[NEWS] GAME CHANGER - BLOCKBUSTER BOEING 737 ORDER FROM RYANAIR

September 8, 2014 - Boeing (NYSE: BA) just announced the launch of the 737-MAX-200 series planes with the initial customer being a long time customer Ryanair (IRXL IE: RYA4B).

The following are some key features of the 737-MAX 200 in comparison to the current generation 737-MAX:

Reference - Information taken from press release issued by Boeing. http://boeing.mediaroom.com/2014-09-08-Boeing-Launches-737-MAX-200-with-Ryanair  Retrieved on September 8, 2014.

The following infographic shows the evolution of the 737 plane in terms of passenger capacity:

Reference - Information taken from wikipedia. First flight information taken from book "Boeing 737-100 and 200" by Mike Sharpe and Robbie Shaw under section 9 Chronology.  Retrieved on September 8, 2014.

ANALYSIS
With modifications to the galleys and the use of thinner seats, the plane type would be capable of carrying up to 200 passengers. As a comparison, the Airbus A320 neo to be introduced can only accommodate 164 passengers in a typical 1-class configuration. [2]

This can be a potential big win for Boeing in managing the demands of low cost carriers searching for additional seat revenue and lowering costs.

Reference
[1] Information taken from wikipedia. First flight information taken from the book "Boeing 737-100 and 200" by Mike Sharpe and Robbie Shaw under section 9 Chronology.  Retrieved on September 8, 2014.
[2] Information taken from wikipedia. http://en.wikipedia.org/wiki/Airbus_A320_family Retrieved on September 8, 2014.
[3] RyanAir photo taken from  http://s1.ibtimes.com/sites/www.ibtimes.com/files/styles/v2_article_large/public/2014/09/08/737-max-200.jpg?itok=_okc3zMw

[INSIGHT] WHICH AIRPORT WAS THE BUSIEST IN 2013?

2013 in REVIEW
From the IATA [1],

• On average, there are more than 8 million people flying every day. 2013 total passenger numbers were 3.1 billion which breaks the 3 billion barrier for the first time.
• The industry supports over 57 million jobs and generates $2.2 trillion US in economic activity worldwide. 

The following is the list of the world's busiest airports by passengers for 2013 (with comparisons to 2012) [2]:
  

 Key Observations

• The top 20 airports accounted for approximately 40% of the world's traffic in 2013. Total passengers for these airports increased by 3.3% from 2012. 
• Although passenger traffic decreased by 5.5%, Atlanta Hartsfield-Jackson International Airport remains the busiest airport by passenger for the a 15th year in a row.
• Dubai, Istanbul and Kuala Lumpur continued to make strides by having the 3 highest percentage increases in passengers.  All three airports feature high growth airlines (Dubai - Emirates (Airline Code: EK), Istanbul - Turkish (TK) and Kuala Lumpur - Air Asia and Malaysian (MH)).

DETAIL LOOK

The following table provides more information on each of the Top 20 airport (click picture for a larger view). [3][4][5]

[1] - A transfer is required from subway or Long Island Railway to AirTrain before reaching the airport. A separate fee is collected.

Key Observations

• The biggest mover is Kuala Lumpur International Airport which moved up 7 spots into the top 20 in 2013.
• Amsterdam Schiphol Airport is the closet to the city centre while Kuala Lumpur is the furthest. 
• All the top 20 airports now featured some form of free-wifi for passengers.  However, there are only a handful like Amsterdam, Hong Kong and Singapore which have unlimited access or would not require a separate login.
• All the top 20 airports are north of the equator except for the Jarkata Soekarno-Hatta International Airport  (06°07′32″S 106°39′21″E) 
• Although passenger traffic decreased by 5.5%, Atlanta Hartsfield-Jackson International Airports remains the busiest airport by passenger for the a 15th year in a row.
• Dubai, Istanbul and Kuala Lumpur continued to make strides by having the 3 highest percentage increases in passengers.  All three airports feature high growth airlines (Dubai - Emirates (Airline Code: EK), Istanbul - Turkish (TK) and Kuala Lumpur - Air Asia and Malaysia Airline (MH)).
• For convenience most of top 20 have direct access to hotels within the airport except four which are all located in the Americas.

