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What The Big Three US Carriers’ 2020 Revenue Streams Reveal About 2021 Capacity

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International travel was absolutely devastated in 2020. Airlines moved around their capacity accordingly and pulled down in markets where they were historically weak. Combined, these results show that airlines saw significantly reduced revenue in all international markets. However, Latin America brought each of the big three US airlines over $1 billion in revenue for the year, while demand for transpacific travel remained weak.

LAX Delta Air Lines and American Airlines
US airlines had a tough 2020 but follow the revenue to figure out where airlines flew their capacity. Photo: Getty Images

Latin America proves strong

Latin America and the US have some strong ties, and airlines reap a lot of financial benefits as a result. In 2019, US airlines made over $11 billion in the region. For 2019, the breakdown was as follows:

  1. American Airlines: $5.047 billion
  2. United Airlines: $3.78 billion
  3. Delta Air Lines: $2.985 billion

Historically strong American ran off with Latin American revenue. The carrier flies to more cities in South America and Latin America than United and Delta. However, 2020 was supposed to be a year when these results changed as Delta found a joint venture partner in LATAM and immediately saw openings to grow stronger in the region.

American Airlines 787-8 Dreamliner
American Airlines maintained its lead in Latin America. Photo: Getty Images

However, once the pandemic hit, it was clear that revenue for this market would not be as strong as expected in 2020. For the year, here’s where airlines came out:

  1. American Airlines: $1.852 billion
  2. United Airlines: $1.512 billion
  3. Delta Air Lines: $1.113 billion

All three airlines appeared pretty similar in terms of revenue, though it is not surprising to see American and United get a few hundred million extra dollars compared to Delta. Delta has historically taken a very conservative stance on restoring capacity. Its new joint venture with LATAM has left some of the North America-South America traffic intact, though not necessarily on Delta metal.

The cratering of transatlantic revenue

The importance of the transatlantic corridor is something that cannot be overstated. Airlines fiercely compete for a slice of this pie, and 2020 was no exception.

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Here is how much airlines earned in 2020:

  1. United Airlines: $2.226 billion
  2. Delta Air Lines: $1.171 billion
  3. American Airlines: $654 million
United 787-10
United Airlines took the lead with over $1 billion more in revenue than Delta and shy of $2 billion more than American. Photo: Getty Images

The spread here is a little more shocking. However, the results do make some sense. American has strong transatlantic joint ventures with partner airlines that, like Delta and LATAM, allow it to offer service on partner metal. However, American did draw down transatlantic capacity pretty significantly.

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For comparison, here is what those airlines earned in this market in 2019:

  1. United Airlines: $7.387 billion
  2. Delta Air Lines: $6.326 billion
  3. American Airlines: $4.624 billion

American Airlines has lower transatlantic revenue than its competitors, but it is working on closing the gap. This included announcements for new flights to Israel and growing its transatlantic portfolio to include new flights to London, Hungary, Poland, Czech Republic, and Morocco, amongst some others.

American Boeing 787 Getty
American is working on expanding its transatlantic presence. Photo: Getty Images

Not all of these routes flew in 2020, and most of them have been postponed until the market conditions improve. However, American is getting there, and the next few years will prove pivotal, especially as American grows out of Seattle and finally gets into Israel.

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Transpacific revenue

Transpacific markets were some of the first hit and hardest hit. Revenues especially cratered in China, then South Korea, and as markets around the world shut down, Australia and New Zealand followed.

Here is how airlines turned out in the transpacific market in 2020:

  1. United Airlines: $1.706 billion
  2. Delta Air Lines: $558 million
  3. American Airlines: $247 million

The stark change in revenue from 2019 to 2020 is evident. In 2019, airlines earned far more in these markets:

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  1. United Airlines: $5.132 billion
  2. Delta Air Lines: $2.501 billion
  3. American Airlines: $1.458 billion

United Airlines has historically been the strongest in the transpacific market. The airline flies to more destinations in China than any other US airline, and it also has a base in Guam– the only US carrier to serve the island.

Delta Air Lines has done well in certain markets in Asia. This includes Japan and, thanks to its partners, Korean Air and China Eastern Airlines, a strong presence in South Korea and China.

