South America’s third-largest carrier Azul has set its sights on a big acquisition target: The continent’s largest Latam Airlines Group.
In an interview with Chilean newspaper Diario Financiero, Azul CEO John Rodgerson said the airline has put together a proposal to acquire the entirety of Latam, and not just its Brazilian unit as it previously said publicly. With the support of some of Latam’s creditors — as yet unnamed — Azul plans to submit its proposal to the U.S. bankruptcy court overseeing the carrier’s Chapter 11 case once Latam’s exclusivity period to file a reorganization plan ends, which is currently set for November 26.
“Latam as a group has a lot of value and to keep it together is important culturally, and is the best option,” Rodgerson said. “I believe that dividing it is not in our interests.”
Bradesco BBI Analyst Victor Mizusaki, who covers Azul, Latam and other Latin American airlines, said he believes Latam creditors are pushing Azul to make a bid for the entire carrier. However, he thinks Azul could sell pieces of the group to “raise money and amortize the debt” once the deal closed.
A Latam spokesperson declined to comment on Azul’s plan to make a hostile takeover bid. Executives have previously spoken against any combination with Azul.
An Azul-Latam combo has the potential to upset Latin American aviation. Latam carried more than four-times the passenger traffic than Azul in 2019, the last full year before the Covid-19 pandemic upset air travel. A merger would create an industry giant controlling half all South American capacity — and almost 58 percent of the key Brazilian market — based on 2019 numbers, according to Cirium schedules. The carrier would have operating units in Brazil, Chile, Colombia, Ecuador and Peru, and an international network that stretches from Australia to Europe, the U.S. and South Africa. And it would operate at least 464 aircraft, ranging from ATR turboprops to Embraer E-Jet-E2s, Airbus A320neos and the Boeing 787.
South America is rife with airline merger talk. There is discussion of a possible combo between Avianca, which is awaiting a U.S. bankruptcy court judge’s decision on its own restructuring plan, and Chilean ultra low-cost carrier Sky Airline driven by two of the former’s creditors. And American Airlines, the largest international carrier into South America in 2019, is expanding the reach within the continent with investments in Gol in Brazil, and JetSmart in Chile and Argentina. And, on a smaller scale, Gol is in the process of acquiring Brazilian regional carrier Map Transportes Aéreos.
If an Azul-Latam merger moved forward, it would also have big implications for their respective international partners. Azul is aligned with United Airlines — which owns an 8 percent stake in the carrier — and TAP Air Portugal; while Latam has strategic partnerships with Delta Air Lines and Qatar Airways that owned 20 percent and 10 percent stakes, respectively, in the Chilean group prior to its bankruptcy. Delta and Qatar face the risk of their investments being wiped out through the Chapter 11 process.
Airline mergers through bankruptcy is a well trod trail. A decade ago, then-US Airways CEO Doug Parker was selling the benefits of a merger with American, which at the time was reorganizing under Chapter 11, despite opposition from the larger carrier. American flew almost double the amount of passenger traffic as US Airways across its global network at the time. But we all know how that ended: American and US Airways announced their combo on Valentine’s Day 2013 and Parker leads what is the largest airline in the world to this day.
In the interview, Rodgerson spoke positively of industry consolidation and claimed that Azul’s proposal could create more value for Latam creditors — who are key to the success of any bankruptcy restructuring — than what Latam has proposed to date.
Rodgerson was also confident that an Azul-Latam tie up would be green lit by Brazilian regulators. He cited the approved merger of rental car companies Localiza and Unidas, which he described as having a 70 percent share of the local market. Wall Street analysts have also said a combination of the two airlines would likely be approved by Brazilian authorities, for example Raymond James Analyst Savanthi Syth described any anti-trust concerns as “solvable” in a May report.
Lufthansa Defends Against Discount Onslaught
The Lufthansa Group is not going quietly as European discounters angle for more share in the Covid-19 recovery. Budget brand Eurowings has added bases outside of Germany to, as Group CEO Carsten Spohr put it, “send a signal” to back off to competitors.
