A Commercial Aviation Consultancy


With the US airline industry consolidated, we would expect at least a short term discipline as the oligopoly finds its “natural” equilibrium.  As we have said before over the long term, there is always going to be a breakdown because of cheating.  Look at any oligopoly (i.e. OPEC) and we see that sooner or later the natural equilibrium isn’t enough.  Greed sets in and once one player cheats – and cheating is defined not by that player, but by the others – the system breaks down. Continue reading

Skymark is bankrupt and is a case study for an airline’s eyes being too big for its stomach. We were not alone in finding this airline’s order of A380s – especially six of them – to be over the top. Airbus, of course, grabbed the order because they need every one. Plus, breaking into Japan was irresistible to Airbus before it won the JAL campaign.

But here we are, Skymark is in deep trouble. In Toulouse last week we noticed a new Skymark A330 on the stand, seemingly ready for delivery. That’s clearly not going to happen. Intrepid Aviation leased a number of A330s to the airline. Apparently Intrepid Aviation is owed ¥100bn by Skymark which is about one third of its total debt of ¥320bn. But being on the hook for an A330 is a “relative breeze” – as these aircraft sell easily as the market loves them –… Continue reading

The Big 3 US carriers began a war of words in March, with a complaint that the Gulf carriers were being unfairly subsidized and asking that Open Skies authorities be revoked.  Etihad, one of the Big 3 Gulf carriers, has responded today, releasing a study it commissioned.  That study, conducted by the London-based Risk Advisory Group, quantified government and court-sanctioned benefits and concessions received by the three largest US carriers (Delta, United and American) valued at $71,48 billion.  A summary of that study can be found here (Risk Advisory Report – US Carriers (May 14, 2015) final).

James Callahan, General Counsel and Secretary of Etihad, stated “We simply wish to highlight the fact that US carriers have been benefitting and continue to benefit from a highly favorable legal regime, such as bankruptcy protection and pension guarantees, exemptions from certain taxes, and various other benefits. … Continue reading

In the latest dispute between the ME3 and US3 during the CAPA conference in Las Vegas, the opinions on who won the debate differ. Looking to Europe, we see that the beliefs of the big European airline groups on government subsidies and traffic rights vary as well. The IAG Group with the legacy carriers British Airways and Iberia as an example left the Associations of European Airlines (AEA) to join the European Low Fares Airline Association (ELFAA), which supports the EU’s liberalization of air transport. AirBerlin and Alitalia have left the AEA as well.   Moreover all of the above-mentioned have recently had investors from the ME.

On the other hand the remaining two big groups Air France/KLM and the Lufthansa Group remain in AEA, which has the goal to “ensure conditions for fair competition”, supporting the concerns of the US3.  That said, let’s take a glance at what… Continue reading

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