Delta A350
Delta has sent some of its flagship aircraft, including the Airbus A350, on routes to East Asia, signifying the importance of the region to the airline. Photo: Getty Images

American Airlines has struggled in mainland China and other parts of East Asia. Thanks to its partnership with JAL, it has done well in Japan, but the airline previously lacked a mainland China partner. Even now, with China Southern Airlines, American Airlines has some work to do to expand this partnership. Once China Southern’s Beijing Daxing base is fully up and running, American Airlines could start to claw its way to much better revenue in the region.

Australia is a great market for all three airlines, or at least was. United’s closest partner in the region is Air New Zealand, but it has an extensive presence in Australia, as well, and does well without a large Australian partner.

United 787
United Airlines has even flown nonstop between Houston and Sydney, making it one of the longest routes flown by a US airline. Photo: Getty Images

American Airlines has a jackpot partnership with Qantas, the largest international airline in Australia. That partnership was enhanced just before the end of 2019 with major plans for 2020, though some of those plans are on hold for now.

Lastly, Delta had a partnership with Virgin Australia, but given Virgin’s restructuring, Delta and Virgin have paused that partnership, and depending on how market conditions are, it might be some time before that partnership resumes.

Domestic was the strongest

Unsurprisingly, domestic revenue was the strongest for all three airlines in 2020:

  1. American Airlines: $11.765 billion
  2. Delta Air Lines: $10.041 billion
  3. United Airlines (including Canada): $9.911 billion

In 2019, these three US airlines combined made over $80 billion in domestic revenue:

  1. American Airlines: $30.881 billion
  2. Delta Air Lines: $30.465 billion
  3. United Airlines: $26.960 billion
American Airlines Delta
American Airlines and Delta Air Lines were the top two airlines for domestic revenue in 2020 and 2019. Photo: Getty Images

With domestic travel one of the only options for most travelers, the airlines quickly pivoted to expanding domestic capacity as much as possible. United has fallen behind its peers domestically, but it is working on closing those gaps as much as possible.

This is one reason why more and more widebodies have started making their way onto domestic flights. All three airlines have operated widebodies on some domestic routes in the past, though the frequency has increased.

This is also one reason why airlines continue to beef up domestic capacity. Airlines are seeing passengers willing to fly domestically, and this is expected to increase as vaccinations continue to roll out, and more states outline plans to accept vaccinated travelers. Expect big boosts again this summer to mountain destinations in Colorado or  Montana, beach destinations in Florida and Hawaii, and warm-weather destinations in Arizona and California.

AA 787-9
It will be easier to find a widebody on a domestic route in 2021: Getty Images

United Airlines has historically had a large amount of international exposure, especially in comparison to Delta and American. While it was a bit conservative to start, the airline has continued to fly a large plethora of international routes, catering to the few passengers who need to and are willing to fly on a long-haul international journey while also running a robust cargo operation.

What do you make of revenue streams for US airlines in 2020? Let us know in the comments!

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Source: https://simpleflying.com/2020-revenue-streams-capacity/

Aviation

Wow: Virgin Australia Sells 71,000 Domestic Tickets In 24 Hours

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Virgin Australia experienced one of its busiest days of domestic ticket sales in 20 years just after the Australian government’s A$1.2 billion (US$920 million) stimulus package went into effect. The enthusiasm was sparked by half-price flights offered on subsidized routes, which included flights to the Gold Coast from the cities of Melbourne and Sydney, among others.

Like other Australian carriers, Virgin Australia’s flight operations have been severely limited over the past year. Photo: Getty Images

71,000 tickets sold in 24 hours

Within the span of a full day, Virgin Australia sold enough tickets to completely fill over 400 of its Boeing 737-800s (which have 176 seats each). The hottest tickets were for subsidized routes, for which the airline halved its standard prices.

Swept up in the momentum and also experiencing large jumps in ticket purchases were other ‘full-price’ routes, which included Melbourne-Perth, Perth-Sydney, and Melbourne-Sydney.

“The overwhelming response from Australians demonstrates loud and clear that they are ready to get back in the air and travel and are a positive sign for the aviation and tourism sectors as they look to recover from the impacts of COVID-19,” -Virgin Australia statement via 7News.com.au

While Virgin Australia had the record-breaking day, The Islander reports that the country’s other airlines saw spikes in web searches during the same period. Searches for “Qantas”, “Jetstar,” and “Virgin” sharply increased from around midnight Thursday and spiking again at 06:00 Australian Eastern Daylight Time.