“We see them as a not only useful tool to send a signal to our competitors that it’s no fun to fight with German Lufthansa in our home markets,” Spohr said referring to Eurowings’ new Prague and Stockholm Arlanda bases during the group’s third-quarter results presentation last week. The group also includes namesake Lufthansa, as well as Austrian Airlines, Brussels Airlines, and Swiss International Air Lines.
Ryanair also has opened a base in Stockholm, and expanded its operations in Austria, Poland, and Northern Italy — all traditional Lufthansa Group markets — in recent months. Wizz Air is expanding in Italy and the UK with an eye on challenging Ryanair’s discount dominance. And EasyJet recently raised capital to fund expansion, including targeting opportunities created by the downsizing of Europe’s legacy carriers to acquire sought-after access at the continent’s slot-controlled airports.
But Spohr’s defensive comments show Europe’s legacy carriers may be down but they are not out. In addition to expanding Eurowings, the Lufthansa Group launched a new leisure subsidiary, Eurowings Discovery, that will feed its Frankfurt and Munich hubs. Air France-KLM is expanding its Transavia budget arm, particularly in France. And IAG’s discounter Vueling is pushing into new markets, including a new base at Paris Orly. And each group’s legacy names — including British Airways, KLM and Lufthansa — are emerging from the crisis with lower cost bases and streamlined operations following pandemic changes.
And, on the plus side for these legacy groups, discount brands are proving needed boosts to their financials and helping narrow steep losses. Eurowings reported positive earnings before interest and taxes (EBIT) of €108 million ($125 million) in the third quarter; its first time in the black since the crisis began. That result came with capacity at just 62 percent of 2019 levels and yields down almost 14 percent year-over-two-years. Eurowings is forecast to turn a profit in 2022.
Transavia similarly helped slim Air France-KLM’s loss in the September quarter, and Vueling is expected to do the same for IAG. IAG reports its results on November 5.
Cargo and premium-leisure travel also buoyed the Lufthansa Group in the third quarter. Lufthansa Cargo reported record EBIT of €301 million, with Spohr forecasting that the segment’s strong performance will continue through 2022 given the global supply chain challenges.
Premium-leisure travel emerged as a bright spot for a lot of airlines in the third quarter. Air Canada, Delta and United all cited the trend as helping narrow losses with at least Delta investing in more premium seats to capture more of these flyers going forward. Lufthansa saw much of the same, with Spohr citing transatlantic bookings as an example. While economy was down roughly 24 percent versus 2019, business class was down just 12 percent and first class down just 8 percent or up 8 percent depending on the market.
“We see more and more leisure travel, VFR [visiting friends and relatives] travel, not happening in economy class but in the forward part of the cabin,” he said. Spohr did not mention any immediate plans to invest in additional premium seats.
Overall, the recovery continues to improve. Lufthansa Group bookings are at 80 percent of pre-crisis levels — including across the North Atlantic — and it plans to fly roughly 60 percent of 2019 capacity in the fourth quarter. Capacity will step up to 65 percent of three-years-ago in the first quarter and hit 80 percent by mid-2022, Group Chief Financial Officer Remco Steenbergen said. The group forecasts flying 70 percent of 2019 capacity for the full year in 2022, compared with just 40 percent this year.
A big question mark for 2022 is when Asia, particularly China, reopens. Thailand is accepting visitors again, and Germany has established a travel bubble with Singapore, but beyond that flying to the region remains the lowest among the Lufthansa Group’s global segments. In the third quarter, it only flew 20 percent of pre-crisis Asia capacity compared to almost 70 percent for Africa and the Middle East, and almost 46 percent for the Americas.
And all-important corporate travelers are coming back, if slowly. The Lufthansa Group expects the segment to recover to 40 percent of two years ago in the fourth quarter, and to 60 percent of 2019 next year. Small- and medium-sized businesses are leading the segment’s return. Spohr has previously said he expects a full recovery over the medium- to long-term.
