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Airlines Worldwide - June 2011

  • The sharp recovery in worldwide airline industry fortunes in 2010 came to at least a temporary halt in early 2011, due to the surge in the price of jet fuel, the political turmoil in the Middle East and North Africa (MENA) region and the earthquake/tsunami in Japan.
  • Capacity is currently rebounding faster than demand, which is depressing load factors and yields.
  • Airfares are rising on the back of higher fuel costs and should rise further in the European Union (EU), as a result of implementation of the latter’s Emissions Trading Scheme (EU ETS), which wil require all airlines flying in EU airspace to have their emissions covered by CO2 pollution permits as of 1 Janaury 2012.
  • The fastest-growing markets for passenger traffic over the next three years should be China, Vietnam, South Africa, India and the Philippines.
  • Horizontal integration continues apace as four major mergers have either been consummated recently or are on the way to completion, including: United Airlines and Continental Airlines (October 2010); British Airways and Iberia (January 2011); Southwest Airlines and AirTran; and LAN (May 2011), the leading Chilean carrier, and TAM, the Brazilian market leader, which has been delayed by a consumer-led antitrust investigation.
  • Following the example of the big US LCCs like Southwest Airlines and JetBlue, the leading European LCCs like Ryanair and easyJet are adapting their services to target the business traveller market, through offering such amenities as reserved seating, flexible tickets, use of booking intermediaries and flights from first-tier airports.
  • LCC growth has shifted from Europe, which is approaching saturation, to newer emerging markets such as Brazil, India, Mexico, Russia and South East Asia.
  • There are still growth possibilities in the crowded US and Canadian LCC markets for small niche players who target specific market segments with well-defined offerings like point-to point travel between small cities.
  • The dispute between major booking intermediaries, namely global distribution systems (GDSs) and online travel agents (OTAs) and a couple of large US carriers has spilled over into the courtroom, with American Airlines suing Travelport (the owner of Galileo, Worldspan, Orbitz and ebookers) and US Airways suing Sabre Holdings (the owner of the GDS Sabre, as well as Travelocity and Lastminute.com).

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Table of contents

  1. Introduction

      • Key findings
      • Data Sources

          • Abbreviations and definitions
          • Overview

              • Outlook for GDP growth
                • UPS results confirm economic rebound
                  • Japan slowdown to be temporary
                    • Much higher energy prices
                      • Figure 1: Forecasted GDP growth by region and major country, April 2009
                    • Air transport link to economic trends
                      • Exchange-rate trends
                        • Commodity-based currencies have surged
                          • Impact of currency moves on air travel
                            • Trend in the price of kerosene
                              • Figure 2: Fuel price at 8 April 2011
                              • Figure 3: Price of jet fuel by region, 15 April 2011
                            • Impact on airline costs in 2011
                              • Figure 4: Fuel impact on airline operating costs, updated in March 2011 
                            • Outlook for spending on travel and tourism
                              • Figure 5: Travel and tourism expenditure worldwide, 2011-21
                            • On the rebound
                              • Figure 6: Real growth in worldwide travel and tourism expenditure, 2008-15
                            • Trend and outlook for air-traffic volumes (passengers and freight)
                              • Impact of political unrest in the Middle East and North Africa
                                • Chinese New Year distortion
                                  • Japanese tsunami impact to be felt for some months
                                    • Figure 7: Year-on-year % change in key industry supply and demand parameters, 2010-11
                                  • Airfreight in general hit by a trend reversal
                                    • Supply getting ahead of demand?
                                      • Figure 8: Month-on-month % change in key industry supply and demand parameters, January 2011 vs February 2010
                                    • Capacity up by 5% in March 2011 (plus 10% for LCCs)
                                      • Middle East is growing fastest
                                        • Asia Pacific now the biggest air transport market
                                          • Airbus and Boeing note rising importance of Asia Pacific
                                            • China
                                              • Inter-regional capacity to/from Asia
                                                • Scheduled capacity growth at major Asian hubs
                                                  • Africa impacted by civil unrest
                                                    • Growth to Nairobi
                                                      • Limited increases in North America
                                                        • Some carriers are lowering growth forecasts
                                                          • Capacity to/from Central and South America declines
                                                            • European international capacity growth boosted by Gulf carriers and LCCs
                                                              • Large capacity increases for Madrid and Amsterdam
                                                                • LCCs continue to grow faster
                                                                  • Premium traffic growth slows
                                                                    • Premium travel still 10% below pre-recession peak
                                                                      • Premium revenues still 9% below pre-recession peak
                                                                        • Slower growth in more price-sensitive economy-seat segment
                                                                          • Geographical differences remain
                                                                            • MENA impacted by political turmoil
                                                                              • North Atlantic route in an uptrend
                                                                                • South America enjoying strong growth
                                                                                  • Slow growth in Europe
                                                                                    • Figure 9: Premium traffic growth, by route, 2010-11
                                                                                  • The impact of the Japan crisis on air travel
                                                                                    • A ‘V’-shaped recovery?
                                                                                      • Japan a producer of jet fuel
                                                                                        • 10% of worldwide air transport revenues
                                                                                          • Markets with the highest exposure
                                                                                            • Figure 10: Summary of routes (domestic and international), serving Japanese airports, 2011
                                                                                          • Sharp drop in Japanese inbound and outbound travel in store
                                                                                            • Figure 11: Japan outbound and inbound travel, by country, 2010
                                                                                          • Travellers urged to leave Tokyo
                                                                                            • Figure 12: Japan domestic market seats per week, March 2011
                                                                                          • US carriers heavily exposed to Japan's international market
                                                                                            • Figure 13: International flights to/from Japan and seats per week, March 2011
                                                                                          • Uncertain outlook for international carriers serving Japan
                                                                                          • The Major Players