Both Qantas and Virgin Australia will benefit from the Australian government’s stimulus package. Photo: Simon_sees via Flickr 

The Australian government’s stimulus package

Announced in early March, the government support package includes A$200 million (US$152.6 million) for Qantas and Virgin Australia. Reuters notes that this funding will support the airlines from April to October, with the intent to help maintain mothballed aircraft as well as bring planes out of storage and support wages for international flying staff.

Another major part of the scheme, and the main reason for this story, is the government subsidization of 13 routes. Subsidization has meant that eligible airlines can offer half-price tickets. The impetus for the deal was to support airlines while encouraging domestic tourism at a time when international tourism has been hard hit. According to The Guardian, the routes are as follows:

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  • Sydney: flights to the Gold Coast, Cairns, Proserpine, Hamilton Island, Maroochydore, Uluru, Alice Springs, Launceston, Broome, and Avalon.
  • Melbourne: flights to the Gold Coast, Cairns, Maroochydore, Alice Springs, Uluru, Launceston, Devonport, Burnie, Broome, and Merimbula.
  • Adelaide: flights to the Gold Coast, Maroochydore, Alice Springs, and Kangaroo Island.
  • Brisbane: flights to Alice Springs, Uluru, and Launceston.
  • Darwin: flights to Cairns and Broome.
  • Perth: flights to Alice Springs.
  • Avalon: flights to the Gold Coast

The half-price fares were made available on April 1st and will continue to be offered until the end of July.

Having recently divested itself of its widebody Boeing 777s and Airbus A330s, Virgin Australia’s fleet is now completely comprised of Boeing 737s. Photo: Aero_Icarus via Flickr 

Hope for the best, plan for the worst

One key concern when it comes to domestic flight bookings is the ever-present risk of interstate border closures in the event of an outbreak during this global health crisis. While it’s hard to resist a good deal, it’s also wise to consider the possibility of such unwelcomed restrictions. Having flight bookings with flexible re-booking and cancelation policies will help greatly if such restrictions arise.

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Were you a lucky Australian resident who managed to secure a half-priced flight? Or did you try and miss out? Share your experience with us in the comments.

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Source: https://simpleflying.com/virgin-australia-domestic-tickets-boom/

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US Congressmen Call On DOT To Deny Norse Atlantic Airways Permits

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The Chair of the US House Committee on Transportation and Infrastructure, Peter DeFazio, and Chair of the Subcommittee on Aviation, Rick Larsen, have called on the US Department of Transportation (DOT) to deny permits for Norse Atlantic Airways to fly to the United States, citing concerns about the airline.

Boeing 787 Dreamliner Takes First Test Flight
Norse Atlantic wants to fly to the US with Boeing 787s, but it has ruffled some feathers. Photo: Getty Images

Members of Congress on Norse Atlantic Airways

Rep. DeFazio, a Democrat from Oregon, and Rep. Larsen, a Democrat from Washington State, have called on the DOT to deny Norse Atlantic Airways Operating permits on account that it is flouting labor protections.

Drawing on earlier language indicating opposition to the airline, Reps. DeFazio and Larsen have argued that, by organizing itself in a country outside of Norway, where there are strong labor laws, the airline is seeking to flout those laws.

Norwegian selling two 787s to Neos Air
Norwegian also used subsidiaries in other countries, which is a concern highlighted in the letter. Photo: Getty Images

Drawing strong comparisons with Norwegian

The two Congressmen believe the airline is doing this because one of its executives was a former executive at Norwegian, which used Irish and UK subsidiaries to operate long-haul low-cost flights between the US and Europe.

In the letter, the Congressman stated the following:

“Their long-haul low-cost business model was predicated on the use of pilots and flight attendants employed under short-term contracts and assigned to the Norwegian subsidiaries via third-party crew sourcing firms. In short, Norwegian exploited labor while enjoying the liberalized benefits of the U.S.-E.U.-Iceland-Norway open skies agreement and competing unfairly with airlines that do not subvert fair labor standards.”

Norwegian 787
Norwegian recently announced it would be ending long-haul operations. Photo: Vincenzo Pace | Simple Flying

Using Norwegian as a warning

The letter also urged the DOT to consider that Norwegian failed in its transatlantic operations. Between 2016 and 2019, the letter states that Norwegian incurred debt of nearly $7 billion.

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Norwegian is currently under bankruptcy proceedings in Europe and has decided to shut down its long-haul routes and focus on its flights within Europe.

