OAG FACTS – June 2014

Continuing the pattern of the past three months, airlines will increase the number of scheduled seats offered by 5% in June 2014, compared to June last year. This translates as to a further 17.3m extra seats across the world’s airline networks. The number of flights will grow slightly slower, by 3%, a consequence of the trend to use larger aircraft.

More than half this growth can be attributed to an increase in airline capacity within Asia/Pacific which will see scheduled seats grow by 9.2m or 8% in June. Above average growth will also occur to/from Central & South America (+9%), to/from Middle East (7%), Within Middle East (+7%) and to/from North America (+7%).

The strong performance for to/from Central & South America has been supported by growth in capacity to/from Brazil, presumably associated with the FIFA World Cup. Airline capacity to/from Brazil has strengthened each month in 2014 and there will be 14% more seats and 14% more flights to and from Brazil in June 2014 compared with June 2013. Many carriers associated with World Cup countries have increased capacity in June, which is driving the increases.

Is the jewel in Star’s crown?

With the news that Air India’s long held ambition to join is finally expected to be realised in July 2014, this month we explore what this might mean for both the carrier and alliance. The latest schedule data for June 2014 shows that India’s domestic market is experiencing strong capacity growth, up 10% on last June, whilst international capacity is growing at a more steady 3%. Air India accounts for 18% of India’s domestic capacity and is the third largest carrier after IndiGo Air and SpiceJet.

Air India remains the largest carrier in terms of seats to and from India, but this is a fragmented market with Air India supplying just 16% of international capacity and flights. This places them only slightly ahead of which is the next biggest carrier with 15.7% of seats. On flights, Jet Airways has a 16.2% share, whilst Air India has just 16%. The past 12 months have seen Jet Airways take market share from Air India; last June Jet Airways offered just 13% of international seats while Air India had 18%. Together, Etihad and Jet Airways account for 19% of seats in June 2014.

In June 2014 Air India and Star Alliance carriers collectively provide 28% of India’s international capacity. Oneworld have 13% of international seats, and Skyteam just 6%.

What does Star offer Air India?

Air India & Star International Networks

Air India Star Source: OAG Mapper

Air India currently operates to 33 international destinations with a focus on the Middle East (54% of seats) and Europe (12% of seats). Joining Star Alliance potentially adds 11 unserved international destinations to Air India’s network – these are amongst the Star routes highlighted in orange on the above map. Two of these are in China, three in Africa (where Air India does not currently operate), and five in Europe. Arguably India is better placed geographically than the Gulf region as a connecting point for the emerging traffic flows between China and Africa, as it is closer to the Great Circle Route. Therefore, effective scheduling between Star Alliance members , and might see some of this traffic shift to and Delhi routings.

Among the European destinations unserved by Air India is Istanbul, served by with daily operation to Mumbai and Delhi. Turkish Airlines has succeeded in creating a rapidly growing hub airport at Istanbul which provides competition for the Middle East hubs through its extensive network into Europe, the Middle East and Africa. The Turkish Airlines network map below, with the two routes to India highlighted in orange, shows that co-operation between Air India and Turkish Airlines has the

potential to give Air India access to a well-placed network, and one-stop connectivity across Europe, North Africa and even into sub-Saharan Africa.

Turkish Airlines International Network

Source: OAG Mapper

This should improve Air India’s ability to compete with the Big Three Gulf carriers (Emirates, Qatar and Etihad) which now contribute 16% of India’s international capacity. The largest International market from India is to the Middle East, but Air India’s market share has now fallen slightly below that of Emirates in this market. This has changed significantly from the position in June 2003 when Air India had 29% of the India-Middle East market. Although Emirates overtook Air India in 2009, their capacity has been more closely matched in recent years. Emirates currently operate 20% of seats between India and the Middle East and the Air India share is 18%.

Much of this capacity serves the booming Indian migrant labour market which provides workers across a range of Middle East countries. In June there are 1.1m airline seats between India and the Middle East each way, and an average of 182 flights each day in each direction.

Over half of the Indian - Middle East capacity operates to and from the UAE. With these airports at the heart of Emirates and Etihad networks, undoubtedly long haul Indian traffic is also being routed via the Middle East.

Air India has a limited offering into South East Asia, with just 10% of their June seat capacity operating to the region. With Air India flights operating to just three destinations in South East Asia, BKK, SIN and RGN, there is scope for the airline to

benefit from Thai Airway’s network which would provide access to Australia and Indonesia for Air India, as well as China and Japan.

Thai Airways International Network

Source: OAG Mapper

What does Air India bring to Star in return?

Air India has a comprehensive domestic network which will be attractive to Star carriers seeking to expand their reach into the Indian subcontinent. With a population of 1.3 billion and an economy projected to grow by 6.2% this year, according to the World Bank, India is a market which international airlines have yet to penetrate.

International air services connecting to Air India domestic operations will provide access to much of India although Air India faces strong domestic competition from market leader IndiGo Air, as well as SpiceJet and Jet Airways which are all significant players in their own right. Competition will intensify as and when AirAsia India and SIA/Tata enter the fray in the coming months.

Air India Domestic Network

Source: OAG Mapper

For , the lead member of the Star Alliance, Air India offers a chance to re- engage with the Indian market having lost market share of India-Europe traffic to the Gulf carriers. The five routes that Lufthansa flies between India and its Frankfurt and Munich hubs connect the substantial Indian’s domestic market with Lufthansa’s vast network.

Lufthansa Network from FRA

Source: OAG Mapper

Successful integration of Air India into Star Alliance, such that all parties gain from Air India’s membership, will require some tweaking of schedules but the network benefits look set to work for a good number of the members.