In the September quarter, the Lufthansa Group dramatically narrowed its net loss to €72 million from €756 million the quarter before. It posted a small EBIT loss of just €9 million, or positive EBIT of €17 million on an adjusted basis. Revenues were down 49 percent to €5.2 billion year-over-two-years.
IAG Looks to Next Summer For Recovery
The chief executive of International Airlines Group (IAG), parent company of Aer Lingus, British Airways, Iberia, and Vueling, thinks the third quarter marked an important “inflection point,” as the group reported its first three-month period generating cash since the crisis began. The future looks decidedly brighter for the group, and it is planning to almost fully restore its 2019 capacity by next summer.
Several important milestones led to this optimism. First, Ireland in mid-July relaxed its almost-total ban on nonessential travel, which boosted Aer Lingus. Second, the UK reformed its “traffic light” travel-restriction system and subsequently eliminated the “red” list of countries from which travelers were barred or faced strict quarantines. And third, the U.S. will start admitting vaccinated international travelers from November 8. The latter development arguably will have the most impact on IAG’s bookings, CEO Luis Gallego said, as the North Atlantic is among the group’s most important and lucrative markets.
Advance bookings for Caribbean and North Atlantic travel are now exceeding 2019 levels for November, Gallego said. “The reopening of the North Atlantic on the eighth of November will be crucial for us.”
The group also was encouraged by the strength of the domestic Spanish market, which benefited both Iberia and Vueling. Spain relaxed its restrictions before the UK and Ireland. Capacity on both those airlines exceeded 2019 levels in the third quarter. Vueling also benefited from the French government mandating that Air France give up 18 Paris Orly slots as a condition of state aid. The Spanish carrier now is the third-largest at Orly after Air France and its subsidiary Transavia France, with 54 European routes from the airport.
Other regions of the world also contributed to the optimism. Visiting friends and relatives (VFR) traffic to India and West Africa remains strong, and bookings to those regions are picking up for the holidays. Winter leisure bookings to the Caribbean and to Latin America — especially important to Iberia — continue to gather steam. But the Asia-Pacific region, other than India, remains locked down with the recovery not expected to occur anytime soon — which especially affects British Airways, for which Northeast Asia and Singapore were key markets.
In the third quarter, IAG doubled its capacity from the second quarter, taking advantage of strong leisure demand in Europe, but it still was only 43 percent of 2019 levels. Looking ahead, IAG plans to operate 60 percent of its 2019 capacity in the fourth quarter, with December reaching 70 percent of two years ago.
But the real prize is next summer. IAG anticipates being almost fully back by next summer as it forecasts strong pent-up demand across the North Atlantic. The group’s airlines are recalling furloughed employees and are expected to begin hiring in the fourth quarter of this year.
The North Atlantic market is expected to be almost at full capacity next summer. Iberia and Aer Lingus plan to fly more than their 2019 capacity in that market, due in part to new U.S. routes for Iberia — Dallas/Ft. Worth and Washington, D.C. — and Aer Lingus launching flights from a new base in Manchester. British Airways will fly 96 percent of its 2019 capacity next summer.
The competitive landscape in this important market is expected to change. Before the pandemic, Norwegian Air accounted for 8 percent of total North American traffic from London. That capacity is gone now that Norwegian Air has given up its longhaul network, and it has not been filled by other airlines. Meanwhile, Gallego said Europe’s legacy carriers are not expected to offer the same capacity next summer as they did before the pandemic. JetBlue‘s London flights also are not a concern, British Airways chief Sean Doyle said. The U.S. carrier is offering only a handful of London flights on Airbus A321LRs with comparatively small premium cabins, which should not affect pricing significantly for North Atlantic routes, he said.
Another trend that encourages IAG about next summer is the rise of premium leisure travel. Although corporate travel is returning, the front the aircraft increasingly is occupied by leisure travelers, especially on Iberia’s Caribbean, Central American, and domestic Spain routes. British Airways expects to take advantage of this trend when North Atlantic travel resumes in force after November 8. The group is putting its money where its mouth is by adding more seats to appeal to this segment. IAG is “rationalizing” its first class cabins, reducing the number of seats on some aircraft and eliminating the cabin altogether in others. These seats will be replaced by more business class seats and larger premium-economy cabins. If this trend continues, the group could change the configurations completely on new aircraft to be delivered from 2024 onward.