TIME ZONES, LOCATIONS AND ALLIANCES

The following map provides information on where the Top 20 Airports by passengers are located around the world. The map also provides key data on timezones and alliance membership (click pic for a larger view). [6][7]

Key Observations

• All airlines are in one of three alliances (SkyTeam, Star Alliance or One World) except for Emirates and JetBlue which operate independently though each have some codeshare partnerships. 
• Most of the Top 20 airlines are located in Asia. 
• The longest current non-stop flight by distance is from Sydney, Australia to Dallas, USA by Qantas (QF). It is 8578 nautical miles in distance and is flown using a Boeing 747-400 currently. The trip takes 15hr 25min and travels over 15 time zones. [8]

Reference
[1] http://www.iata.org/pressroom/pr/Pages/2013-12-30-01.aspx Retrieved on September 8, 2014.
[2] Passengers data taken from Airport International Council website http://www.aci.aero/Data-Centre/Annual-Traffic-Data/Passengers Retrieved on September 8, 2014.
[3] Wifi and direct train access information is taken from each airport's website. Retrieved on September 6, 2014.
[4] Hotel information is taken from http://www.sleepinginairports.net/hotels/ Retrieved on September 6, 2014.
[5] Other information is taken from Wikipedia and each airport's website. Retrieved on September 2-6, 2014.
[6] Time zone map is taken from http://eurock2016.org/wp-content/uploads/2014/03/HiRes_timeZone.jpg  Retrieved on September 6, 2014. 
[7] Alliance information taken from each airline's website. Retrieved on September 6, 2014. 
[8] Non-stop flight information is taken from Wikipedia. http://en.wikipedia.org/wiki/Non-stop_flight Retrieved on September 6, 2014.

[NEWS] 100 YEARS OF COMMERCIAL AVIATION

Reference - http://aerotoons.com/blog/2010/08/ Retrieved on September 8, 2014


2014 marks the 100 year anniversary for the commercial aviation industry.

From the first commercial was took place between two cities 21 miles apart (St. Petersburg, Florida and Tampa, Florida) with a flying time of 23 minutes. The plane was a Benoist XIV (see pic below), a two seater air boat with a small flight deck with accommodation for the captain and one paying passenger. This first flight was piloted by Tony Jannus. [1]

Over 100 years, the industry has transformed the way people travel between destinations, build relationships and conduct business. In a future [INSIGHT], we will explore the major milestones for the industry in the last 100 years.

Reference
[1] Google search "First commercial 737 flight"  Retrieved on September 8, 2014

[INSIGHT] AIR INDIA, STAR ALLIANCE AND THE INDIAN AVIATION LANDSCOPE

HEADLINE

Air India joined the Star Alliance in a ceremony on July 11, 2014 after its second attempt at making it to the elite airline group. [1]

About this Entry
In this entry, we will explore the Indian aviation market, Air India and its opportunities and challenges moving forward as it joins Star Alliances.

BACKGROUND

With a population of 1.248 billion people as at July 1, 2014 [2], India is a lucrative market for the airline industry. 

For 2013, India's Ministry of Tourism reported improvement across the board for both domestic and international travels.  There is an appetite for airlines to expand services to cover the increase of travellers within and outside of the region.

Reference - Ministry of Tourism - India 2013 data (Retrieved on August 25, 2014)
http://tourism.gov.in/writereaddata/CMSPagePicture/file/marketresearch/Incredible%20India%20final%2021-7-2014%20english.pdf 

The major hubs for the country are New Delhi (Airport Code: DEL), Mumbai (BOM) with secondary hubs in Chennai (MAA), Hyderabad (HYD) and Bangalore (BLR). In the past five years, after some industry consolidation, four main domestic players exist to serve this country - Air India (IATA Airline Code: AI), Jet Airways (9W), IndiGo (6E) and SpiceJet (SG). 

New entrants from Air Asia and a joint venture between Tata and Singapore Airlines named Vistara will further make the aviation market more competitive both domestically and internationally.

