3 Links I Love: Southwest Further Sheds AirTran Markets, NewLeaf Backs Down, Emirates Trouble

Emirates, Links I Love, Southwest

This week’s featured link:
Summer is Here—Summer 2017 Schedule is now Published!Southwest Airlines Community
Southwest’s summer schedule is out, and there are a bunch of changes. Most notably, Southwest is going into Cincinnati, building up Cleveland, and abandoning Akron/Canton and Dayton in the process. The dismantling of the old AirTran network continues, and Akron/Canton was one of that airline’s best markets. It’s a real shame to see that disappear, but clearly Southwest is more interested in the big city airport where revenues are higher. It’s a far cry from the old days.

Links I Love

Two for the road:
NewLeaf drops sun marketsFacebook
NewLeaf is a company that partners with an airline to offer ultra low cost service in Canada. It had recently announced flights into US sun markets including Phoenix/Mesa and Melbourne (Florida). But guess what happened? Competition. WestJet came into the markets, and now NewLeaf has given up. Its CEO posted on Facebook, blaming the big guys for being unfair. Though I know nothing about the company’s current financial performance, I’d consider this to be the beginning of the end. NewLeaf has just shown WestJet (and everyone else) how to beat it. You can assume the competition will simply step up the pressure from here on out, knowing that NewLeaf will walk away.

Is Emirates Airline Running Out of Sky?Bloomberg
It’s a long, wandering journey, but Bloomberg took a look at Emirates and wonders if the good times are coming to an end. Certainly the oil economy hasn’t been as robust, and demand in some other places has tanked. Combine that with election of a protectionist new president here in the US along with a ton of aircraft still on order and there’s reason to worry.

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24 comments on “3 Links I Love: Southwest Further Sheds AirTran Markets, NewLeaf Backs Down, Emirates Trouble

    1. Follow the link at the bottom to “summer 2017 schedule frequencies.”

      Scan down the (many) pages, paying attention to the column showing the new frequency this summer, and look for zeros.

  1. This is one significant effect of airline consolidation. When FL and WN had to compete, FL was able to carve out niches like CAK and DAY due to the high prices at nearby fortress hubs CLE and CVG and lack of low fare competition (despite WN’s presence at CLE during that time).

    At one point, I believe you could fly from CAK on FL to BOS, LGA, DCA, ATL on fairly regular (multiple daily flights) scheduled.

    Now these second tier airports are lucky to have hub service on the three major airlines that remain. WN is more like a legacy carrier than a market maker / disrupter, evidenced by higher rates matching the legacy carpets and fortress style hubs at MDW, BWI, DAL, etc.

    Is the flying community at large better off with a healthier oligopoly of 4 or 5 airlines that only rarely are forced to actually compete with each other or with 10ish airlines and real competition? Service elimination by WN at CAK and DAY are but a microcosm of this big picture.

    1. Pretty close. FL never flew CAK-DCA. WN did 1 daily RT after the merger, but it didn’t last. FL also served MCO year round, plus FLL/RSW seasonally. They tried CAK-LAS after CAK extended the main runway, but blamed the cancellation on fuel prices. It’s really a shame that WN couldn’t make CAK work, but their cost structure now just won’t allow it. CAK flyers who were used to a high quality/low cost product from FL are in for a rude awakening when they try Spirit (who has replaced most of the AirTran service).

  2. Why do people confuse Dubai/Emirates with oil? There is virtually no oil in Dubai, all that black stuff is down the road in the Abu Dhabi Emirati, owner of ETIHAD. While Qatar sits on an ocean of gas.

    Dubai has for hundreds of years sold itself as a trading and transit hub for goods, people, and services, Emirates the airline is that writ very large.

    EK’s problem seems to be the number of “new lunches” per the article are getting smaller for connection purposes (i.e. adding a Gaberone is not like adding a London), and there is a lot more competition enabling a bypass of Dubai. In other words, what EK has done to others such as SQ on the Kangeroo route others are doing to EK.

    Upshot is the market does not appear to be growing as fast as potential capacity, and there are very hungry competitors out to eat as much of the available and new lunches as possible.

    A protectionist US will definitely hinder further growth, especially as there is a strong argument that the next stage of EK’s strategy is/was to develop hubs via secondary centres, say Manchester/Milan, to markets such as the US. This may seem counter-intuitive to the general acceptance that tags are not economic but 20 years ago the Middle East as a hub other than a fuel transit point between UK/Europe and the Far East/Australia was considered fanciful.

    The Bloomberg journos seem to know EK faces some hard choices but do not seem to understand EK as a business.