Cargo also was a bright spot during the quarter. The group flew fewer cargo-only flights, but the capacity was offset by more belly-hold cargo as international longhaul began its slow climb back out. IAG reported record third-quarter cargo revenues of €405 million ($468 million), or 34 percent more than in 2019. The group expects cargo to remain strong, especially in Europe and North America, driven by the shift to e-commerce, port congestion and the global dearth of shipping containers.
Group-wide, however, the quarter was marked by another loss, although halved from last year to €452 million. Revenues more than doubled to €2.7 billion. IAG forecasts a fourth-quarter loss of €3 billion, but expects to return to profitability next year.
“We hope that from now on, we will be talking about more positive numbers,” Gallego said.
Wizz Air Raises Overcapacity Concerns Even as it Grows
Wizz Air bucked the industry trend with its forecast that something aside from the Covid-19 pandemic could disrupt airlines next year. On Thursday, CEO József Váradi warned of overcapacity in certain European markets as discounters vie for share and legacy carriers defend their turf in the recovery.
“If airlines will have to fight for their incumbent positions and they will decide to operate capacity not needed for the market, that may result in overcapacity,” he said about summer 2022 during the Budapest-based carrier’s September quarter results presentation. Yet, in a defense of Wizz’s own growth strategy that could see it 50 percent larger next summer than it was in 2019, Váradi argued that the discounter would have a “strategic advantage” if such a scenario played out due to its low costs and young, efficient fleet.
But the truth behind Váradi’s comments are that no one really knows what summer 2022 will look like. Despite warning of overcapacity, Váradi also expects strong travel demand in Europe on par with 2019. Executives at Air France-KLM, Lufthansa Group and Ryanair have all echoed that outlook, though none of the three carriers — which flew almost a third of intra-Europe capacity prior to the crisis, according to Cirium schedules — warned of overcapacity next summer.
And nearly every European airline plans further capacity recovery next year in line with returning travelers. Air France-KLM could recover to more than 90 percent of 2019 capacity by mid-year; Lufthansa Group to 80 percent; and, while not providing a specific forecast, Ryanair Group CEO Michael O’Leary said on November 1 that he expects a “very strong recovery in short-haul intra-European air travel.” However, overall European capacity likely will be down year-over-three-years given the cuts and closures at a number of airlines, including Alitalia, Flybe, Norwegian Air, and TAP Air Portugal.
And one only needs to look as far as this past summer to see how quickly the pandemic can lay the best laid plans to waste in just two words: Delta variant.
Overcapacity concerns are not stopping Wizz’s growth. In fact, Váradi said the airline would accelerate its expansion plans for by extending some aircraft leases and talking to Airbus about moving up deliveries of some of the 235 A320neo family jets it has on order. Wizz plans to fly 170 aircraft by September 2022, or a more than 40 percent increase compared to the start of the pandemic in March 2020. Growth markets remain the same as before: Italy and the UK, as well as Abu Dhabi, Austria and Ukraine. And Wizz is also growing in many of its core Eastern European markets.
“We are upping the game,” he said. “We are adding more capacity and planning more growth.”
But the outlook is not all positive. After posting a €57 million ($66 million) operating profit in the September quarter, Wizz anticipates a loss in the December quarter. Váradi attributed the forecast loss to lower vaccination rates in Eastern Europe, fuel, and foreign exchange headwinds, and lower productivity of both its fleet and staff than pre-pandemic. These challenges are forecast to continue into the March quarter, though executives declined to say whether Wizz would be profitable then.
Wizz management also faced questions over the airline’s operations. During Ryanair’s results presentation earlier in November, O’Leary called out Wizz for repeatedly cancelled flights or postponing the opening of new bases. He said the Hungarian carrier would “struggle” in Italy as its “labor model simply is not sustainable in the Western European market.”