Reference - Air traffic statistics for March 2014 (Retrieved on August 25, 2014)

1.  http://www.aai.aero/traffic_news/mar2k14annex3.pdf
2. Jump up http://www.aai.aero/traffic_news/mar2k14annex2.pdf
3. Jump up http://www.aai.aero/traffic_news/mar2k14annex4.pdf

The following chart illustrates the current revenue and net profit figures for the main players. Over capacity and pricing pressure within the domestic market had caused three out of the four players to incur a net loss from the latest reporting year. This trend will likely to continue with the introduction of additional domestic players and increased pressure from foreign airlines in 2014/15.

Reference - All figures are taken from Wikipedia and airline websites and are for FY2013 (except for SpiceJet which is for FY2012) Retrieved on August 25, 2014

The following illustrates the domestic market shares for the major players from April 2012 to June 2014. One key observation here is that low cost carrier SpiceJet has made significant strides in the market up 8.7% from 2012 and eroding market shares from the other players. Jet Airways is affected the most as it moved from being the market leader to No. 2 with a drop of 8.1% share over the past 3 years.

Reference - 2012 and 2013 market share percentages are taken from dsij.in website. Retrieved on August 18, 2014 http://www.dsij.in/article-details/articleid/7478/market-share-of-scheduled-domestic-airlines-for-april-2013.aspx 
- 2014 percentages are converted from the June 2014 passengers information taken from the Directorate General of Civil Aviation - India website  http://dgca.nic.in/reports/Traffic-ind.htm 
- Jet Airways percentages include JetLite 
 
FOCUS - AIR INDIA
Air India is the flag carrier of India formed in 1932 by Tata Sons (now Tata Group). It is the fourth largest airline in India in domestic market share and operates a fleet of Airbus and Boeing aircrafts. [3] With the introduction of the 777-300ER and the 787 Dreamliners, the average age of the fleet is 9.3 years. [4]

As of August 2014, Air India serves 60 domestic destinations and 31 international destinations in 19 countries across Australia, Asia, Europe and North America through its hubs in New Delhi and Mumbai. [5]

The airline has been facing financial challenges since 2006. It's merger with Indian Airlines in 2007 expedited the losses which required further restructuring efforts. [6] As of the last fiscal year, its net loss is ~$350 US million (which is an improvement of 44%). [7]

CURRENT MARKET CONDITIONS
Domestic

Air India is under tremendous pressure in its home market with both low cost carriers IndiGo and SpiceJet making inroads on market shares since 2012. Although it is a full service airline, many of the core amenities like meal service have been pared down to match some of the lower cost carriers (for example, flights less than 90 minutes do not offer a hot meal). [8]

In October 2014, a new entrant will join this crowded marketplace. Designed as a full service airline, Vistara, a joint venture between Singapore Airlines (49% ownership) and Tata Sons Limited (51%) [9] will serve Northern India trunk routes (e.g. Mumbai, Goa, Bangalore) from its New Delhi hub with fuel efficient Airbus 320neos planes. An expansion to international destinations is being considered after regulation changes are being implemented in 2015/16. [10]

Analysis

With the debut of Vistara and continued pressure from current market leaders, Air India might face some pricing and capacity pressure for its domestic operations. However, joining Star Alliance in July 2014 would no doubt counter some of these challenges with increased code-sharing arrangements with other member airlines. As of August 2014, 10 of the 26 member airlines already have agreements with Air India to cross-sell flights and share revenue. [11] This will help Air India fill its planes with additional passengers and cargo. 

Future Success Factors: 

1. Closely monitor capacity and demands and make quick adjustments, as necessary
2. Monitor product mix (e.g. service level) to ensure it differentiates itself from low cost airlines 
3. Continually increase cooperation with other Star Alliance airlines to build code sharing agreements and marketing efforts. This will ensure that there is more feeder traffic to India through this flag carrier

International

While domestic heavy weights SpiceJet and IndiGo have not been posing significant pressure to Air Asia's international operations. Jet Airways with an international footprint and a similar full service product is a main challenge to Air India's dominance in the marketplace from India. Helping Jet Airways is a new bi-literal agreement between India and UAE (Abu Dhabi) which resulted in Ethiad Airways buying a 24% stake for $330 US Million.  [12][13][14]

A similar agreement had been finalized with Emirates last year which will increase yearly seats from 54,200 to 65,200 by Summer 2015 [15]. Emirates (IATA Code: EK) is the dominant airline serving India currently with some routes using the Airbus A380.  