Norwegian made a huge splash when it started transatlantic operations in 2016 between the US and Europe. Using a fleet of mostly Boeing 787 aircraft, the airline brought large numbers of customers across the pond.

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Norse Atlantic Airways has already indicated it will operate a similar model, using Boeing 787 aircraft it has signed leases for.

Boeing 787 Dreamliner
The Dreamliner is an efficient long-haul aircraft. Photo: Getty Images

US airlines breathed a sigh of relief

When Norwegian came into the transatlantic market, it followed its initial routes with plenty of growth. That growth put pressure on US airlines.

Now, without Norwegian in the market, airlines are breathing a sigh of relief. Without that low-cost competition in the market, airlines like United are bullish on their international exposure. Without Norwegian in the market, there is also room for plenty of existing airlines to move toward higher-yield transatlantic operations.

Norwegian 787
Norse will need to do what Norwegian could not: make long-haul operations profitable. Photo: Vincenzo Pace | Simple Flying

The return of transatlantic demand will depend greatly on the removal of travel restrictions between the US and Europe. Most airlines are focused on cargo with low passenger loads on flights to Europe currently. Only essential travel is permitted between the two areas.

Norse Atlantic is a startup to watch. It has the opportunity to massively grow to the size of Norwegian’s long-haul operations before it shut down, but doing so may come at a high cost and low profitability. It will have to make the long-haul low-cost model work to be successful.

For now, it is a waiting game to see how the DOT will respond to Norse Atlantic. US Congressmen are coming down on the side of the US airline industry, but the DOT may end up granting Norse Atlantic operating permission.

Do you think Norse Atlantic Airways should be allowed to operate between the US and Europe? Let us know in the comments!

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Source: https://simpleflying.com/us-congressman-norse-atlantic-permits/

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Frontier Launches IPO – How Can The Airline Benefit?

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American ultra-low-cost carrier (ULCC) Frontier Airlines has officially gone public. Pricing out at the lower end of its target share price, the airline is still expecting to raise over $200 million from the endeavor. Here is a look at how that could benefit the airline.

Frontier Airbus A320
Frontier Airlines is set to benefit from its IPO. Photo: Frontier Airlines

Frontier’s initial public offering pricing

Frontier Airlines announced its initial public offering of 30 million shares at a price of $19 per share. This was toward the lower end of the initial pricing for Frontier’s shares. The share consists of 15 million shares of commons tock offered by Frontier and 15 million shares of common stock to be sold by certain of Frontier’s existing stockholders.

Less the underwriting discount, commissions, and estimated offering expenses, Frontier will net proceeds of approximately $266 million. The sale of stock by the existing stakeholders will not raise Frontier cash. Overall, the net proceeds to both Frontier and the private stakeholders is expected to be over $500 million.

Frontier IPO
Frontier is now trading on the stock market. Photo: Frontier Airlines

The airline is being traded on the Nasdaq Global Select Market under the ticker “ULCC.” Since going public, the airline’s stock price has hovered between $18 and $19 a share.

The net proceeds

The amount that Frontier expects to receive is around $266 million. This is a respectable amount similar to the funding another airline IPO, Sun Country, received.

With $266 million, the airline can do plenty of things. Frontier ended 2020 with long-term debt of over $300 million. The airline can choose to pay down some of its high-cost debt with these proceeds. Or else, the money can be used to fuel expansion. The airline sees plenty of growth opportunities and has a sizable aircraft order book which costs money, and this funding can go a long way.

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Frontier A320
There is a lot Frontier can do with this money. Photo: Frontier Airlines

The current state at Frontier

Frontier Airlines is one of the carriers leading the way with capacity increases through the year. The airline’s top stations are Denver, Orlando, and Las Vegas. These are major leisure travel hotspots, but some of them also provide opportunities for Frontier to sell connecting flights.

Frontier serves over 300 nonstop routes touching around 110 airports. Using a low-frequency model, the airline targets mostly point-to-point leisure travelers.

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Frontier also sees plenty of room for growth. In the airline’s initial filing for an IPO, the carrier highlighted it had an opportunity to serve 518 additional domestic routes between airports within its existing network not currently served by a ULCC. This is a fascinating number, but it also raises the question of Frontier’s expansion.

