Air Arabia Increases Profits By 10 percent

Air Arabia lifted its second-quarter profit by 10 per cent as it expanded its route network and attracted passengers seeking lower fares.

The budget carrier reported net profit of Dh90 million (US$24.5m), compared with Dh82m a year earlier. It launched a Moroccan subsidiary and added two new routes from its hub in Sharjah.

The group’s performance demonstrated the strength of the budget airline model in the middle of the economic crisis, said Adel Ali, the airline’s group chief executive.

“We are pleased with the positive results achieved today amid the ambiguity of global economy performance and the impact of swine flu on air travel trends,” Mr Ali said.

The International Air Transport Association has predicted that airlines will lose a combined $9 billion over the course of the year. Budget carriers have fared better than major airlines, but they have also been affected by the slowdown.

Ryanair, Europe’s biggest budget airline, said last month its profit would come in at the bottom end of forecasts by the end of the year.

Air Arabia served 1.9 million passengers in the first half of the year, up 20 per cent from the same period last year.

The airline filled 80 per cent of the total number of seats on flights for the second quarter, even as it began operations to Athens and Goa and launched a Moroccan joint-venture firm, Air Arabia (Maroc), which is based in Casablanca.

But Karim Murad, an analyst at Shuaa Capital, said profits and the proportion of seats filled fell below his expectations.

“I was expecting a higher load factor, I was expecting a higher yield,” Mr Murad said. “My expectations were based on the high season (for travel).”

The quarter also saw the arrival of a new budget competitor, flydubai, which flies to four Middle-Eastern cities. It probably had minimal effect on Air Arabia’s business in the second quarter, Mr Murad said.

The flydubai airline, based at Dubai International and owned by the Dubai Government, will add three Indian cities this month to its network.

Mr Ali warned that conditions would remain tough for Air Arabia in the third quarter.

“The coming period continues to add pressure on aviation sectors and we therefore remain focused on maintaining the highest levels of operational cost efficiency,” he said.

Goldman Sachs and Nomura both put “buy” recommendations on the company’s stock last week, pushing the share price up 5 per cent, to Dh1.05.

“We believe investors have associated the woes of international carriers with airlines in the region,” Nomura said. “We see airlines such as Jazeera Airways and Air Arabia as business models better positioned relative to national carriers in the current environment.”

John Weikle Plans Launch New Airlines to Fly With $9 Seats

Aviation entrepreneur John Weikle isn’t afraid of a stiff headwind. He plans to launch a new airline in July, modeled after Irish discounter Ryanair, with super-low fares and designs on customers who don’t mind driving a little farther to get a good deal. Tickets went on sale Wednesday.

Never mind that U.S. airlines are weathering one of the largest contractions in aviation history, or that a good chunk of the public is likely to stay grounded until the economy improves. About 14 million fewer Americans are expected to fly this summer, down 7 percent from 2008, according to the Air Transport Association, an airline trade group.

Weikle thinks this is the perfect time to give wing to a new carrier, positioning it to take off into an economic upswing and focusing on markets where competition is limited.

His instincts are sound, aviation experts said, but his odds of succeeding are low.

“His timing is actually pretty good,” said Vaughn Cordle, a former airline pilot turned market researcher, who thinks the uptick in consumer confidence points to an airline industry rebound in 2010. “Unfortunately, airlines serving those small markets very rarely make it. He will not get economies of scale or scope.”

Weikle’s venture, JetAmerica, will lure customers with fares priced as cheaply as $9 and by flying full-size jets between midsize cities such as South Bend, Ind., and Toledo, Ohio, and tourist destinations such as New York and central Florida.

Skybus founder

Sound familiar? That’s because Weikle (pronounced “why-kel”) also founded Skybus, a discounter that featured $10 fares and targeted smaller Midwestern markets like Columbus, Ohio, and Gary, Ind., places treated as afterthoughts by major carriers.

Some dubbed the upstart Skybust, however, when it folded in May 2008, having operated for less than a year. The discounter racked up a net loss of $56 million on $80 million of revenue over three quarters of earnings, according to federal data compiled by AirlineForecasts LLC, Cordle’s firm.

Weikle, who left Skybus shortly after it began flying, says the carrier had a sound strategy but executed it poorly. Sky-high oil prices didn’t help, either.

Skybus also was weighed down by heavy overhead, including orders for 65 new Airbus A319s. As that venture failed, Weikle started formulating plans for JetAmerica but found little interest among investors until oil prices plummeted.

Weikle’s new company will start with just one plane, a Boeing 737-800 leased from Miami Air International along with flight crews, that will seat 189 passengers. He plans to add three aircraft over the next year from Miami Air, which would provide backup planes as needed, Weikle said.

“We hope to get it right by growing very slowly,” he said.

The first nine people to buy tickets on a flight will receive fares for $9; the most expensive seats will go for $199 apiece. SkyAmerica plans to launch service with 34 flights per week between Newark, N.J., and Toledo, South Bend, Lansing, Mich., and Melbourne, Fla. The carrier will start flying between Toledo and Minneapolis in August.

The discounter plans to add other cities to its network, Weikle said. The carrier expects to generate sales of $50 million in its first year and $150 million the second year by charging passengers fees for amenities, like sodas and snacks, and by encouraging more people to fly.

