ATW Editor's Blog

2015’s big aviation moments; what 2016 could bring

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As we welcome in a new year, I thought I would give a personalized recap on some of the most significant moments in the global air transport industry through 2015; and give a few thoughts on what to watch for in 2016.

What Happened

Gulf Wars III. For commercial aviation journalists, this was the gift that kept on giving through 2015. As the three major US carriers, American, Delta and United, ramped up their campaign to put a cap on the growth of the three major Gulf carriers, Emirates, Etihad and Qatar Airways, the public exchanges became more heated, nasty and personal. As each accused the other of billions of dollars of disallowed subsidies within the US-UAE and US-Qatar Open Skies frameworks, all spent millions on legal assistance, public relations support and campaign ads. The topic overwhelmed the IATA AGM in Miami, even though the CEOs of Delta and United scarpered before the annual meeting proper even began. And despite IATA DG & CEO Tony Tyler’s guidance that IATA does not have a mandate on this dispute. Where did all this hot air, finger pointing and money get everyone? Pretty much the same place as they were in 2014. The US partnership did not achieve its stated goal of having government-to-government talks on the Open Skies agreements. The Gulf carriers are continuing their successful strategies of growing networks based on their geographically-perfect hub locations in Abu Dhabi, Dubai and Qatar. And, for that matter, American, Delta and United are posting some of their best financial results ever and some of the best in the global air transport industry.

Where do I think this will go in 2016? The US coalition has had some of the wind taken out of its more absurd rhetoric. United was dealt a double blow when CEO Jeff Smisek abruptly resigned under a cloud related to the New Jersey Ports scandal. Then replacement CEO Oscar Munoz had emergency heart surgery and will be on leave until sometime in the first quarter of 2016. We hear he is recovering well and wish him all-speed. But Smisek’s departure has allowed United to refocus on much more pressing and close-to-home issues than the Gulf carriers: its poor labor relations and even poorer customer service. It seems to me that American’s Doug Parker, meanwhile, developed a distaste for the Gulf campaign when it became nasty. He was the one CEO of the three who stayed throughout the IATA AGM (Parker was the AGM chair) and he did a fantastic job of fielding the never-ending questions on the Gulf dispute while politely returning the subject to the AGM agenda. Parker’s much bigger priority is the continued – so far seamless – integration with US Airways.

That leaves Delta’s Richard Anderson, who is widely perceived to have started this fight, but who also made himself ineligible as campaign spokesman after his remarks on CNN that appeared to link the Gulf carriers with the 9/11 terrorists. Anderson won’t give up this fight. But the Gulf carriers have wisely avoided joining forces and that’s a strategy that has so far paid off.

Some token government talks may happen in 2016, but it’s my prediction that they won’t accomplish much more than they did in 2015 – certainly nothing like the curtailment that the US carriers were seeking. In the end, I see this very expensive campaign fizzling in 2016.

American & US Airways became One. In what has to have been the smoothest and most remarkable airline merger in history, American reached a major milestone Oct. 17 when it successfully cutover US Airways’ reservations system to American’s Sabre system, ending the US Airways brand. President Scott Kirby reported an 89.4% on-time performance and 99.5% completion rate following the cutover.

American thus became the world’s largest airline and is sharply focused on restoring the brand to that of its Crandall heyday. My opinion is they will achieve this in 2016 and beyond. The company has a long-standing, close-knit and superb executive team that has stuck meticulously to its transition plan. With the nuts and bolts in place, this airline will, I think, demonstrate a lot of innovation and creativity going forward and become a fiercesome global competitor.

The economy was sluggish, but many airlines did ok. As IATA chief economist Brian Pearce said, the results were decidedly patchy with North American carriers faring far better than most. But still, a forecast collective record net profit of $33 billion for 2015 and $36.3 billion in 2016 is a much better outcome than the world’s airlines have seen in the past. It speaks to smarter management, better capacity and yield control, more efficient aircraft and, of course, a continuing and growing demand for air travel. That’s a positive trend that bodes well for 2016 and beyond.

