unaligned

JetBlue Airways was competing aggressively with Spirit Airlines Inc. and other discount carriers on ticket prices before making a $3.8b takeover bid last year for its smaller rival, a JetBlue executive testified during the government’s case seeking to block the deal. Dave Clark, JetBlue’s head of revenue and planning, told a federal judge in Boston on Thursday that Spirit was growing rapidly in the years before the pandemic and expanding in the same markets, prompting JetBlue to consider other ways of responding. The government showed internal emails by Clark and presentations he gave to other executives showing the airline had a difficult time in 2020 winning business from price-sensitive customers. That forced JetBlue to match Spirit’s pricing. “At that time, we needed to,” Clark testified. JetBlue speculated it would be overtaken in market share by Spirit by 2025, according to an internal presentation Clark gave that was displayed in court by government lawyers. But during his testimony Thursday, Clark said JetBlue doesn’t consider Spirit one of its primary competitors. Instead, he said, JetBlue spends “99% of our time thinking about the Big Four” – American Airlines Group Inc., Delta Air Lines Inc., United Airlines Holdings Inc. and Southwest Airlines Co. Those companies account for 80% of US ticket revenue. Spirit remains “a competitor of ours, but they are roughly a 5% player, and that’s frankly the amount of mind share we spend on them,” Clark testified.<br/>

Southwest Airlines said it has forged a two-decade agreement to buy as much as 680m gallons of renewable jet fuel, part of the US carrier’s goal of slashing climate-polluting emissions. The sustainable aviation fuel, or SAF, will be sold by Arizona-based USA BioEnergy LLC starting as early as 2028, Southwest said in a statement. USA BioEnergy is working to build a $2b-plus plant in Texas to make green jet fuel from wood waste, the company’s CE, Nick Andrews, said in an interview. Pressure for US airlines to become more climate-friendly has been ratcheting up, including from the White House. At the same time, energy companies are looking to take advantage of government incentives, including tax credits in President Joe Biden’s landmark climate law, to make cleaner fuels. Carbon dioxide emissions from aviation, an industry that is seen as difficult to electrify, are expected to jump by 94% from pre-pandemic levels, according to BloombergNEF. The purchase of as much as 680m gallons is over the life of the 20-year pact, according to Andrews. During the term of the deal, the equivalent of 2.59b gallons of net zero carbon emissions SAF could be produced, once blended with conventional aviation fuel, avoiding 30m tons of carbon dioxide, according to Southwest. The Dallas-based airline burned through 1.58b gallons of jet fuel during the first nine months of this year. The deal announced on Thursday also gives Southwest the chance to buy an additional 180m gallons of SAF annually from USA BioEnergy’s future planned facilities, according to the statement. Southwest said it has a goal of replacing 10% of its total jet fuel consumption with SAF by 2030 and to achieve net zero carbon intensity by mid-century. <br/>

Allegiant Travel Company posted a $25.1m loss during a Q3 that increasingly appears to have been a slow period for US low-cost carriers. In the same three months last year, the parent of Las Vegas-based discount carrier Allegiant Air lost $46.5m. Q3 revenues stood at $565m, the company said on 2 November, an increase of about 1% from $560m last year. Expenses were down 1.4% compared with the same period of 2022. Frontier Airlines, JetBlue Airways and Spirit Airlines all recently reported Q3 losses amid idling domestic demand and broad operational difficulties. But Allegiant says it maintains an advantage over its competitors with its out-and-back routes and flexible capacity strategy, boasting a 99.8% controllable completion factor during Q3. “Our variable-cost model gives us a competitive advantage as we adjust capacity to the environment,” says president Greg Anderson. “Whether day of week, month of year, or route-by-route, our planning teams are expertly matching capacity with leisure demand.” The carrier is doubling down on that strategy. As seasonal demand becomes “more normalised”, Anderson says, Allegiant is taking a “measured approach to take utilisation higher during peak demand periods”. “For instance, average aircraft utilisation was 7h this summer,” he says. “Increasing that by even one hour would drive roughly $50m more in earnings.” Allegiant flew fewer passengers during the quarter, down to 4.29m from 4.36m passengers in the same period the previous year. Total network departures were down to 29,251 from 29,432, while block hour flying increased slightly. <br/>