                                                                                              • Ranked by passenger kilometres
                                                                                                • Emirates surges to the top
                                                                                                  • Figure 14: Airline ranking by revenue passenger kilometres on international flights, 2008 & 2009
                                                                                                • US and China dominate the domestic rankings
                                                                                                  • Figure 15: Airline ranking by revenue passenger kilometres on domestic flights, 2008 & 2009
                                                                                                  • Figure 16: Airline ranking by revenue passenger kilometres on total (international + domestic) flights, 2009
                                                                                                • Ranked by passengers carried
                                                                                                  • Figure 17: Airline ranking by passengers carried on international flights, 2008 & 2009
                                                                                                • US and Chinese carriers dominate domestic rankings
                                                                                                  • Figure 18: Airline ranking by passengers carried on domestic flights, 2008 & 2009
                                                                                                  • Figure 19: Airline ranking by passengers carried on total (domestic and international) flights, 2008 & 2009
                                                                                                • Airfreight
                                                                                                  • International
                                                                                                    • Integrated freight-transport companies
                                                                                                      • Figure 20: Airline ranking by scheduled freight tonne kilometres (international only), 2008 & 2009
                                                                                                      • Figure 21: Airline ranking by scheduled freight tonne kilometres (domestic only), 2008 & 2009
                                                                                                      • Figure 22: Airline ranking by scheduled freight tonne kilometres (domestic and international), 2008 & 2009
                                                                                                    • Global airline industry worth US$1 trillion
                                                                                                      • Most valuable airline in the world is Chinese
                                                                                                          • Figure 23: Enterprise values and market capitalisations of the world’s leading publicly quoted airlines, March 2011
                                                                                                      • Global Performance and Airfares

                                                                                                          • Figure 24: Performance data for system-wide global commercial airlines, March 2005-11
                                                                                                        • Trends in airfares
                                                                                                          • Higher ticket prices in Europe due to carbon permits
                                                                                                            • A ‘cap-and-trade’ scheme
                                                                                                              • A windfall possible?
                                                                                                                • Ticket prices back to pre-recession levels in the UK
                                                                                                                  • More business class
                                                                                                                    • Summer airfares may climb 15% in the US
                                                                                                                      • International flights to increase even more
                                                                                                                        • Fees for extras add to the bill
                                                                                                                          • US airlines raising fares and cutting capacity
                                                                                                                            • Corporate business rebounding driven by higher yields
                                                                                                                              • Slight capacity declines instead of slight capacity increases
                                                                                                                              • Bankruptcies in the Airline Industry

