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P3

“The Atlantic and You”

António Gomes de Menezes: [email protected] (SATA and the University of the ) with Luís Silveira and Ana Azevedo (SATA) Slide 1

P3 Que título? SATA is building something... "Building a bridge between Europe and America"? PDLXTSP; 4/7/2010 P2 Foundation – August 21th, 1941 First flight – June 15th, 1947

Today Slide 2

P2 este ou outro slide como pano de fundo para apresentar em empresa. PDLXTSP; 4/7/2010 SATA: 14 aircraft, 40+ destinations and 1.5Mpax (2010)

SATA Internacional SATA Air Açores

4 4

4 2 Corporate Mission Network Network Design

A geographical decision: • Which markets do we want to serve? • Geography and Corporate Identity (100% owned by the Autonomous Region of the Azores: connecting the Azores and the Azores to the World) • Operating outside of the Azores (LIS, OPO, FNC) in order to reach economies of scale and scope. An airline network is: • a source of brand identity; • a revenue and cost driver; • a source of competitive strength or weakness; • a potential hedge against economic cycles.

Source: Holloway, S., Straight and Level , Ashgate, 2008 Types of Networks

Small/medium-sized network carriers Larger network carriers SATA Internacional Network - Jets SATA Air Açores Network – Turboprops Network Outsourcing

The network design involves deciding • The pattern of routes to be operated; • Who will operate them – using own aircraft or outsourcing capacity provision.

Extension of the network by • Code-sharing; • Block-spacing; • Joint services; • Franchising.

Source: Holloway, S., Straight and Level , Ashgate, 2008 The Bombardier Q400 NextGen, phased-in in the 1 st Quarter of 2010, brought new synergies SATA Internacional outsources SATA Air Açores to replace the A320 (CY159) by the Q400 NG (Y80) in PDL-FNC route and to open the new routes PDL-FNC-LPA and PDL-FNC-FAO

SP:S4 SP:S4

SP:S4 SP:S4 - operated by SP on behalf of S4 (ACMI) S4 – Domestic Network Routes operated by SATA Internacional, code-shared with TAP (marketing carrier)

S4*TP S4 – Domestic Network Routes operated by SATA Air Açores aircraft and crew on behalf of SATA Internacional, code-shared with TAP Portugal

SP:S4 S4 – Domestic Network Routes operated by TAP Portugal, code-shared with SATA Internacional (marketing carrier)

TP*S4 S4 – Domestic Network Parallel code-sharing with consolidation in thin routes

S4*TP TP*S4

Parallel code-sharing: Dual service Sole service S4 – European Routes "destination carrier” Routes operated by SATA Internacional, code-shared with TAP Portugal (marketing carrier) S4 – European Routes Route operated by SATA Air Açores aircraft and crew on behalf of SATA Internacional, code-shared with TAP Portugal

SP:S4 S4 – European Routes Routes operated by TAP Portugal code-shared with SATA Internacional (marketing carrier)

TP*S4 S4 – European Routes Seasonal point-to-point services plus through hub services

MAD BCN

LIS Parallel Code-sharing: sole S4 sole TP dual S4 Network – North America Routes operated by SATA Internacional. TAP Portugal places its code on LIS+PDL/BOS, LIS+OPO+PDL/YYZ+YHM routes S4 Network – North America Next step: concentrating BOS and YYZ destinations and code-sharing connections (through hub services versus point-to-point services) P5 S4 Network– Charter A dying species? Slide 22

P5 intra-Europe, charters are being replaced by LLC; surving on long-haul market; mergers/consolidation among charter airlines. PDLXTSP; 4/7/2010 Code-sharing Motivations:

• To broaden network reach (accessing to particular markets); • To deepen network coverage (increasing the number of frequencies); • To improve the GDS display positions of connecting services; • To develop an alliance strategy; • To contain costs, avoid launching new routes that cater only to price-sensitive leisure traffic, with low- yields, directional and seasonal traffic.

Source: Holloway, S., Straight and Level , Ashgate, 2008 Alliances Categories: Bringing SATA under the radar. TYPE OF AGREEMENT TYPE OF ALLIANCE Commercial Alliance  Interline/pro-rate  Mutual ground handling  Frequent-flyer Programmes  Code-Share  Block Space  Common Sales/Ticket Outlets Strategic Alliance  Schedule/Capacity Coordination  Joint Engineering  Joint Flights  Franchising  Common Branding  Joint Cargo and Passenger Services Ventures  Full Merger Source: Doganis R., The Airline Business , Routledge, 2006 Alliances => Network Expansion Global alliances: • code-sharing • schedule co-ordination • joint sales offices and ground handling • frequent flyer programmes • joint maintenance

Regional alliances: • code-sharing • joint marketing and sales • some capacity coordination • use of each other lounges

Route- specific alliances: • covering a limited number of city pairs • most common: interline pro-rate and code-sharing SATA Network and Alliance Strategy Geographical decision: • SATA “natural” markets – Azores to/from Portugal Mainland and North America (Boston and Toronto); • Atlantic markets such as to/from Portugal Mainland and Europe; Portugal Mainland to/from Boston and Toronto. Alliance: • Partnership with the national/flag network airline (code-sharing and FFP). • Next step: code-sharing and/or block-spacing for connections within USA and Canada (underway). • Position SATA to capture traffic to the Azores and Madeira from Europe (via LIS, including New Airport; via OPO and via FKT or other main tourism market). António Gomes de Menezes [email protected] Porto, July 7th, 2010