Frontier AIrcraft
Frontier is a ULCC that generally operates on a low-frequency, point-to-point model. Photo: Getty Images

In the past, Frontier has not been very hesitant in terms of adding new cities and then cutting them if those flights do not provide the anticipated financial benefits. Moving forward, Frontier will face shareholders and stockholders that may temper some of those ambitions, but the carrier is still expected to add new routes. This is especially true as signs continue to point toward a summer surge, and the CDC outlines guidelines for vaccinated Americans to travel.

The airline is already making moves to become a more modern, fuel-efficient carrier with an eye on costs. The aging and comparatively expensive Airbus A319s will exit the fleet this year as the airline welcomes newer Airbus A320neo family aircraft. Those new jets will also feature lighter-weight seats that will save on fuel, which in turn saves on Frontier’s costs.

Frontier A320neo
Frontier has started taking delivery of aircraft with new seats inside. Photo: Frontier Airlines

Ultimately, Frontier has set itself up to do well in the future. The net proceeds from this IPO will go a long way in getting Frontier the cash influx it needs to survive the next few months and prepare to handle the increase in passengers expected over the summer. As the US airline industry starts to turn the page on the crisis, Frontier is expected to be one carrier that benefits early on from its mostly domestic and short-haul international leisure-oriented model.

Do you think Frontier made the right decision by launching an IPO? Let us know in the comments!

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Source: https://simpleflying.com/frontier-ipo-launched/

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Cheap ticket deal breaks Virgin’s all-time record, despite lockdown

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‘Trinity Beach’ arriving into Brisbane Airport as ‘VA957’ in some windy and overcast conditions. 1/10th sec pan for those who are interested.

Virgin sold more domestic tickets on the launch day of the government’s half-price ticket scheme than on any 24-hour period in its history.

The result came despite fears Brisbane’s recent snap lockdown, which ended on Thursday, would put people off interstate travel.

Domestic aviation has been pinning its recovery hopes on the federal government’s plan to supplement 800,000 half-price airfares for passengers to 15 destinations including the Gold Coast, Alice Springs and Kangaroo Island. It follows the end of JobKeeper last week.

Virgin said in a statement it sold 71,000 supplemented seats in the 24-hour period from 12:01am on 1 April. The top five routes were:

  • Melbourne to Gold Coast
  • Gold Coast to Sydney
  • Maroochydore to Melbourne
  • Cairns to Sydney
  • Adelaide to Melbourne

Destinations not in the scheme also received a “significant boost”, in particular, Melbourne to Perth, Perth to Sydney and Melbourne to Sydney.

“The overwhelming response from Australians demonstrates loud and clear that they are ready to get back in the air and travel and are a positive sign for the aviation and tourism sectors as they look to recover from the impacts of COVID-19,” said the business in a statement.

“As a sign of renewed confidence and pent-up travel demand for travel, more than 85 per cent of the new bookings have been booked for travel from May onwards.”

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Skyscanner also said direct interest in booking on Thursday were 25 per cent higher than the week prior, while web searches for “Qantas”, “Jetstar” and “Virgin” also leapt six-fold.

Greater Brisbane lifted its snap lockdown on Thursday at noon, following the state recording just one new case of community transmission.

Queensland Premier Annastacia Palaszczuk did though announce a slight increase in restrictions, which will require residents to wear masks indoors and a limit of indoor gatherings to 30.

The good news came shortly before NSW announced no new local infections across the state, too.

The half-price ticket scheme saw Virgin announcing fares from just $55 between Melbourne-Launceston and Jetstar offering tickets from just $32 between Adelaide and Avalon.

The updated list of destinations now includes Cairns, Townsville, Whitsunday Coast/Hamilton Island, Sunshine Coast, Darwin, Alice Springs, Hobart, Launceston, Devonport, Broome, Avalon, Merimbula, Adelaide, Kangaroo Island and the Gold Coast.

The fares are on sale until the end of July for travel until the end of September, with discounts applied automatically.

Both airline groups have also topped up the 15 locations with sales to other destinations and also extended fare flexibility in light of recent uncertainty.

The package of measures to support aviation in Australia also includes a new wage subsidy for those working in international aviation; cheap loans to small business coming off JobKeeper; and a six-month extension of the ‘RANS’ and ‘DANS’ supplemented routes initiative.

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Source: https://australianaviation.com.au/2021/04/cheap-ticket-deal-breaks-virgins-all-time-record-despite-lockdown/

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