FAA stepped up to the small UAV problem. And did so remarkably swiftly and with the right balance of enticement and enforcement. If you live in the US and received a UAV in your Santa stocking – get it registered. It’s the law.

The US signed air agreements with Cuba and Mexico. These two historic agreements, sealed at the end of 2015, herald a new era in air transport freedom and competitiveness. It’s remarkable that, given all the Open Skies agreements the US has forged, a liberalized deal with Mexico has been so long in coming. But it’s a good thing for airlines and the traveling public. As for Cuba – don’t expect anything to happen fast in 2016. But the significance of that air agreement cannot be overstated; and the door it opens to a much larger travel and tourism industry is phenomenal.

The Airbus A350 XWB entered service. This was supposed to happen at the end of 2014, of course, but an attempt by Qatar Airways CEO Akbar Al Baker to get a last-minute additional discount related to the weight of the aircraft, turned sour and led to the whole thing being called off. Quite rightly, Airbus president & CEO Fabrice Bregier didn’t blink, for which he has my admiration. An aviation equivalent of the Christmas Truce was called; both sides cooled off, and the A350 delivery ceremonies were rescheduled to Jan. 7 in Doha. Take a look at the photos.

The spacious cabin, comfort levels and significant efficiencies of this aircraft provide airlines a lot to play with – new point-to-point routes, huge flexibility in cabin layout, and a great work room for flight and cabin crew.

MRJ was delayed, again. Right at the end of the year, Mitsubishi Aircraft announced yet another major delay to the service introduction of its Mitsubishi Regional Jet (MRJ). First delivery to launch customer ANA is moving from the 2017 second quarter to “approximately one year later.” This was the third major delay of first delivery and a major program setback.

CSeries began to find its feet. After a rocky 2014, when the Bombardier CSeries flight-test program was halted because of an engine failure during ground tests, this very attractive 110-seater found steadier ground in 2015, gaining certification in December. Bombardier also secured a deal with the Quebec government that invested$1 billion in the company, giving the program a financial security blanket as it continues through development. But the Quebec deal was, no doubt about it, a lifesaver. Bombardier earlier failed to secure an investment partnership with Airbus – a deal that made public the desperate situation of the CSeries. And the aircraft still lacks the number of orders it needs to ensure a long-term future. 2016 will be another critical year for the CSeries, perhaps its most critical. Without some serious orders from mainstream airlines, it will become an orphan aircraft. That would be a shame – the CSeries is a well-built aircraft with great performance. It looked fantastic in the 2015 Paris Air Show flying display. And not all of its troubles are home grown. It seems to me that Airbus and Boeing have played their part in keeping the CSeries order numbers low and ensuring that a third competitor does not take a hold in the narrowbody market as they bring the A320neo and 737 MAX into service. Embraer saw the way the wind was blowing and opted not to pick a fight with Airbus and Boeing. Bombardier, urged on by Lufthansa, which wanted a third competitor, went all-in and is taking a bruising. It would be nice to see the Canadians deliver a couple of knockouts in 2016.

The neo gained certification and the MAX rolled out. And that’s good news for the narrowbodies, for Airbus and Boeing and for airlines. The 737 and A320 families have already proven their immense value to the industry; these re-engined versions will make it more so.

 

What Didn’t Happen

The first Airbus A320neo didn’t get delivered in 2015. But hey, what’s a few weeks in today’s world of new aircraft program delays (see 787, CSeries, MRJ…)? By that benchmark, the delivery to Lufthansa, now expected in January 2016, is practically early…

We didn’t find MH370. Despite heroic and extensive search efforts (especially by Australia), and the tantalizing discovery of a flaperon washed up on Reunion Island, there’s still unfinished business to determine the whereabouts and reason why that Malaysia Airlines Boeing 777 disappeared in March 2014. It’s my fervent hope that 2016 may be the year that answers are forthcoming on this most perplexing incident.

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