Questions, questions, questions

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By TESTCustomwebLP TESTCustomwebLP June 24, 2015 14:01

Questions, questions, questions

When people ask me what is going on in the industry my mind always goes blank because there is simply too much to mention and most of the time the interesting things are embargoed but if we were going to pose some questions then maybe we could make a start with the following:

Will the Airbus E-Fan change everything? Are we seeing the very first signs of the dramatic technology leap post 2030 that will start the next order boom and shorten the life of those late-order Neo and Max aircraft?

For the more immediate future: Will the C-Series receive further orders on the back of a 4% performance enhancement from 2018? Or indeed maybe this will simply assist those who have already ordered the aircraft and keep them from cancelling the same. Is the Aeroflot order cancellation from last week really a cancellation – or does the airline require a little assistance on price and financing of the same…..? And most importantly of all at this time, will Thai AirAsia X weather the growing international ban on all Thai aircraft?

The announcement today that Thai AirAsia X is cutting back all important Japan routes is a very serious blow to an airline that was already in trouble; I for one worry about the future of this airline. Also Thai Airways received another 777-300ER yesterday, so without doubt there is an older aircraft in the fleet that is now grounded, and so this will continue as deliveries are made and international route growth is banned. Thai should start selling or leasing out aircraft at speed.

Also of extreme interest to all at Paris is the macro economic impact on the wider airline industry. While it remains true that Greek airlines will be hit very hard indeed if there is a Greek exit from the Eurozone, currently Greek airlines and all airlines serving Greece are suffering a current reduction in summer traffic because of tourist worries both domestic and international as European governments warn tourists to take cash with them for the entire stay in case ATMs and banks run dry.

But away from Greece and its unwanted limelight, there is troubling information coming out of Brazil at this time. The GBTA Foundation, the education and research arm of the Global Business Travel Association (GBTA) – yesterday announced the results of its latest GBTA BTI Outlook – Brazil report, a semi-annual business travel outlook and overall economic analysis of Brazil. For the second time in a row, the GBTA Foundation significantly downgraded its business travel spending forecast for Brazil.

After reaching US$32 billion in 2014, business travel spending is forecast to grow only 1.8% in 2015, down from the 2014H2 projection of 4.1%. The GBTA cites the struggling domestic economy, the lack of significant infrastructure improvements and the troubled regional economy for their findings, along with accelerating inflation during a period of slow economic growth. Most worrying of all is the particularly acute water shortage.

Brazil’s reservoirs are at historically low levels and are on par with the worst month of 2001 when Brazil was forced to ration electricity – electricity rates are already climbing fast with predictions of a 30% annual increase for this year adding to inflation worries. Also in Brazil fuel prices continue to increase. The government controls all areas of domestic oil consumption and has been increasing prices steadily for some years now. Now a further blow to Brazil-based airlines may well come in 2016 as the country hosts the Olympic Games during the summer weeks. All of the domestic flag carriers or main hub airlines for every Olympic Games city this century have seen a double blow of being forced to pay to be the official airline of the games while also seeing traffic decrease exponentially, it is likely that TAM will suffer similarly and Gol will also be affected. Brazil remains the 8th largest business travel market in the world.

One airline that could gain from the Rio Olympics next year is Delta Air Lines, but in the here and now it is interesting to note that Delta’s $2 one-way domestic increase failed to gain traction over the past few days and the airline has now adjusted fares back to Thursday June 18 levels. Even so the Delta domestic fare structure is still averaging $5.50 higher than at the start of June 2015 and that will noticeably lift domestic yield for this period, maybe even by 1%.

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By TESTCustomwebLP TESTCustomwebLP June 24, 2015 14:01