Is the airline competitive?

But will it make money? As soon as other airlines view JetAmerica as a threat, they’ll likely ratchet down prices to steal customers, Cordle predicted.

Chicago-based United Airlines, for one, said it will fight to keep area customers. Weikle’s sights are set on Rockford as an expansion city.

“We are Chicago’s hometown airline and will compete aggressively with competitive fares, better service and more convenient flight options,” said Robin Urbanski, a United spokeswoman.

But Weikle thinks he can borrow from the success of Allegiant Air, another discounter that has found a way to make money by serving smaller cities. “Our goal is to stay away from the competition,” he said.

Analysts say he has a novel strategy that may prove sensible, especially in the current environment.

“It’s not a bad way to see if the concept works,” said aviation consultant Robert Mann.

Weikle declines to say how much he has raised from investors. But he also is relying on millions of dollars in financial support, waived fees, government aid and free marketing from some of the airports he’s serving.

Airlines Companies and Business Underpresure from Oil Prices Fluctuation

Flat oil prices, a slumping market and predictions that the global airline industry is facing a significant loss next year was putting pressure on the sector early Tuesday. At last check, the Amex Airline Index was off 1.7% to 23.12 points with all but three of its 13 components trading down. Oil prices gained just 21 cents to $43.92 as traders weighed reports of a possible production cut by OPEC, while the International Air Transport Association forecast a 2009 industry loss of $2.5 billion on the back of receding passenger traffic, revenue and yield. Major carrier stocks were mixed, with AMR and Delta trading up fractionally, and UAL and US Airways.

News York Collaboration With Airlines to Bring Tourists to New York City

The competition for supremacy among major airlines at New York’s airports is paying dividends for the city’s campaign to attract more visitors.

On Wednesday, American Airlines announced that it had formed an $8 million marketing partnership with the city’s tourism agency, NYC & Company.

American will be the exclusive airline sponsor of the city’s summer and fall tourism campaigns this year and next, and, in exchange, it will help promote New York across the country. The airline will also contribute $3.5 million toward NYC & Company’s marketing budget, increasing it by about 15 percent.

Mayor Michael R. Bloomberg has been pushing for more visitors to the city, but the latest round of budget cuts reduced NYC & Company’s allocation from City Hall. To offset that reduction, tourism officials have sought help from corporations seeking a higher profile in the city.

“We just have to become more self-sustaining,” said George Fertitta, the chief executive of NYC & Company. “We’d be doing this anyway, but it’s even more important now.”

Referring to the agency’s corporate partners, he added, “We’re using a lot of their assets to drive people to New York.”

Right now, airlines are among the most eager partners because the competitive situation at the city’s airports is in flux. Delta Air Lines is seeking to expand its presence at La Guardia Airport by adding flights there in a swap with US Airways for slots at Ronald Reagan National Airport, in Washington.

Not wanting to be eclipsed by Delta, American Airlines said on Wednesday that it had struck a partnership with New York-based JetBlue Airways. JetBlue agreed to trade some of its slots at Kennedy International Airport for some of American’s slots at Reagan Airport. American also agreed to allow JetBlue’s passengers to connect to overseas flights on American with a single ticket.

More important for New York officials, American and JetBlue agreed to encourage their passengers to stop over in the city for a night or more during their trips. Those additional overnight stays could significantly help the city’s economy, Mr. Fertitta said.

“If we got another 100,000 people who happened to be coming through New York to stay over, that would mean probably $25 million in economic impact,” Mr. Fertitta said.

Mr. Bloomberg has set a goal of drawing 50 million tourists a year by 2012. The city was on pace to meet that goal before the number of visitors dropped off last year to 45.25 million, according to NYC & Company’s estimates.

source : nytimes.com

Japan Expects US To Decide On Airline Pacts By Oct 2010

Japan’s transport ministry expects the U.S. government to rule on two expected airline antitrust applications by October 2010 before enacting a landmark new aviation deal.

The ministry expects the applications involving Japanese members of two global airline alliances to be filed by mid-February, and called on its counterpart “to give expeditious consideration,” according to a letter sent to the U.S. State Department.

The Japanese timetable sets the stage for Japan Airlines Corp. (9205.TO, JALSY) to decide whether to stay in the Oneworld pact with existing partner American Airlines, a unit of AMR Corp. (AMR), or defect to the SkyTeam grouping led by Delta Air Lines Inc. (DAL).

The so-called side letter from Japan’s Ministry of Land, Infrastructure, Transport and Tourism accompanied the memorandum of understanding agreed upon last week by the two countries to liberalize their restrictive aviation pact.

The ministry said it would sign the open-skies deal when antitrust immunity is granted “on the terms that are acceptable to the Japanese delegation.” Keiji Takiguchi, deputy director general of civil aviation at the ministry, said in the letter that he “strongly urges” the U.S. to decide on the application from JAL and its partner by October next year, when a new runway at Haneda airport will see the Tokyo gateway expand international service.

A parallel application for immunity to coordinate flights, fares and marketing is expected from All Nippon Airways Inc. (9202.TO) and partners United Airlines, a unit of UAL Corp. (UAUA), and Continental Airlines (CAL).