                                                                                                                                  • Japan Airlines
                                                                                                                                    • Forced to accept major downsizing
                                                                                                                                      • Turning a corner
                                                                                                                                        • Major setback
                                                                                                                                          • Figure 25: Forecast JAL Group international reservations for the ‘Golden Week’ holiday period, 28 April-8 May 2011
                                                                                                                                        • Weak projected domestic load factors
                                                                                                                                          • Figure 26: Forecast JAL Group domestic reservations for the ‘Golden Week’ holiday period, 28 April-8 May 2011
                                                                                                                                        • Mexicana
                                                                                                                                          • Ownership structure
                                                                                                                                            • Tenedora K backed by diverse group of investors
                                                                                                                                              • Links to the government?
                                                                                                                                                • Grupo Posadas had already sold out
                                                                                                                                                  • Only regional services remained prior to bankruptcy
                                                                                                                                                    • Long-haul fleet grounded
                                                                                                                                                      • Figure 27: Mexicana’s long-haul fleet prior to bankruptcy, 2010
                                                                                                                                                    • What can emerge from the bankruptcy?
                                                                                                                                                      • Sale of Click Mexicana and MexicanaLink?
                                                                                                                                                        • oneworld and partners slow to react
                                                                                                                                                          • A link missing in oneworld’s network
                                                                                                                                                            • Aeromexico and LCCs take up the slack
                                                                                                                                                              • Slight growth in the domestic market in 2010
                                                                                                                                                                • Decline in international market
                                                                                                                                                                  • Aeromexico IPO raises US$332 million for expansion
                                                                                                                                                                    • Much improved financial position
                                                                                                                                                                      • LCC competition to intensify
                                                                                                                                                                        • Figure 28: Domestic market shares (passengers) in Mexico, February 2011
                                                                                                                                                                      • Aeromexico fleet development
                                                                                                                                                                        • Long-haul route expansion
                                                                                                                                                                        • Mergers in the Airline Industry

