic era now underway, India still has just two longhaul international carriers: Air India and Vistara. Emirates, you might say, is India’s true national airline, likely moving more Indian overseas travelers than any other airline. Through Dubai, it connects India to just about everywhere — the Americas, Africa, Europe, Asia, Australasia, and so on.

The story, however, isn’t over. IndiGo, though no longer keen on widebodies, sees potential to serve longer-haul international routes with longer range narrowbodies, specifically the A321XLR that should arrive around 2025. For now, the newcomer Akasa Air, run by Jet’s former CEO, doesn’t have any intercontinental plans. Jet itself is making a comeback, but only with narrowbodies. And you can understand why. Flying longhaul from India is no walk in the park, never mind the prospect of having to compete with Emirates and the like. Another challenge is India’s underdeveloped airports, especially in Mumbai. Still another is India’s high aviation taxes.

None of this is stopping the Tata Group, India’s largest private company. In January, it formally took ownership control of Air India, including its low-cost carrier Air India Express and the group’s ground handling unit. It quickly added domestic flights to boost international connectivity. And last week, new CEO Campbell Wilson, a former Singapore Airlines/Scoot executive, unveiled a “transformation plan,” aimed at “becoming a world-class global airline with an Indian heart.” The plan envisions “dramatically” growing both its network and fleet, improving service and reliability, and investing in people, technology, sustainability, and innovation. Also last week, Air India announced the addition of 30 new planes to its fleet, including five widebodies, specifically Boeing 777-200LRs. They all arrive by March. Reports suggest a much bigger aircraft order is coming. Air India currently has 43 widebodies, 33 of which are operational.

The big question is whether Vistara, also backed by Tata, will merge with Air India. That would boost the latter’s chances of becoming a true global longhaul leader, and perhaps even have itself an Air France moment.

Jay Shabat

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