Váradi responded saying that, while Wizz experienced “a few weeks of turbulences,” the issues were behind it. He added that none of the issues were due to crew or staffing issues, but related to a number of wet-leased aircraft that the airline since has removed from its fleet.
“Our competitors like talking about this, but we are definitely in a much better shape than some of the U.S. peers like Southwest or American Airlines, who will be constantly struggling with resources, getting crews, getting the rosters going through,” said Váradi referring to the recent weekend meltdowns at both U.S. carriers.
Wizz is actively hiring staff in preparation for summer 2022 operations, with 1,000 employees joining its roster during the September quarter.
In the first half of Wizz’s fiscal year that ended in September, the airline posted a net loss of €121 million. Revenues were down 47 percent year-over-two-years to €880 million and expenses down 26 percent to €932 million. Unit revenues decreased 23 percent while unit costs excluding fuel increased 24 percent over the same period. Wizz flew 144 aircraft at the end of September compared to 119 two years ago.
Air Canada Has Premium Economy and Cargo to Thank For Pared Losses
Business travel may still be in the doldrums, but Air Canada has found a way to fill the seats in the front of its airplanes: Premium leisure. Like many of its peers around the world, the carrier is pivoting to take advantage of this emerging market until and possibly after road warriors return.
The return of those road warriors is anyone’s guess. Air Canada admits that the Canadian recovery lags the U.S., but its executives still are optimistic that business travel will resume next year as more companies in the country recall workers to their offices. The recovery will be led by small- and medium-size enterprises, Air Canada Commercial Chief Lucie Guillemette predicted, which is in line with what her peers in the U.S. have said as the recovery gathers steam.
In the meantime, Air Canada is filling its premium and premium-economy cabins with leisure travelers. This trend emerged quickly after Canada reopened travel during the third quarter after more than a year of all but sealing itself off from the world. This trend has been pronounced on Air Canada’s transatlantic, India, and warm-weather — or “sun” — routes, Guillemette said during the company’s third-quarter earnings call on Tuesday. “In the past, we would not have gone out and chased it,” she said of premium-leisure traffic. “Now, we are doing everything we can to go out and capture it.” Premium cabin revenues are recovering much faster than economy-class tickets, she added.
This is a new market for Air Canada, and one for which it has little history or data to guide it. Because of that, executives were unable to predict the resilience of premium-leisure demand as the recovery accelerates. What little information it did have has helped guide the carrier on rolling out new products and strategies to capitalize on the demand, Guillemette said. “There will be an opportunity for premium products for leisure travelers,” she said. “We have to test some of these models to see what sticks.”
Another new area of strength for Air Canada is cargo. The carrier has already earned C$1 billion ($806 million) this year from cargo, a record in the carrier’s history. During the quarter, cargo generated C$366 million, or 107 percent more than it did in 2019. Air Canada will take delivery of eight more converted Boeing 767 freighters this year.
“The last few months have shown cargo’s value in diversifying our revenue, but demand for our services is expected to continue due to persistent demand and continuing bottlenecks in other modes,” CEO Michael Rousseau said.
During the pandemic, Air Canada converted 11 Boeing 777s and Airbus A330s into preighters. The carrier has no plans to re-convert these aircraft back to passenger operations soon, but it expects to need to do so from the first quarter of next year as travel demand begins to rise. But some of this lost cargo capacity will be replaced by belly-hold space on the new international routes Air Canada is launching, Guillemette said. “We are in good shape.”
When passenger demand will return in force is an open question, of course. Air Canada is seeing demand rise for U.S., transatlantic, and sun destinations, but the Pacific network lags, thanks to ongoing travel restrictions in most of the Asia-Pacific region. Both transborder and international routes got a boost when Canada loosened quarantine requirements for vaccinated travelers in the third quarter. India flights — now up to 10-times weekly from Toronto and thrice weekly from Montreal — are performing well, due to strong visiting friends and relatives demand. Rousseau believes a full recovery could come as soon as the end of 2023. “There is no textbook for this kind of recovery, or any history,” he said.
