Transatlantic Emerges as Longhaul ‘Anchor’

Edward Russell

December 20th, 2021

Travelers looking for a vacation in Palma de Mallorca, Rome, or St. Louis will have new longhaul flight options next summer. Those are just three of the growing list of leisure-oriented destinations that the likes of Lufthansa, Qantas, and United Airlines are betting will be in demand despite continuing uncertainty over the trajectory of the Covid-19 pandemic.

With the start of the IATA summer season less than four months away, global airlines are publishing what amount to dream schedules for summer 2022. These include the aforementioned new destinations as well as numerous new routes and frequency additions that aim to take advantage of what many hope will be robust longhaul international demand, particularly across the North Atlantic. But the operative words here are “dream” and “hope”: Covid-19 has proved time and time again to be unpredictable, with the Omicron variant the latest setback. It’s anyones guess what the status of the pandemic will be six months from now.

“It’s a lot easier to announce, and have [flights] in place and cancel, then it is to try to quickly do it the other way,” said MKM Partners airlines analyst Conor Cunningham. “It’s all about planning — [airlines are] trying to plan.”

And plan they are.

  • American Airlines will connect Doha and New York JFK from June 7; however, it is also cutting Edinburgh, Hong Kong, and Shannon citing Boeing 787 delivery delays.
  • British Airways will land in Portland, Ore., on June 3, almost two-years later than planned before the pandemic.
  • Delta Air Lines loaded a return to Stockholm from New York JFK in June after a nearly five-year hiatus.
  • Finnair will add Dallas/Fort Worth and Seattle to its map in February and June, respectively.
  • Lufthansa will connect St. Louis and Frankfurt from June — aided no less by up to $5 million in local incentives — plus Rio de Janeiro and San Diego to Munich from late March.
  • Icelandic startup Play will begin flights to Baltimore-Washington and Boston from its Reykjavík base on April 20 and May 11, respectively (more below).
  • Qantas return to Rome from June through October after 18 years with one-stop service from Sydney via Perth.
  • Swiss will go double daily to Boston, Chicago O’Hare, and New York JFK from Zurich through the summer.
  • United will connect Amman to Washington Dulles, and Bergen and Punta Delgada to Newark from May; and Palma de Mallorca and Tenerife to Newark from June. All five are new destinations for the carrier.

Airlines typically need 60-90 days to market and sell and new destination or route. Though the lead time is shorter when resuming a previous route, such as when U.S. airlines rapidly resumed some of their European services last summer as the EU dropped restrictions on American travelers.

However, even with additions, Europe-U.S. capacity is scheduled to be almost 12 percent lower from June through August 2022 compared to the same period in 2019, according to Cirium schedules. The decline is almost entirely driven by the exit of several carriers, most prominently Norwegian Air, which shed its long-haul operation during the pandemic. Excluding Norwegian, transatlantic capacity will only be down just roughly 5 percent year-over-three-years. Schedule data does not include Play’s new U.S. routes or Norse Atlantic Airways‘ planned service.

“You don’t want to be the airline that’s really conservative about summer, and then the summer turns out to be great,” said Ailevon Pacific Managing Director Brad DiFiore. He agreed that it is easier for airlines to pare back schedules than to add flights quickly if demand is strong.

IATA estimates that transatlantic passenger traffic will recover to roughly 65 percent of 2019 levels next year.

Another factor at play is the availability of longhaul fleets. By most estimates, the international travel recovery to Asia is about a year behind the transatlantic market. The exceptions being Australia, which began reopening in November, with Qantas seeing strong pent-up demand, and Singapore with its vaccinated travel lanes. That still leaves a lot of the region largely closed off to international travelers, and the airlines with sizable operations into Asia — like Finnair and United — with idle planes. Lufthansa, for example, is deploying some of the new Airbus A350s it acquired this year on its new routes from Munich while it awaits Asia and other regions to reopen.

“It seems like the transatlantic market is going to be an anchor market for airlines in 2022,” Campbell-Hill Aviation Group Vice President Howard Mann said. He described the Europe-U.S. market as one of the “lowest risk” longhaul markets, particularly when compared to flying to Asia, to deploy aircraft next year.

In addition, the airline route planning calculus of 2022 is not the calculus of 2019. Many forecast robust leisure demand, including from premium leisure travelers who are willing to pay more for posher seats on planes, while business travel demand remains down significantly, particular on international routes. This likely demand mix has airlines favoring spots popular with holidaygoers — like Lufthansa’s new San Diego nonstop or United’s to Palma de Mallorca, both of which are sunny beach destinations — for next summer.

Edward Russell

BA Unveils 35 Euroflyer Routes

British Airways is on the defensive with its new BA Euroflyer subsidiary at London Gatwick. In the works for some months, the new Gatwick-based subsidiary will launch 35 new routes between March and May taking aim at EasyJet‘s dominance of the secondary London gateway. In November, EasyJet CEO Johan Lundgren said that, with the addition of slots leased — ironically — from BA, “more than half of the capacity from Gatwick will be orange” in summer 2022.

