Virgin America to Order 40 Airbus Jets Worth $3.3 Bln

U.S.-based airline Virgin America plans to order 40 narrow-bodied Airbus jets, worth $3.3 billion, as part of its strategy to offer low-fare, eco-friendly service to 30 cities by 2016, its chief executive said Thursday.

The San Francisco-based airline has also taken options for another 20 A320s, doubling its fleet to 90 by 2016. The first delivery is scheduled for 2013.

“It’s my 60th birthday this week, and I can’t think of a better 60th birthday present than getting 60 aircraft,” said Sir Richard Branson, speaking by video link from his hideaway on Necker Island in the British Virgin Islands. His Virgin Group owns 25% of Virgin America.

The airline plans to announce a new U.S. destination in the next 30 days, which will bring the cities it serves to 11, Virgin America’s Chief Executive David Cush told Dow Jones Newswires at the Farnborough International Air Show.

The company, which recently opened up a new route to Toronto and plans two destinations in Mexico by this winter, intends to open three new routes every year, beginning in 2011. It opened five this year.

“The quality of airlines in America hasn’t been good, and now people have a choice,” said Branson. “I look forward to adding new routes…and adding the Caribbean as soon as possible.”

Cush said the airline’s fleet expansion is “relatively small” at about 6% to 7% of U.S. industry capacity, so he doesn’t think its growth will be destabilizing for the industry. He added Delta Air Lines Inc. (DAL) is shedding 70 unneeded airplanes this year because of its merger with NorthWest Airlines Corp. (NWA)

Billing itself as a “green” airline, Virgin America will stock its fleet with Airbus’s new “sharklet” option, which is said to enhance eco-efficiency and payload range, resulting in at least 3.5% reduced fuel burn over long haul flights. The airline said since its 2007 launch, its fleet is up to 25% more fuel efficient than the average U.S. fleet.

Cush said Virgin America met with Bombardier Inc. (BBD.B.T) about its mid-sized CSeries jet, which is also scheduled to enter the market in 2013. The Canadian planemaker so far has failed to announce another CSeries order at the air show, the year’s biggest trade event.

“We looked at other aircraft but we were able to come to a good deal with Airbus on this plane, plus they are very committed to finding ways to improve the efficiency of the aircraft,” Cush said. “That’s obviously what we loved about the CSeries, as it’s a very efficient aircraft and it’s very environmentally friendly.”

“Bombardier has a very compelling aircraft. Just the green nature of that aircraft, that’s what we liked about it. In the end, the barriers to a second fleet are pretty tough. It just seemed like the best path for us.”

Cush said Airbus is working hard to ensure its aircraft remain “state-of-the-art” and expects it to “be there in 2016, 2017,” with a competitive offering.

“We’ll certainly look at our options if there’s another aircraft out there that’s 15%-20% more fuel efficient and 15%-20% less carbon intensive. Our hope is that Airbus will have an option out there around that time period, but in all honesty, if they don’t, because of the economics and our commitment to have sustainable transportation, we’ll look at other options,” Cush said.

Airbus will backstop the financing for about 15 planes, although that isn’t expected to be necessary, Cush said.

The two companies expect to reach a binding agreement in the next few months.

Airbus is a division of European Aeronautic Defence & Space Co.

Kuwait’s new airline, Wataniya Airways first flights to Dubai in February

Kuwait’s new airline Wataniya Airways said on Sunday it will commence its first flights to Dubai in February.

Watanaiya said that it will operate two flights a day to and from the booming emirate and will later announce other destinations.

It said that its parent company, Kuwait National Airways, will be listed on the Kuwait Stock Exchange next month.

The airline, the first premium private carrier in the oil-rich sheikhdom, has already signed deals to lease seven Airbus A-320 aircraft.

Oil-rich Kuwait already has a national carrier, Kuwait Airways, which is expected to be privatised next year. Jazeera Airways, a low-fare private airline, is also Kuwaiti.

Airlines Halt Premium Slide at Expense of Price Cuts

The decline in premium air travel slackened in June after carriers slashed prices to fill seats.

First- and business-class traffic fell 21.3 percent from year-ago levels, compared with a 23.6 percent drop in May, the International Air Transport Association said today. The decline was the least since March.