                                                                                                                                                                            • Four major mergers
                                                                                                                                                                              • United Airlines/Continental Airlines
                                                                                                                                                                                • A 55/45% ownership split
                                                                                                                                                                                  • Over US$1 billion of synergies expected
                                                                                                                                                                                    • Fleet
                                                                                                                                                                                      • Route network
                                                                                                                                                                                        • Strong international presence
                                                                                                                                                                                          • Figure 29: Summary of United/Continental’s foreign route network, 2010
                                                                                                                                                                                        • More US–EU flights than any other airline
                                                                                                                                                                                          • Figure 30: Top 12 airlines ranked by weekly departures from European airports in July 2010
                                                                                                                                                                                        • Twice as many flights as Delta to Asia
                                                                                                                                                                                          • Figure 31: Top 12 airlines ranked by weekly departures from Asian airports in April 2010
                                                                                                                                                                                        • Customer service features
                                                                                                                                                                                          • Joint venture with Air Canada
                                                                                                                                                                                            • Joint venture with All Nippon Airways
                                                                                                                                                                                              • Joint venture with Lufthansa
                                                                                                                                                                                                • Other partnerships
                                                                                                                                                                                                  • British Airways/Iberia
                                                                                                                                                                                                    • Europe’s third-largest airline group
                                                                                                                                                                                                      • Figure 32: Destinations served on each non-European continent by Europe’s three global mega-carriers, April 2010
                                                                                                                                                                                                    • Lufthansa weak in Latin America but strong in Asia
                                                                                                                                                                                                      • Only BA makes it all the way to Australia
                                                                                                                                                                                                        • Figure 33: Weekly flights from airports in the region, April 2010
                                                                                                                                                                                                      • New York JFK leading North American airport for all three airlines
                                                                                                                                                                                                        • Figure 34: Number of weekly departures for each carrier at their top three airports in each region, April 2010
                                                                                                                                                                                                      • BA has offloaded its pension risk
                                                                                                                                                                                                        • Agreement with American Airlines
                                                                                                                                                                                                          • Also a 55/45% split
                                                                                                                                                                                                            • IAG shares began trading on 4 January 2011
                                                                                                                                                                                                              • 2010 results showed a turnaround in operating profit
                                                                                                                                                                                                                • Possible acquisitions on the horizon
                                                                                                                                                                                                                  • Southwest Airlines/AirTran
                                                                                                                                                                                                                    • Move represents departure from organic growth
                                                                                                                                                                                                                      • AirTran expands Southwest network in key hubs
                                                                                                                                                                                                                        • Atlanta a major attraction for Southwest
                                                                                                                                                                                                                          • Figure 35: Hartsfield-Jackson Atlanta International Airport capacity (seats per week, to/from) by carrier, 25 April-01 May 2011
                                                                                                                                                                                                                          • Figure 36: Top 10 US destination airports from Hartsfield-Jackson Atlanta International Airport, by passengers, 2009-11
                                                                                                                                                                                                                        • AirTran’s route network
                                                                                                                                                                                                                          • Figure 37: AirTran Airways’ top domestic markets*, February 2010-January 2011
                                                                                                                                                                                                                          • Figure 38: AirTran Airways top domestic origin-destination city pairs*, February 2010-January 2011
                                                                                                                                                                                                                        • Full integration by 2013
                                                                                                                                                                                                                          • AirTran brand to be maintained for the time being
                                                                                                                                                                                                                            • An ‘integration board’ to manage the process
                                                                                                                                                                                                                              • Will Southwest’s merger with AirTran be good for consumers?
                                                                                                                                                                                                                                • Other considerations
                                                                                                                                                                                                                                  • Southwest will challenge Delta at its main hub
                                                                                                                                                                                                                                    • Changes in service delivery
                                                                                                                                                                                                                                      • Some do expect prices to rise – especially in the longer run
                                                                                                                                                                                                                                        • Becoming a major player
                                                                                                                                                                                                                                          • Business travellers may balk
                                                                                                                                                                                                                                            • LAN Airlines/TAM Airlines
                                                                                                                                                                                                                                              • A complex holding structure
                                                                                                                                                                                                                                                • Ranked among the top 15 in the world
                                                                                                                                                                                                                                                  • LAN a leader in South America
                                                                                                                                                                                                                                                    • TAM, market leader in Brazil
                                                                                                                                                                                                                                                      • Little network overlap
                                                                                                                                                                                                                                                        • Leading in ten of 15 major airports
                                                                                                                                                                                                                                                          • Services to North America and Europe
                                                                                                                                                                                                                                                            • Asia out of range
                                                                                                                                                                                                                                                              • Figure 39: Intercontinental routes of TAM and LAN, August 2010
                                                                                                                                                                                                                                                            • All for one or two for Star?
                                                                                                                                                                                                                                                              • Merger delayed by antitrust probe
                                                                                                                                                                                                                                                                • LAN accused of anti-competitive practices
                                                                                                                                                                                                                                                                  • American mulling a spin-off of its Eagle unit
                                                                                                                                                                                                                                                                  • Low-cost Carriers

