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Report: Aviation Update

The airline industry is reacting to economic turbulence with innovation on routes and in-flight offerings. By Gary Noakes

 

As baseball legend Casey Stengel once said, “Never make predictions, especially about the future.” This seems like good advice as 2017 and the Trump era begins.
President Trump is the first former airline boss to take office in the White House — he ran Trump Shuttle for three years between New York, Boston and Washington before its demise in 1992 — so it could be reasonable to assume he will take an active interest in the U.S. airline industry.

His protectionist stance on trade may come into play at this point. Take China as an example; the flurry of new routes to Chinese cities seen in 2016 might not be repeated if a trade war begins. Similarly, his thoughts on restricting entry to Mexicans may affect travel patterns and he may choose to discourage travel to Cuba, despite President Obama loosening some restrictions during his tenure. Then there is the on-going dispute between the Gulf airlines and the big U.S. carriers over alleged breaches of open skies, affecting Emirates, Etihad and Qatar Airways.

Other factors will have a more direct impact on airlines: rising fuel prices and new costlier labor agreements mean U.S. carriers will not repeat 2016’s swathe of route launches, particularly internationally. Reining in capacity will, airlines hope, at this time of high demand, stop the decline in average fares that consumers have enjoyed in the last few years. One contributor to this slide has been the ‘disrupters’, in the shape of budget transatlantic airlines. If last year was about new transpacific routes, this year the action is across the Atlantic.

A key development will be Norwegian Air’s New York to Edinburgh flights beginning this summer. Norwegian is the launch customer for the Boeing 737 MAX, a narrow body jet with 189 seats that will fly to an as yet unnamed second-tier New York airport. This ultra-low cost formula means the airline is touting one-way fares of just $69.

There is more: a deal in the last days of the Obama administration saw the Department of Transportation approve a licence for Norwegian Air International, an Irish subsidiary, which will see Boston and New York linked with 737 flights to Cork this summer. This followed three years of U.S. carrier opposition against Norwegian’s plan to hire staff from Asia on lower pay rates, something it agreed not to do. Norwegian has a track record of introducing ultra-low fares and is already rocking the market with its Boeing 787s; wide bodied aircraft that have 20% lower fuel burn than similar jets.

It began flying from Las Vegas, Oakland and Boston to London Gatwick last year and this year ramps up frequencies from Los Angeles, Oakland, Fort Lauderdale and Orlando to London. A typically bold move sees a second daily from JFK to London from August, departing Gatwick at 6am, arriving in New York at 9am. The return flight arrives in the UK just before midnight, meaning budget leisure travelers will likely make up the bulk of its passengers, along with a few red-eyed business travelers.

It’s not all about the U.K.; Norwegian began flying to Paris from JFK, Los Angeles and Fort Lauderdale in July and adds Orlando this summer. Then flights to Barcelona from Los Angeles, Newark and Oakland will be added this June, plus Fort Lauderdale in August. Before this, Oakland gets a Copenhagen service in March.
Germany has watched and learned: Lufthansa’s budget brand Eurowings stamps its presence further in the U.S. this summer, beginning flights from Seattle, Las Vegas and Orlando to Cologne/Bonn in July, where it has connecting services throughout Europe. Later, expect Air France/KLM to announce a number of US routes via a new budget subsidiary.

Iceland is also part of this revolution, with Reykjavik a key place to change planes and head to destinations in Europe. As well as Icelandair, which led the way, Icelandic budget rival WOW Air has made big inroads into the market; in June it brings Pittsburgh its first year-round transatlantic connection since 2010.
It’s not all about low cost; among legacy airlines, 2017 sees Delta become the first U.S. carrier to introduce the Airbus A350, which will fly firstly to Asia. More importantly, the new generation twinjet will carry the new Delta One business cabin, which, for once, promises to be truly revolutionary, propelling a U.S. airline into the major league of premium global carriers. With sliding doors enclosing individual cabins, Delta can truly argue that it is redefining international business class travel with this new cabin.

Ahead of this comes United’s Polaris business cabin, which, while not as fancy, is a big improvement, offering aisle access for all. Fourteen new Boeing 777-300ERs will have Polaris first, with one operating Newark-San Francisco until May 4 and another due to start San Francisco-Hong Kong on March 25.
Finally, back to politics and over in Europe, some predict a Trump Slump as many avoid the U.S.A. for their vacation. Those empty plane seats should, however, find some takers, as Great Britain has suddenly become a bargain. After the country voted to leave the E.U. in June, the pound crashed around 20%, meaning a dollar that bought 68 pence in May 2016 now buys around 80 pence. The U.K. is a bargain right now. Start selling!

2017 Trends
Taking it to the MAX: This year sees the entry of the Boeing 737 MAX, not just for Norwegian, but also for Southwest Airlines, which has a big order for the aircraft that cuts fuel bills and flies up to 500 miles further, so expect new routes.

Loyalty brings fewer rewards: The incentive to book flights based on reward points will become less pronounced in 2017, as airlines continue to become less generous. Most now base points on the amount spent, not the distance traveled.

Cuba’s air travel market settles: The initial flurry of route announcements to Cuba has turned into cancellations from some carriers, which over-estimated demand. Until full restrictions are lifted — unlikely under Trump — caution will prevail.

Tweeting from on high: 3G in the skies brought a big increase in connectivity in the year or so in which it has become more common. More than half of AeroMobile’s airline customers offer 3G, with the U.S. topping the league for usage.

Sitting comfortably, paying less — for now: Amex predicts US domestic business class fares will fall 2.5-5.5 percent in 2017. Enjoy it while you can: fares could be pushed up by an increase in fuel and employee costs, along with a capacity squeeze that includes the consolidation of Alaska Air and
Virgin America.

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