Norwegian has reported “encouraging” booking trends through to the end of the year, after it achieved its second-highest-ever operating profit during Q3. Its operating profit of NKr2.17b ($194m) for the July-September period – which equates to an EBIT margin of 25% – was only beaten once before in the company’s history, in the same three months of 2019, when the carrier’s fleet was around twice as large. It was achieved on revenue of NKr8.78b during the seasonally strong period, which was up by more than NKr1.5b year on year. Its net profit more than doubled on the same basis to NKr2.04b. Ticket revenue yields were up 6% year on year, as strong travel demand continued to support earnings. Load factor dropped slightly year on year, to 87.4% from 88.8%, on capacity up 17% on the same basis. “Thanks to the outstanding effort of the entire Norwegian team, we can look back at one of the best quarters in our 21-year history,” says CE Geir Karlsen. “I am very satisfied that our financial results are strong. “We have also delivered an operational performance as one of the absolute top airlines in Europe with a remarkably low number of cancellations and strong on-time performance.” Norwegian says its liquidity position increased to NKr9.4b at the end of the quarter and that it is forecasting a full-year operating profit of NKr1.8-2.0b. It notes a cost impact from the weakening of the Norwegian krone against the US dollar and euro, alongside inflationary impacts on supplier costs and employee salaries – factors which are pushing up unit costs. The carrier says it has “not observed any sign of weakness in forward bookings”, but adds that it remains “mindful of demand uncertainties following a potential deterioration in consumer confidence”.<br/>

Scandinavian low-cost carrier Norwegian is working on raft of measures to offset the impact of the high-cost environment, including through the removal of certain “add-ons” from its incoming Boeing 737 Max jets. Outlining a strong Q3 performance on 2 November, CE Geir Karlsen nevertheless said the operator is taking extra steps to ensure “sustainable profitability” amid high yields but significant cost headwinds. “We have to do this, we have to push it extremely hard, and I think we will show results as we go down into 2024,” he says. Those headwinds include the Norwegian krone’s falls against the US dollar and euro, which added 6% to unit costs year on year in Q3. Weakness against the dollar was particularly pronounced, Karlsen notes, pushing up costs paid in the currency, including those related to fuel and leasing. Meanwhile, inflation hit a whole range of costs, he says, adding 5% to unit costs on the same basis. At the same time, the carrier’s push into more corporate markets is adding to its distribution costs, Karslen says, although it is also bringing a “significantly positive” impact on profit through extra, higher-yield revenue. Among a long list of fresh operational and structural initiatives that Norwegian is working on to push costs down, Karlsen says the weight of up to 80 incoming 737 Max jets from its order with the airframer – the first of which is due for delivery in 2025 – will be reduced by the removal of “low-value add-ons” and “optimisation” of specifications, which will contribute to lower operating costs. “We have been going into the specification in detail, to adjust the specification more in accordance with the market we are flying,” he says, insisting that the customer experience will not be affected. As well as the operational savings those adjustments will achieve, Karlsen says that based on the order price agreed with Boeing in 2022, “we will reduce the capex on the 50-80 aircraft order by millions of dollars”.<br/>

Uzbekistan-based start-up Air Samarkand is set to open services from the city whose name it bears by the end of this year. The new airline intends to operate Airbus flights from Samarkand to cities in Turkey, Vietnam, China, Malaysia and Indonesia. Samarkand is the second-largest city in Uzbekistan after the capital, Tashkent, and has a population of around 600,000. But the carrier believes it can access a catchment of 12.6m and plans an initial network of some 25 destinations. The airline says it aims to build a fleet of five aircraft – including A330 and A320-family jets – within the next two months, and plans further expansion over the course of a year, including routes to European cities. “Launch of this new airline is a significant event for the future development of Uzbekistan as a tourism, cultural and business centre,” says founder Bakhtiyor Fazylov. “Over the past year we have implemented a large-scale project to develop the ‘Silk Road Samarkand’ tourism centre, which has already begun to bring the tourism potential of the region to a qualitatively new level, combining ancient heritage with modern infrastructure and facilities.” The carrier has already acquired an A330-300 – provisionally identified as MSN1177, originally delivered to China Airlines in 2010 and powered by General Electric CF6 engines.<br/>

AirAsia X is to appeal against the Malaysian stock exchange’s decision to reject its bid to shed its financially distressed status, reiterating the “significant improvements” in operations in recent months. In a statement dated 2 November, the medium-haul, low-cost carrier says it remains confident of being able to shed its Practice Note 17 (PN17) status – a categorisation for troubled businesses. “The foremost short-term goal for the airline is to emerge from the PN17 status as smoothly and swiftly as possible to boost the post-pandemic upward trajectory for future sustainable and profitable growth,” the airline states.The appeal comes weeks after Bursa Malaysia rejected the airline’s submission to exit PN17. While it did not provide reasons for doing so, the stock exchange granted AirAsia X up to 17 January 2024 to submit its business regularisation plans. AirAsia X chief Benyamin Ismail says: “Alongside significant improvements across all key metrics as outlined in our recent financial and operational performance announcements, we are working closely with Bursa Malaysia to close this pandemic-induced chapter as soon as possible. Ismail adds that the removal of PN17 status will allow the airline to “chart our positive growth trajectory including securing additional financial support to spread our wings further than ever before and continue to do our part for the travel industry within this region”.<br/>