“The issue now is that this stabilization of passenger numbers is partly being achieved at the expense of much lower yields as airlines seek to boost cash flow by making more cheaper seats available,” IATA said in a statement.

Revenue from premium seats fell an estimated 41 percent in the second quarter, compared with a 33 percent drop in the first, IATA said. Including economy tickets, traffic, or the passenger total times the distance flown, slid 7.1 percent in June, easing from a 9.2 percent drop in May and indicating that demand has steadied when adjusted for seasonal fluctuations.

The decline in premium travel has hit hardest at carriers such as Singapore Airlines Ltd., which gets about 40 percent of its revenue from business and first-class berths. The state-controlled carrier reported its first quarterly net loss in six years in the three months through June following an 20 percent plunge in passenger numbers.

Japan Airlines Corp., Cathay Pacific Airways Ltd., Air France-KLM Group and British Airways Plc also had losses.

International air traffic fell 19.2 percent in March, helped by the timing of the Easter holiday.

Capacity Growth

Separately, the Official Airline Guide said today that airlines have increased seating capacity by 0.2 percent this month compared with a year earlier, a move that will erode average occupancy unless traffic also returns to growth.

The gain was the first in a year, with airlines previously parking planes or flying them less to curb capacity. The number of flights is down 2 percent versus last August, suggesting carriers are using bigger planes with more seats in each.

“It’s dangerous for the airlines as a group to be moving into positive territory on capacity when they haven’t quite yet gotten back the volumes,” said Penny Butcher, an analyst at Morgan Stanley in London. “I wouldn’t say it’s a surprise, that’s where our expectations were for the year overall, but it’s not prudent of the global industry on the whole.”

Morgan Stanley has a “cautious” rating on the European airline industry, is “overweight” on Air France and “neutral” on Deutsche Lufthansa AG.

Airlines Company To Develop Flight Services, New Italian Airline Brand

Lufthansa today said it plans to launch Lufthansa Italia, a new Italian airline brand that would use a fleet of Airbus A319 aircraft to serve such European destinations as Paris and Barcelona from Milan as soon as February 2009.

The announcement comes amid an ongoing bid for a stake in the Italian carrier Alitalia, in which Lufthansa and Air France are the chief rivals. Italian consortium CAI last week finalized a deal to purchase the assets of the long-suffering Italian flag carrier for more than €1 billion in cash and assumed debt, with plans to relaunch the airline next month and the potential for one of those foreign carriers as a partner.

A Lufthansa spokesperson today said the launch of Lufthansa Italia is “completely separate from anything that might take place with Alitalia. It’s the start of a new Italian brand with an Italian operating certificate,” a spokesperson said.

Lufthansa said the new brand would serve Barcelona and Paris beginning Feb. 2, 2009, with service to Brussels, Budapest, Bucharest and Madrid following within a month. The carrier also said it expects to add London and Lisbon to the network “with the start of the 2009 summer flight schedules at the end of March.”

Lufthansa said it would outfit the A319 fleet with 138 seats configured into two classes and plans to sell the tickets through “Lufthansa’s usual distribution channels.”

“Lufthansa Italia will position us in an important market that is characterized by strong demand and holds opportunities for buoyant growth in the future,” said Lufthansa CEO Wolfgang Mayrhuber in a statement today. “We will be offering our Italian customers an extensive route network from northern Italy to destinations throughout Europe.”

US Airlines To Cutting Capacity of Air Flight Traffic in 2009

It appears United Airlines, Northwest Airlines and American Airlines were the carriers most serious about cutting capacity this fall.

United cut 14.2 percent of its capacity, or about one-seventh of its flying, in November compared to the same month in 2007. Northwest was down 10.1 percent, followed by American with a 9.3 percent reduction.

Only Southwest Airlines showed an increase in capacity, and it was a measly 0.4 percent. But all airlines showed a decrease in traffic, and only AirTran Airways and Delta Air Lines reported that they filled a greater percentage of their seats this November compared to last.

The big capacity cutters were also the big traffic losers, led by United’s 17 percent drop in traffic measured by revenue passenger miles. If you count passengers, United lost 17.8 percent of its actual passengers – or more than one passenger in six compared to November 2007.

Below are charts showing traffic, in revenue passenger miles; capacity, in available seat miles; and load factors, or percentage of seats with paying passengers in them. RPMs and ASMs are in thousands.