Euroflyer’s new routes take direct aim at EasyJet. Of the 35 markets unveiled, all but two — Paphos in Cyprus, and Santorini in Greece — are served by orange jets, according to Cirium schedules. Most of the markets are leisure destinations in and around the Mediterranean with notable exceptions, including Amsterdam, Berlin, Madrid, and Milan Malpensa.

“Gatwick customers will benefit from access to a premium service from the UK’s flag carrier at competitive prices,” said BA CEO Sean Doyle, indicating the airline is betting on its premium brand to attract travelers from budget competitors.

EasyJet management, for its part, came off unconcerned in November about the new BA subsidiary that at the time was only confirmed as in the works. While noting that the airline cannot be “complacent,” Lundgren said that, on the whole, EasyJet is in a “good position” on costs compared to legacy competitors.

Euroflyer will operate as a lower-cost subsidiary under the BA brand. Initially, flights will be operated by BA until the carrier secures its own air operators certificate from UK authorities. Euroflyer will launch with three Airbus aircraft in March, and grow to 18 by the end of May.

Edward Russell

Play Goes to Boston and Baltimore in First U.S. Routes

Icelandic startup Play has chosen its first U.S. destinations: Baltimore-Washington and Boston with flights set to launch on April 20 and May 11, respectively. The carrier, which got its U.S. Transportation Department permit in October, expects to reveal a third North American destination early next year, although it has not determined if that will be in Canada or the U.S.

“Covid is a huge opportunity for startups,” Play CEO Birgir Jonsson said. “In fact, I think it’s a perfect opportunity for this business model,” he added. The carrier plans to focus squarely on the price-sensitive leisure market and keep its fleet to narrowbodies, namely the Airbus A320neo and A321neo. Jonsson sees huge potential in low-cost demand to Europe, especially next summer after two years of lockdowns and travel restrictions.

This marks a change from now-defunct Icelandic low-cost carrier, Wow, where many of Play’s executives — including Jonsson — worked. Wow branched out into Airbus A330s and started flying to the U.S. West Coast, Israel, and India. This is not in Play’s plans, Jonsson said. “Wow grew too big,” he said. “When you have that kind of size, you are pressed into flying to destinations to feed other parts of your hub-and-spoke system, and then you have drop prices and fly below costs.”

Other low-cost, long-haul carriers, like French Bee and its fleet of Airbus A350s and Norse Atlantic‘s planned North America flights on Boeing 787s, may struggle to fill their aircraft. Widebodies limit the destinations a startup can serve profitably, Jonsson said. “That’s a tough market, I would say,” he said.

Play now flies three A321neos on routes around Europe, and by next spring will add three A320neos. The A321neos will then be pressed into transatlantic service. By the end of 2025, Jonsson said Play will have a fleet of 15 aircraft: nine A320neos and six A321neos. The additional A321neos will allow Play to open further East Coast and Canadian destinations, although Jonsson declined to offer details on what cities are in the airline’s sights.

Reykjavik will function as a hub for Play, with passengers from Baltimore and Boston funneled through the airport to flights to up to 22 European destinations. The carrier’s route network is a mix of European point-to-point flights, with the U.S. flights expected to be a blend of connecting passengers and passengers who originate or end their journeys in Iceland. “We do not have to rely on any one source [of passengers],” Jonsson said. “The flexibility of the business model is perfect for this type of uncertainty.”

Jonsson is not concerned about the masses of new capacity airlines are planning to add to the North Atlantic market next summer. Play’s value proposition are low fares and easy connections to Europe. And he believes there is a niche for that around the margins of the larger carriers’ capacity. “It doesn’t matter how big Play or even Icelandair get,” he said. “We will only ever be tiny players in the market.”

Play assumes a large proportion of inbound U.S. passengers will end their journeys in Iceland. Before the pandemic, the country of 400,000 people saw 2.5 million tourists annually. Although overtourism is a concern, Jonsson said there hasn’t yet been the kind of backlash seen in other popular European destinations, like Venice. “Iceland as a destination is still in its infancy,” he said. “There is so much potential for growth, and our investors are betting on this.”

“Fifteen years ago, you would have been considered a weirdo for opening a hotel in Iceland,” Jonsson noted. “Tourism now is the second- or third-largest source of revenue for Iceland, and we have to realize we are a destination; that’s our business.”

Madhu Unnikrishnan

Virgin Australia Swaps Delta for United

Virgin Australia is swapping U.S. partners a year out from its restructuring. The carrier, which shed its widebody jets and longhaul operation as part of the exercise, will tie the knot with United after breaking up with long-time partner Delta. Virgin and United will implement a broad codeshare, which includes reciprocal loyalty benefits, in April. The move comes more than a year after Delta and Virgin suspended their Australia-U.S. joint venture following the latter’s exit from the market.

