SkyTeam/Delta Plans To Reduce Winter Transatlantic Capacity By 15%

by: Siva Vayali - May 19th, 2011   Filed under: Airlines, Airports 1 Comment

Delta Air Lines today announced plans to reduce the transatlantic capacity by 15% during winter. Delta’s President Edward H. Bastian made this announcement during the presentation in Bank of America Merrill Lynch Investor Conference. This is in contrast to the original plans to increase the capacity. Delta itself will reduce the transatlantic capacity by 10–12 % (against the original plan to increase the capacity by 3–4 %). The JV partners will reduce the capacity by 7–9 % (against the original plan to increase it by 7–8 %).

Transatlantic business has been the weakest link during the March quarter and almost entirely contributed to the year-over-year profit decline. Delta is planning to align its revenue, capacity and structure to build a sustainable business model at $3+ per gallon jet fuel. Delta anticipates the jet fuel price to be $3.20 for the June quarter and $3.10 for the September quarter. Because of the additional expenses due to fuel, Delta plans to keep other costs flat by reducing capacity, retiring more aircraft.

Memphis hub reduced: Delta already indicated that it would reduce the departures from Memphis by 25%. Even though Delta claims that the reduction in departures will not significantly reduce the ASM, I do not believe it. Would Memphis be next Cincinnati? Would it cut the daily Memphis – Amsterdam service? It is possible.

New York and Atlanta will have minimal impacts: New York JFK and Atlanta would retain most of its routes as JFK has the best O&D traffic and ATL is the world’s largest connecting airport. But expect frequencies to be trimmed on many sectors, especially from ATL.

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Some thoughts on the World Airports Traffic Data

by: Siva Vayali - March 16th, 2011   Filed under: Airports 2 Comments

The Airports Council International released its preliminary results of world airports traffic data for 2010. ACI reports the traffic data under three categories: passenger traffic, cargo and aircraft movements.

As usual, Atlanta (ATL) retained the top spot on passenger traffic. But, Beijing (PEK) dislodged London Heathrow (LHR) to become number two. Beijing grew 13% to take the clear number two spot. Heathrow slipped to number four.

Hong Kong (HKG) overtook Memphis (MEM) as the top cargo airport, which is not a surprise.

US airports continue to dominate in the aircraft movements category, reflecting the fact that smaller regional aircrafts make up a significant part of the carriers fleets.

Do these numbers show any clear trend?

Yes, they do.

  • The passenger and cargo traffic are definitely growing to reach the pre-recession levels.
  • Asia, especially China, will set the trends in future with North America and Europe slowing down.
  • London Heathrow is slowly losing its position as the largest international airport. Dubai (DXB) already claims this title. The other super hubs of Europe, Paris (CDG), Frankfurt (FRA) and Amsterdam (AMS) too will grow slower.
  • China’s export machine will propel continued cargo growth at Hong Kong and Shanghai (PVG).
  • The US airline industry uses a disproportionate number of smaller aircrafts to transport passengers, making it difficult to drive up efficiency. One example is Charlotte (CLT). The airports ranks number 25 in total passengers, but lands at number 7 in aircraft movements.

Some interesting questions

How would the on going crisis in the Middle East affect Dubai’s astonishing growth curve?

Would the soaring oil price slow down the world economy, especially the US economy, resulting in difficult periods for the US airline industry?

What would be the trend lines in another 10 years? Most airlines would have B787 and A350 type aircrafts in their fleets. Would the Hub-and-Spoke system survive, especially in Europe?

Let’s wait and see!

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