                                                                                                                                                                                                                                                                      • Southwest still world’s biggest LCC
                                                                                                                                                                                                                                                                        • IndiGo fastest growing
                                                                                                                                                                                                                                                                          • No capacity reductions
                                                                                                                                                                                                                                                                            • Figure 40: Top 25 LCCs worldwide by capacity (ASKs/week), April 2011 vs April 2010
                                                                                                                                                                                                                                                                          • Are LCCs really cheaper?
                                                                                                                                                                                                                                                                            • Figure 41: Additional charges as a proportion of total price and variance in airfares between low-cost and full-service airlines according to booking window in Europe, 2011
                                                                                                                                                                                                                                                                            • Figure 42: Difference in airfares across Europe for low-cost and full-service airlines, 2011
                                                                                                                                                                                                                                                                          • Growth slowing in Europe
                                                                                                                                                                                                                                                                            • Figure 43: Passenger traffic for Europe’s six biggest low-cost carriers, 2010
                                                                                                                                                                                                                                                                          • Many new routes but how much growth?
                                                                                                                                                                                                                                                                              • Figure 44: Summary of the route networks and fleets of the six major European LCCs, May 2011
                                                                                                                                                                                                                                                                            • Ryanair diluting its business model?
                                                                                                                                                                                                                                                                              • Airline to operate out of some of Europe’s main airports
                                                                                                                                                                                                                                                                                • Growth is slowing down
                                                                                                                                                                                                                                                                                  • An end to the 'pile ’em high and sell ’em cheap' approach
                                                                                                                                                                                                                                                                                    • A different profile of CEO will be needed in future
                                                                                                                                                                                                                                                                                      • Reduced facilities make costlier airports viable
                                                                                                                                                                                                                                                                                        • Competitors have already taken steps to woo business travellers
                                                                                                                                                                                                                                                                                          • Offer of reserved seating
                                                                                                                                                                                                                                                                                            • Europe’s second-tier LCCs
                                                                                                                                                                                                                                                                                              • A fast-growing Russian LCC
                                                                                                                                                                                                                                                                                                • Past the million mark in September 2010
                                                                                                                                                                                                                                                                                                  • Avianova is foreign-owned
                                                                                                                                                                                                                                                                                                    • Targeting 40 aircraft by 2015
                                                                                                                                                                                                                                                                                                      • Focus on domestic expansion
                                                                                                                                                                                                                                                                                                        • Regulation slows down expansion
                                                                                                                                                                                                                                                                                                          • Avianova enters Siberia
                                                                                                                                                                                                                                                                                                            • North American niche players
                                                                                                                                                                                                                                                                                                              • Porter Airlines, a successful Canadian niche player
                                                                                                                                                                                                                                                                                                                • Not competing on price
                                                                                                                                                                                                                                                                                                                  • Hub is near to downtown
                                                                                                                                                                                                                                                                                                                    • Route expansion to major US cities
                                                                                                                                                                                                                                                                                                                      • Porter benefits from barriers to entry
                                                                                                                                                                                                                                                                                                                        • Small budget airlines connecting small cities
                                                                                                                                                                                                                                                                                                                          • Vision Airlines, a former charter operator
                                                                                                                                                                                                                                                                                                                            • Direct Air charters planes from other carriers
                                                                                                                                                                                                                                                                                                                              • Sun Country Airlines goes long-haul
                                                                                                                                                                                                                                                                                                                                • Allegiant Air
                                                                                                                                                                                                                                                                                                                                  • Legacy carriers now charge for extras like LCCs
                                                                                                                                                                                                                                                                                                                                    • Low distribution costs
                                                                                                                                                                                                                                                                                                                                      • An issue with aircraft, however
                                                                                                                                                                                                                                                                                                                                        • Low frequency
                                                                                                                                                                                                                                                                                                                                          • REDjet, a new Caribbean LCC
                                                                                                                                                                                                                                                                                                                                            • Four non-stop routes so far
                                                                                                                                                                                                                                                                                                                                              • Figure 45: REDjet’s initial route network alongside those of the competition, May 2011
                                                                                                                                                                                                                                                                                                                                            • LCC model taking over Indian domestic market
                                                                                                                                                                                                                                                                                                                                              • Indian domestic market has become low-cost
                                                                                                                                                                                                                                                                                                                                                • Air India Express
                                                                                                                                                                                                                                                                                                                                                  • LCC model necessary for survival
                                                                                                                                                                                                                                                                                                                                                    • Surging growth in India’s domestic market
                                                                                                                                                                                                                                                                                                                                                      • Fare increases criticised
                                                                                                                                                                                                                                                                                                                                                        • Dedicated LCCs taking share
                                                                                                                                                                                                                                                                                                                                                          • Figure 46: Indian domestic passenger traffic, November 2010
                                                                                                                                                                                                                                                                                                                                                        • Kingfisher and IndiGo neck and neck in Q1/2011
                                                                                                                                                                                                                                                                                                                                                          • Strong load factors
                                                                                                                                                                                                                                                                                                                                                            • IndiGo, the little airline with big growth plans
                                                                                                                                                                                                                                                                                                                                                              • IndiGo will start with most popular foreign routes
                                                                                                                                                                                                                                                                                                                                                                • IndiGo enjoys strong financial support
                                                                                                                                                                                                                                                                                                                                                                  • GOL, the South American champion
                                                                                                                                                                                                                                                                                                                                                                    • Competing with bus transport
                                                                                                                                                                                                                                                                                                                                                                      • Varig acquisition in 2007
                                                                                                                                                                                                                                                                                                                                                                        • GOL’s brands
                                                                                                                                                                                                                                                                                                                                                                          • VARIG
                                                                                                                                                                                                                                                                                                                                                                            • SMILES
                                                                                                                                                                                                                                                                                                                                                                              • Gollog
                                                                                                                                                                                                                                                                                                                                                                                • The Voe Fácil card
                                                                                                                                                                                                                                                                                                                                                                                  • A challenge to GOL?
                                                                                                                                                                                                                                                                                                                                                                                    • Figure 47: Brazil’s domestic market share by carrier, March 2011
                                                                                                                                                                                                                                                                                                                                                                                  • Azul has only existed for little over two years
                                                                                                                                                                                                                                                                                                                                                                                    • 50 destinations by year-end 2011
                                                                                                                                                                                                                                                                                                                                                                                      • Fleet of Embraer E-jets and ATR 72 turboprops
                                                                                                                                                                                                                                                                                                                                                                                        • 40 potential destinations
                                                                                                                                                                                                                                                                                                                                                                                          • Figure 48: Azul’s current fleet in service and on order, May 2011
                                                                                                                                                                                                                                                                                                                                                                                        • Strong load factors in spite of fleet expansion
                                                                                                                                                                                                                                                                                                                                                                                          • Rapidly gaining share
                                                                                                                                                                                                                                                                                                                                                                                            • Azul is riding crest of growth wave
                                                                                                                                                                                                                                                                                                                                                                                              • An IPO on the horizon?
                                                                                                                                                                                                                                                                                                                                                                                                • Reproducing JetBlue’s business model
                                                                                                                                                                                                                                                                                                                                                                                                • Major Airline Alliances