Under the Air Asia - India brand and based out of Bangalore, the low cost carrier specialist Air Asia started operations in June 2014 focusing on Southern secondary Indian cities such as Chennai, Kolkata to its core operations in Bangkok, Kuala Lumpur and Singapore. [16]

Analysis

For eastern traffic, with the bi-literal agreements signed between India and UAE/Emirates, there is a shift of using the Middle East and away from East and Southeast Asia as hubs to Asia and Australia. Air India would need to evaluate how it can closely cooperate with other Star Alliance airlines in the Asia region to ensure that passengers would take the direct flight option over making a stop in the Middle East.

For western traffic, Air India should evaluate which are the routes that can provide higher yields to Europe and North America using newer airplanes with better fuel management.

Future Success Factors: 

1. Closely monitor slot allocations to ensure that new entrants would have a difficult time getting slots in over capacity airports like New Delhi and Mumbai 
2. Work closely with other Star Alliance partners to build a network that would enhance its presence as the lead international Indian carrier
3. Ensure its products are on par with other competitors

FINAL CALL
Air India faces an uphill battle in returning to profitability. In the next five years, continued focus should be placed on cost management, debt reduction and utilization of its Star Alliance membership to compete against domestic and international airlines. 

References
[1] Air India joining Star Alliance http://www.staralliance.com/en/press/ai-joining-prp/ Retrieved on August 18, 2014
[2] India's population - July 2014 http://www.indiastat.com/default.aspx Retrieved on August 18, 2014
[3] Air India Fleet information - August 2014 - http://www.airindia.in/fleet-details.htm Retrieved on August 18, 2014
[4] Average age of Air India's fleet - http://www.planespotters.net/Airline/Air-India Retrieved on August 18, 2014
[5] Air India current flight network - http://www.airindia.in/network.htm Retrieved on August 18, 2014

[6] "What sent Air India crashing?". Economictimes.indiatimes.com. 16 July 2009.  Retrieved on August 18, 2014
[7] Air India financial results for FY 2013. Air India - http://articles.economictimes.indiatimes.com/2014-04-01/news/48767414_1_air-india-express-operating-revenue-load-factor  Retrieved on August 18, 2014
Conversion to $US completed using Oanda.com http://www.oanda.com/currency/historical-rates/   Retrieved on August 25, 2014

[8] Air India in-flight experience - http://www.airindia.com/inflight-experience.htm Retrieved on August 18, 2014

[9] "Vistara’s plan is flying". Daily News and Analysis. Retrieved on August 18, 2014
[10] Eliminating the 5 year operational / 20 aircraft rule http://indianexpress.com/article/business/business-others/civil-aviation-ministry-to-propose-abolition-of-520-rule-for-domestic-airlines-to-pm/  Retrieved on August 18, 2014
[11] Counting the number of code share partners from Air India's website http://www.airindia.in/code-share-partners.htm Retrieved on August 18, 2014
[12] Biliteral agreement between India and UAE (Abu Dhabi) http://pib.nic.in/newsite/erelease.aspx?relid=96968) Retrieved August 25, 2014

[13] Jet-Ethiad Strategic Alliance details including route network and key information of companies  
http://www.jetairways.com/EN/CA/AboutUs/JetAirwaysEtihadStrategicAlliance.aspx Retrieved on August 18 2014.
[14] Jet-Ethiad Strategic Alliance financial details - http://aviationweek.com/awin-featured-story/etihad-completes-purchase-24-jet-airways
[15] http://www.livemint.com/Companies/LSvALwXzhIu1uVKX4y6g8O/Increase-in-seats-to-Dubai-could-hurt-Air-India-Jet-Airways.html  Retrieved on August 18, 2014
[16] Air Asia - India Route Map - http://www.airasia.com/in/en/where-we-fly/route-map.page Retrieved on August 25, 2014

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