    1. Nicc – To assume that the oil economy has no impact on Emirates is short-sighted. The economy in Dubai may not run on oil, but the economies of many surrounding areas do and that impacts emirates as an airline. It’s likely why the Houston flight is back down to a 777-300ER instead of an A380. And I’m sure it’s having on impact on Russian flights as as well those to Saudi Arabia and others. It’s just one of the issues Emirates faces, but it’s certainly valid.

      1. I never said that oil had no impact (and yes to suggest oil has no impact is incorrect), perhaps I should have been clearer in saying it is overstated as a factor, especially as EK acts as a hub to distribute traffic regionally and wider. But to suggest oil is the clear driver ignores how EK has developed, and the issues it faces as a business, this is one factor of which there are arguably two more important, over capacity, and finding new markets.

    2. To expand on Cranky’s point, the article does mention that Dubai has little in the way of energy resources. The issue for EK and Dubai writ large is that while they don’t depend on oil and gas directly, they do depend a lot on oil and gas wealth from the region as a whole. In that sense, EK is no different from the banks, real estate firms, and luxury importers in Dubai who have seen their best and highest-paying customers beset by red ink.

      EK may be mainly in the long haul 6th freedom business, but there aren’t enough cheap connecting itineraries to India and Thailand to replace the local and regional revenue they’ve lost in the energy bust.

      1. To expand further, those struggling Dubai banks, real estate firms, and luxury importers are probably some of EK’s most valuable customers on a strict yield basis.

  3. Interesting article on Emirates. From an American perspective I’ve always thought we were relatively isolated from the ME3 really having too much impact since the last thing I want is a connection in Dubai if I’m going to London. I think the real question if they can continue growing is 5th Freedom Rights and if they’ll be allowed to expand under those rules. The article only briefly touched on that. They also didn’t even give one note that the ME3 economy on-board product isn’t anything special.

  4. In the past few days, someone finally posted a NewLeaf trip report on Airliners.net. Even just a week before Christmas, the passenger’s flight from Hamilton, Ont. to Moncton, N.B. was only about 60 percent full. It also noted that the Flair Air cabin crew were accommodating of passengers moving to better seats, defeating the purpose of NewLeaf’s seat selection fees. (The report can be found here: http://www.airliners.net/forum/viewtopic.php?t=1351387)

    Even here in Winnipeg, where NewLeaf is based, they’ve had little impact. Their marketing is uninspired, even timid. While successful ULCCs like Ryanair and easyJet sell the dream of affordable Amsterdam weekends, winter homes in Spain and regular trips home for eastern Europeans living in the west, NewLeaf (like Jetsgo) hasn’t been able to appeal to peoples’ dreams. Their marketing basically amount to, “Here’s a cheap fare to Edmonton. Want one?” Why anyone would want to go to any of their destinations except relatively attractive Halifax — although Abbotsford and Hamilton are within a 1-2 hour drive of Vancouver and Toronto/Niagara Falls — remains a question without a convincing answer.

  5. I expect in 20 years some new airlines will be picking over the carcass of what Gary Kelly managed to infect with me-tooism. These individual decisions may be correct but I fear in winning some battles they are trying to lose the war.

  6. You know what’s odd? IIRC CAPA was really excited about NewLeaf and other upcoming ULCCs that were aiming to change the Canadian airline market. IIRC CAPA even said NewLeaf would do well (can’t remember the exact quotes since their analyses are behind paywalls now when they weren’t before). I don’t really get why CAPA seems to heap nothing but praise on LCCs in general; even in the case of Africa’s Fastjet which is clearly struggling financially and marketwise CAPA said it had the guts to take on other airlines in the region; in fact, I remember one of their analyses of Fastjet saying that while Fastjet was losing a ton of money quickly Fastjet would still rule Southern Africa’s skies (okay maybe the latter point is an exaggeration but you get the idea). Brettt, just wondering after all these years: why does CAPA seem to have an obsession with LCCs to the point of praising them 90% of the time even when they’re struggling, while putting down FSCs even when they’re profitable?

    1. MK03 – I can’t say I really know what drives CAPA’s thinking. I was hopeful for FastJet as well, but it became clear quickly that most of Africa isn’t ready for that kind of model. As for NewLeaf, there likely is room for one ULCC up there, especially since WestJet has gone upmarket.
      But NewLeaf may just not be the one to make it work. Somebody probably will.

        1. MK03 – I don’t know enough about each of those to know which one has a leg up on the rest, but somebody will figure it out one of these days.

          1. Jetlines is the most serious. They obtained a federal exemption in December to allow a 49 percent foreign ownership limit, and are still planning on a Summer 2017 launch.

            Jetlines are more vague now (“Canada, the United States, Mexico and the Caribbean”) than they were initially about destinations; but their 2015 proposed route map offered a more appealing mix of cities: Montreal and Vancouver proper domestically; Hawai’i, California, Arizona and Florida trans-border; Nassau, Montego Bay and Cabo internationally. Future potential for western Europe from the eastern half of the country with the 737 Max.