                                                                                                                                                                                                                                                                                                                                                                                                    • Code-sharing a key feature
                                                                                                                                                                                                                                                                                                                                                                                                      • Alliances have about a 50% share of supply
                                                                                                                                                                                                                                                                                                                                                                                                        • Star grows share, oneworld loses
                                                                                                                                                                                                                                                                                                                                                                                                          • Figure 49: Global alliances vs LCCs and unaligned carriers seats, ASKs and flights, March 2011 vs March 2010
                                                                                                                                                                                                                                                                                                                                                                                                        • Reaching out to LCCs
                                                                                                                                                                                                                                                                                                                                                                                                          • American and WestJet
                                                                                                                                                                                                                                                                                                                                                                                                            • Airline alliances date only from 1997
                                                                                                                                                                                                                                                                                                                                                                                                              • Star Alliance the clear leader
                                                                                                                                                                                                                                                                                                                                                                                                                • Star is strong in Continental Europe, North & South America and East Asia
                                                                                                                                                                                                                                                                                                                                                                                                                  • Figure 50: Airlines, by alliance, 2011
                                                                                                                                                                                                                                                                                                                                                                                                                • Recent developments
                                                                                                                                                                                                                                                                                                                                                                                                                  • Oneworld
                                                                                                                                                                                                                                                                                                                                                                                                                    • Airberlin
                                                                                                                                                                                                                                                                                                                                                                                                                      • Kingfisher Airlines
                                                                                                                                                                                                                                                                                                                                                                                                                        • SkyTeam
                                                                                                                                                                                                                                                                                                                                                                                                                          • Saudi Arabian Airlines
                                                                                                                                                                                                                                                                                                                                                                                                                            • Middle East Airlines
                                                                                                                                                                                                                                                                                                                                                                                                                              • Figure 51: Middle East Airlines’ route network, 2011
                                                                                                                                                                                                                                                                                                                                                                                                                            • Other airlines on the runway
                                                                                                                                                                                                                                                                                                                                                                                                                              • Star Alliance
                                                                                                                                                                                                                                                                                                                                                                                                                                • Ethiopian Airlines – a future member
                                                                                                                                                                                                                                                                                                                                                                                                                                  • Figure 52: : Ethiopian Airlines’ passenger route network, 2011
                                                                                                                                                                                                                                                                                                                                                                                                                                  • Figure 53: Ethiopian Airlines’ cargo route network, 2011
                                                                                                                                                                                                                                                                                                                                                                                                                                  • Figure 54: Ethiopian Airlines’ fleet, including planes on order, 2011
                                                                                                                                                                                                                                                                                                                                                                                                                                • Believes alliances are restricting
                                                                                                                                                                                                                                                                                                                                                                                                                                  • Does have code-shares
                                                                                                                                                                                                                                                                                                                                                                                                                                    • Maintained its service standard during recession
                                                                                                                                                                                                                                                                                                                                                                                                                                      • Direct connection to Europe from Asia Pacific
                                                                                                                                                                                                                                                                                                                                                                                                                                      • Distribution Trends