“Virgin Australia customers will have significantly more options for travel from Australia to the States, with more than three-times as many services available to them, which is great news for Australian travelers,” said Virgin CEO Jayne Hrdlicka.

Prior to the pandemic, United operated more than four-times the flights between Australia and the U.S. than Delta, Cirium schedules show. Routes included Melbourne to Los Angeles and San Francisco; and Sydney to Houston, Los Angeles, and San Francisco. And for a shorthaul only Virgin — the airline served Los Angeles from Brisbane, Melbourne, and Sydney prior to its restructuring — feed into Australia is key; Delta only flies Los Angeles-Sydney.

United is flying to Sydney from Los Angeles and San Francisco today, and plans to resume Sydney-Houston service plus nonstop flights to Melbourne later in 2022.

The shift in allegiance comes a little over a month after Australia began easing border restrictions. That easing has led to a surge in international bookings, including to the U.S. where Virgin competitor Qantas plans to resume flying its superjumbo Airbus A380s next year. In October, United CEO Scott Kirby named Australia, along with Singapore, as the markets that would drive the recovery of the carrier’s Pacific network in 2022.

The Virgin-United partnership is a bit of return to form for both airlines. They codeshared on select flights from 2004 to 2009 when the former was still known as Virgin Blue, according to Cirium.

Edward Russell

Route Briefs

  • Aer Lingus has contracted Emerald Airlines to fill the gap in its regional network left by the collapse of Stobart Air earlier this year. Emerald, operating under the brand Aer Lingus Express, will launch 11 routes from Dublin with ATR 72-600 aircraft. The affiliate will add new service to Exeter; resume flights to Isle of Man, Jersey, Leeds Bradford, Newcastle, and Newquay; and complement existing Aer Lingus service to Birmingham, Bristol, Edinburgh, Glasgow, and Manchester. Emerald will also begin flights from Belfast with routes to be announced in the new year.
  • AirBaltic is making good on its plans for a new Nordic base. The Latvian carrier selected Tampere, Finland, for its first base outside of the Baltics. AirBaltic will connect Tampere to Copenhagen, Frankfurt, Malaga, Munich, Oslo, and Rhodes from the beginning of May. The new routes complement the airline’s existing service between its Riga home base and Tampere. In October, AirBaltic CEO Martin Gauss said the new base would be supported by the arrival of eight additional Airbus A220-300s by end-2022.
  • American and JetBlue Airways continue to defend their controversial Northeast Alliance with new flights. The former has unveiled five new routes from Boston for next summer: Halifax, Louisville, Memphis, Pensacola, and Traverse City all on Embraer E175s from June. In addition, JetBlue will start its previously announced new routes between Boston and Vancouver on June 9; Boston and Asheville, and New York JFK and Vancouver on June 16; and New York LaGuardia and Portland, Maine, on July 9. The new routes come after American announced its exit from 20 Boston, JFK, and LaGuardia markets in November.
  • Copa Airlines is hitting back against Delta after the latter’s expansion in Panama City. Copa began four-times weekly service between Atlanta and the Panamanian capital with a Boeing 737-800 last week. The addition comes just days before Delta launches new service between Panama City and Los Angeles, New York JFK, and Orlando — all routes served by Copa.
  • Speaking of Delta, the SkyTeam Alliance carrier is exiting three smaller markets amid a growing U.S. regional plot shortage. Delta will exit Grand Junction, Colo., and Lincoln, Neb., on January 9, and not resume seasonal flights to Cody, Wyo., on April 11, Cirium schedules show. All three cities will maintain commercial air service on other airlines.
  • Lufthansa will add five new destinations as part of a nine route European expansion aimed at leisure travelers next summer. Brindisi, Kalamata, Liverpool, Rennes, and Stavanger will join the Star Alliance carrier’s map with the first two served from Munich — Brindisi will be operated by subsidiary Air Dolomiti — and the latter three from Frankfurt. Lufthansa will also connect Munich to Bergen, Billund, Menorca, and Varna in its summer 2022 schedule.
  • Spirit Airlines will land in Memphis this spring. The discounter will connect the home of Graceland to Las Vegas and Orlando from April 20, and to Los Angeles from June 8. Spirit faces competition on all of its new routes from Allegiant Air, Delta, Frontier Airlines, and Southwest Airlines.
  • Showing its confidence in summer 2022 demand, Swiss will add five new destinations and six new routes to its map. The Star Alliance carrier will connect Zurich to Bologna, Nantes, Sofia, Odessa, and Vilnius — all new additions — plus Geneva to Brussels in its schedule next summer. Swiss plans to operate 80 percent of its 2019 capacity by the third quarter of 2022.
  • Transavia France is adding two new Greek routes next summer. The budget carrier will connect Paris Orly and Kefalonia twice weekly from April 23, and Montpellier and Mykonos weekly from June 1. Transavia will fly roughly 60 percent more capacity to Greece in summer 2022 than it did three years earlier.

Edward Russell

Edward Russell

December 20th, 2021