  7. Being a local to DAY, I find WN’s decision here kind of interesting. Most people are aware that CVG is in Kentucky. If you are north of the Ohio river it is a real pain to get there during the day, Google Brent Spence Bridge for more info.

    Consequently, many people who live in the northern suburbs of Cincinnati (especially north of I-275) fly out of DAY to avoid the hassle of getting to CVG. For people in areas like Mason, it is actually closer on a time basis to get to DAY.

    I guess for the WN loyalists it won’t matter as they will go to CVG or CMH. For others, I guess they will need to decide if they can stomach Allegiant (I don’t know their reporting prefix) or switch to the other mainline carriers.

    I just don’t know if WN will grow traffic much larger at CVG than what they have at DAY. Especially since SDF will compete for traffic from the Kentucky side. Unless SDF is at risk of being dropped as well.

    This was another reason, other than Delta and the price controls, why Airtran never went in to CVG. They had CVG bracketed by DAY and SDF.

    I guess to WN having Cincinnati as a named destination must be more valuable than Dayton and maybe Louisville.

    1. AirTran used 717s for cities like Dayton. WN has only 737s so they need bigger cities. WN calculated that the business market at CVG is much smaller – but they have to take on DL in order to get to it. WN says they have guarantees from some large Cincinnati companies to use its service and those companies are located downtown – closer to CVG than DAY.

      WN is only serving CVG to MDW – which DL does not serve – and BWI. MDW is a viable alternative for downtown Chicago but there are many more businesses in the suburbs closer to ORD. Chicago is too close to CVG for them to be able to stimulate a lot of local traffic unless they price it really low. They will likely pull more local traffic to BWI but I suspect both markets from CVG will be very heavily oriented to connecting traffic. If DL maintains its presence to the top markets – most of which DL serves nonstop – and matches WN fares, companies might not be as committed to flying WN if the choice is connecting on WN or nonstop on DL.

      I can’t also wonder if part of the reason for WN to finally move forward w/ CVG is because the FAA is about ready to rule that the City of Dallas has to provide the gate space that DL asked for years ago to increase the size of its operation. The FAA has delayed its ruling several times but I believe the next date is within a couple weeks. Might not be connected at all but I wouldn’t be surprised if it is.

      1. oops… should say that WN calculated that the business market at CVG is much larger…

        and the final paragraph refers to DAL – Love Field… I didn’t make that clear.

    2. As a former resident of Cincy, I totally agree. Everyone north of I-275 (and north of 275 in areas like Mason are where the wealthier suburbs are) mostly preferred DAY unless they really wanted a nonstop, especially because CVG was (still is?) one of the most expensive airports in the country to fly out of. CVG also isn’t located that close to downtown for a city of its size, thus the success of Ultimate Air Shuttle out of Lunken.

      Cincy – Chicago is a bit of a weird air market. It’s a relatively “short” (~4-5 hours without traffic, and depending on which side of the respective metro areas one is hitting) drive, but people in Cincy perceive it mentally as being much farther away. Fares are not cheap (at least a few years ago, $400-500 R/T fares were common, even booking a week or two ahead), but a lot of Cincy businesspeople still prefer to fly it instead of drive it, and you also have people who are transiting to Chicago merely to use ORD or MDW as a hub to catch another flight. To be honest, I’m surprised that a luxurious coach (bus) service with WiFi and relatively few stops hasn’t been tried between Chicago and Cincy.

    3. Forgot to add…

      Within a two hour drive from Cincy, you have DAY, LEX, SDF (Louisville), CMH (Columbus), and IND. Even if CVG doesn’t have many lower cost airlines (and I’m surprised at that, given the relatively high airfares out of CVG), that leaves plenty of options for leisure travelers. However, most business travelers in the Cincy metro area aren’t going to consider any airports besides CVG and Dayton.

  8. ……”The dismantling of the old AirTran network continues, and Akron/Canton was one of that airline’s best markets. It’s a real shame to see that disappear…..”

    Your description above is very accurate. My perception has been that the people in North Eastern Ohio have supported the Southwest services fairly well. Given that, it seems like an unwarranted kick in the gut for the community to have a carrier like Southwest just abandon them! No, we don’t like driving 50 miles to Cleveland, probably getting a ticket on the way, paying more for parking, paying more for the airfare, etc. This sucks.

  9. The Bloomberg article on Emirates is very good and quite thorough. While I personally believe EK is here to stay as a mechanism for transit to markets like India, Africa, and Australia and parts of Asia, I do believe EK’s expansion days may be behind it.

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