But the booking curve remains short, Guillemette said. Bookings are coming in — even for international travel — within 60 days. “This is not for the faint of heart,” she said. But, she added, the volume of bookings now for first-quarter travel is on pace with where it was in 2019. “Load factors may not be at 2019 levels, but booking velocity is the same.”
Rousseau added that although the company is encouraged by Canada’s loosening of restrictions, more could be done. The country still requires PCR tests before arrival in Canada. This step is unnecessary, given Canada’s vaccine requirement for inbound travel. “We don’t believe it’s necessary from a safety perspective,” Rousseau said. “It would certainly help demand [to drop the testing requirement, but we just don’t know what that number is.”
Air Canada has recalled more than 10,000 of its furloughed employees so far this year and expects to complete recalling workers by years’ end. The carrier also is hiring for new positions and growth. So far, Air Canada has not seen the labor challengers that other airlines, particularly in the U.S., have experienced.
In the quarter, Air Canada reversed its decision on two of the 12 Airbus A220s that it had said it would cancel. These aircraft are expected to join the fleet in 2024. It is moving up the delivery of four Boeing 737 Max aircraft to the fourth quarter, and will take an additional nine in the first quarter, bringing its total fleet of the type up to 40 aircraft.
The carrier plans to operate 135 percent more capacity in the fourth quarter than it did last year, but this will be 47 percent down from 2019.
Air Canada reported an adjusted pre-tax loss of C$649 million, down from C$1.1 billion last year. Revenues rose to C$2.1 billion, compared with C$757 million last year. Air Canada announced it will no longer provide daily cash burn guidance.
Atlas Air Sees no End to Cargo Boom
As the world’s airlines ramp up their longhaul networks and bring widebody aircraft out of the desert, the amount of belly-hold cargo capacity is going up. But that doesn’t concern Atlas Air chief John Dietrich, who thinks the air cargo bonanza will continue for the foreseeable future.
“I’m not suggesting things aren’t going to moderate,” Dietrich said. “They will eventually from where we are today, but we feel good about the long-term prospects.” Before the pandemic, belly-hold cargo accounted for about half of all longhaul freight capacity, but now more freight is carried on dedicated freighters, a trend Dietrich believes will continue.
Nor is he concerned about companies like maritime behemoth Maersk ordering air freighters (see Fleet section). Atlas will have to compete with new entrants like Maersk, but Dietrich took it as a sign of the overall strength of the air cargo business. Demand outstrips supply currently, and he sees no reason for this to abate soon.
The reason for the optimism? There are many. Maritime shipping’s bottlenecks are causing a mode shift to air cargo, especially now that air freight costs only five times as much as maritime, compared with 12 times more before the pandemic, IATA data show. Companies are continuing to restock inventories that ran low during the pandemic. And consumer behavior has shifted decisively toward e-commerce. Even if shoppers return to brick-and-mortar stores, retailers will need to move goods quickly to meet demand, Dietrich said.
And the nature of passenger networks may have changed toward more point-to-point service, which is less optimized for air freight than hub-and-spoke networks, Dietrich said. More passenger service relies on the Boeing 787, which is designed for point-to-point flights. These two trends could shift even more cargo to companies like Atlas, Dietrich said. “We’re watching it very closely.”
Atlas ordered four more Boeing 747-8Fs, the last 747s Boeing will produce. In addition, it took possession of 11 Boeing 747-400Fs that it had previously leased. The type is the best cargo aircraft, Dietrich said. He added that the company could consider any future Airbus freighter, but has not made a decision yet.
Atlas reported the highest quarterly revenues in its history, at just over $1 billion in the third quarter, up from $809 million last year. Adjusted net income, which factors in $64 million in CARES Act funding, was $145 million. Atlas forecasts an even stronger fourth quarter, fueled by the holiday peak season and e-commerce demand, with revenues expected to top $1.1 billion. “We just completed the best quarter in our company’s h istory, and we expect next quarter will be even better,” Dietrich said.