                                                                                                                                                                                                                                                                                                                                                                                                                                          • Direct channels 80% cheaper than GDS
                                                                                                                                                                                                                                                                                                                                                                                                                                            • Direct Connect
                                                                                                                                                                                                                                                                                                                                                                                                                                              • American tries to go it alone
                                                                                                                                                                                                                                                                                                                                                                                                                                                • A resolution to be expected?
                                                                                                                                                                                                                                                                                                                                                                                                                                                  • From commodities to personalised offers
                                                                                                                                                                                                                                                                                                                                                                                                                                                    • DOJ restrictions placed on Google
                                                                                                                                                                                                                                                                                                                                                                                                                                                      • Deal to affect offline agencies also
                                                                                                                                                                                                                                                                                                                                                                                                                                                        • Airlines versus GDSs – the battle shifts into courts
                                                                                                                                                                                                                                                                                                                                                                                                                                                          • Suits allege anti-competitive practices
                                                                                                                                                                                                                                                                                                                                                                                                                                                            • Sabre sues AA and joins as a defendant in another case
                                                                                                                                                                                                                                                                                                                                                                                                                                                              • Sabre joins Travelport as defendant
                                                                                                                                                                                                                                                                                                                                                                                                                                                                • American’s claims
                                                                                                                                                                                                                                                                                                                                                                                                                                                                  • Airlines want more control over distribution
                                                                                                                                                                                                                                                                                                                                                                                                                                                                    • Airlines need to cut costs
                                                                                                                                                                                                                                                                                                                                                                                                                                                                      • Complex corporate fares
                                                                                                                                                                                                                                                                                                                                                                                                                                                                        • Travel agents support the GDS’ position
                                                                                                                                                                                                                                                                                                                                                                                                                                                                          • Direct Connect distribution to result in higher costs
                                                                                                                                                                                                                                                                                                                                                                                                                                                                            • Airlines want to sell ancillaries directly
                                                                                                                                                                                                                                                                                                                                                                                                                                                                            • Frequent-Flyer Programmes

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                • Airlines make money by selling miles
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  • FFP passengers generate 3-9% of total RPKs
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    • More than half a billion members
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      • Figure 55: Frequent-flyer programme membership totals, 2008-11*
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    • Similar structure with some differences
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      • Figure 56: Comparative details of major airline frequent-flyer programmes, 2011
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    • FFP miles generally expire after three years, but not all
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      • Blackout periods and limited redemptions
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        • Redemption possibilities limited at peak periods
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          • Speed up security for frequent flyers?
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            • More selective screening
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              • Relying on historical FFP data
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                • TSA scheme would add to FFP perks
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  • General improvement in security surveillance procedures
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    • ‘Secure Flight’ implemented
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      • About 3% still subjected to secondary searches
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      • What Next?

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          • 800 million more travellers by 2014?
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            • China the biggest contributor to growth
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              • Great opportunities but also major challenges
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                • Forecast details
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  • Top ten to make up 95% of the world market
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    • Figure 57: Top ten international air passenger markets in 2014
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  • China, UAE and Vietnam to grow fastest
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    • Airfreight has bounced back strongly
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      • Top ten to make up almost 100% of world market
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        • Figure 58: Top ten international airfreight markets in 2014
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      • Fastest-growing markets
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        • Regional outlook over period 2009-14
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          • US to continue as world’s biggest aviation market
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            • More mergers needed
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              • US Airways to merge at some point
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                • Branson ready to sell up?

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                Companies Covered

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                To learn more about the companies covered in this report please contact us.

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                Airlines Worldwide - June 2011

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                £1,495.00 (Excl.Tax)