In Other News
- All Nippon Airways reported a ¥98.8 billion ($868 million) loss during the first half of its 2021 fiscal year that ended in September. Revenues increased 139 percent to ¥431 billion compared to the same period a year ago while expenses decreased 25.6 percent to ¥547 billion. ANA’s capacity was down 54 percent during the six months ending in September compared to two years earlier, Cirium schedules show. Citing the surge in Covid-19 variants and continued border restrictions during the first half, ANA has reversed its forecast of a small 2021 fiscal year profit to a loss of roughy ¥100 billion. It cut its revenue outlook by ¥320 billion to ¥1.06 trillion for the year ending in March. But despite the full year loss, ANA sees travel demand improving during its second half and a net profit in the March quarter.
- It was a very similar story at Japan Airlines. The carrier posted a ¥105 billion net loss during the six months ending in September on a 150 percent year-over-year improvement in revenues to ¥291 billion. Expenses increased 106 percent to ¥443 billion compared to the first half of its 2020 fiscal year. JAL’s capacity was down 59 percent during the period compared to 2019, Cirium schedules show. The airline forecasts a loss of ¥146 billion on ¥766 billion in revenues during the 2021 fiscal year ending in March. However, like ANA, JAL sees demand improving with a forecast of positive earnings before interest, taxes, depreciation and amortization (EBITDA) in the December quarter, and positive earnings before interest and taxes (EBIT) in the March quarter.
- Judge Martin Glenn of the U.S. Bankruptcy Court for the Southern District of New York approved Avianca‘s restructuring plan last week, removing the last major obstacle to the carrier’s emergence from Chapter 11 before the end of the year. The new parent company will be named Avianca Group International and listed in the UK, rather than its home Colombia. The airline will exit Chapter 11 with dramatically lower costs, a plan to densify narrowbody jets, and a route map with more point-to-point routes as the airline pivots to a future with fewer business travelers. In a statement, CEO Adrian Neuhauser said the carrier was now “better positioned to capture recovering travel demand.”
- Sun Country Airlines beat its forecast for the third quarter with an operating margin of 12.7 percent, at least 3.2 points higher than its forecast in July. Asked by analysts last week about the outperformance, Chief Financial Officer Dave Davis attributed it to a conservative outlook three months ago and more-than-expected cargo flying under its contract with Amazon. Sun Country posted a $14 million profit on total revenues of $174 million, which were up 123 percent compared to 2020. The airline was profitable even without the benefit of $30.8 million in federal payroll support relief. And the outlook is strong for Sun Country, CEO Jude Bricker said winter — for Sun Country the period from Thanksgiving to Easter — demand looks “as good as we’ve ever seen,” with the carrier focused on flying as much as it can during peak periods. Sun Country forecasts $164-169 million total revenues and an operating margin of 1.5-5.5 percent on passenger capacity that will be down 8-11 percent year-over-two-years in the fourth quarter.
- Icelandic startup Fly Play lost $10.8 million on $6.7 million in revenue in the third quarter. Having only launched in June, CEO Birgir Jónsson has described 2021 as a “warm-up” phase for the airline before it begins transatlantic flights to the U.S. next spring. That gradual build up was on display in Play’s load factors that rose from just 41.7 percent in July, hampered by the Delta variant surge, to 67.7 percent in October. Play’s ultra low-cost business model relies on high load factors — averaging around 90 percent or better — to succeed. Separately, Play unveiled plans to open a new Vilnius, Lithuania, office with “various support and technical functions” in December.
- Hawaii is reopening to tourism. Like the rest of the U.S., Hawaii will admit international visitors with proof of vaccination and a negative test for Covid-19. But unlike the rest of the U.S., the state is maintaining its requirement for proof of vaccination or negative test result for domestic passengers. Travelers who do not comply will face a mandatory 10-day quarantine.
- What are United and Singapore Airlines plotting? The two carriers signed a memorandum of understanding to “work on the resumption of connectivity between Singapore and the U.S.,” the Straits Times first reported. Details of the deal are scant, but the Straits Times said enhanced codesharing could be part of it as well as preferential access to Singapore’s Vaccinated Travel Lanes.