A look at the challenges – and opportunities – that await airline chief executives in the year ahead


Arguably, Air France-KLM has already overcome one of its biggest and longest-standing hurdles, by appointing "an outsider" – in the shape of Air Canada executive Ben Smith – as its new group chief during 2018.

The SkyTeam operator once again saw its fortunes hit by strained labour relations last year. Those problems came to a head when group chief executive Jean-Marc Janaillac resigned in May, after workers at Air France rejected a pay deal aimed at resolving the industrial dispute that had repeatedly caused flight disruption during the first half of the year.

Ben Smith, Air France-KLM

Air France-KLM

But for the first time Air France – or since Air France-KLM became the parent company – opted for a non-French candidate to replace him. While Smith's appointment was greeted with plenty of bluster from unions, a deal was struck fairly swiftly with a number of them – but not, significantly, with pilot group SNPL.

Briefing analysts in late October, Smith said the group had seen some "early positive results" from open dialogue and was hopeful of striking a pay deal with SNPL. "They [SNPL] do want a sustainable future. And I think, more and more, there's a common belief that ways of the past have not helped anybody," says Smith.

He will be aided in his task by the relatively good financial health of the group, which has – at an operating level at least – enjoyed three consecutive years of profit during a reasonably benign climate for airlines generally.

But he will have to work to resolve the divisions within the group after recent years in which Air France has been financially outperformed by its supposedly junior partner KLM.

The group distanced itself from reports it had already decided to pull the plug on Joon. Something of a curiosity, given its positioning as a millennial-focused carrier, the airline was the most tangible – if still relatively small – innovation under Janaillac's tenure. But for a group that already counts regional units Hop and KLM Cityhopper and two Transavia leisure units alongside its mainline network carriers, it was not obvious why adding a further brand was an immediate priority.

The slate has further been cleaned at Air France by the appointment of Anne Rigail as its new chief executive in December.


Expectation is weighing heavily on the shoulders of Turkish Airlines chief executive Bilal Eksi.

He took over at the flag carrier during a turbulent 2016, when security and economic factors combined to dent travel demand in Turkey.

This arguably gave Eksi some breathing space, including generous year-on-year points of comparison as finances and traffic bounced back from 2016's trough.

Its 2019 performance, however, will be an important indicator of whether Turkish is truly back on track.

A big concern for Eksi must be that Turkey's economy appears to be tanking just as the carrier prepares for a switch of operations to Istanbul's brand-new mega-airport.

The new airport is needed with Ataturk at bursting point. But moving your main hub operation is a difficult job at the best of times; doing so amid declining economic confidence, rising interest rates and inflation, international trade disputes, geopolitical tensions, military activity in the region, and a weak local currency would challenge even the most seasoned airline chief.

Further cranking up the pressure, the state-run carrier's performance at the mega-hub is intrinsically linked to the perceived success or otherwise of the national infrastructure project, which was opened in high-profile fashion by Turkish president Recep Tayyip Erdogan at the end of October.

Europe has had a patchy record of opening major new airports or terminals, as anyone in Berlin can testify. Turkish will be hoping that news of a delay to its planned ramp-up at the airport – now not expected until March – does not become a rolling story in the year ahead.

The new hub could reignite expectations that Turkish and Istanbul airport can challenge the Gulf giants – a possibly unhelpful source of pressure for Eksi in the short term, amid the slew of negative factors in Turkish's home market. Such ambitions – many forged pre-2016 – are reflected in the carrier's hefty slate of 200-plus on-order aircraft. Over the medium term, Eksi will need to keep an eye on the viability of that backlog.

He can point to some encouraging signs, however. The past 12 months show that Turkish has a level of resistance to outside factors, including higher fuel costs.

Eksi's task in 2019 is therefore to ensure a smooth transition away from Ataturk airport while keeping the carrier on a growth path and managing expectations along the way. A confluence of outside factors means that is likely to be easier said than done.


While there was no repeat of the pilot-rostering woes that resulted in the flight cancellation chaos for Ryanair in 2017, ongoing labour challenges served to make 2018 another difficult year of operations. The Irish carrier sought to downplay the role that strike action played in the disruption it faced, pointing instead to air traffic delays.

A grim summer of delays and disruption in key European markets certainly contributed to Ryanair's challenges, but labour unrest and stoppages across several of its European bases were a regular occurrence during the year.

And despite making progress in terms of recognition – and subsequent pay deals – with a number of unions, such is the pan-European nature of its operations that Ryanair still has plenty of groupings to deal with.

This means Ryanair's future labour relations environment – and with that its cost base – remains uncertain.

While unions will aim to keep labour issues centre-stage, the carrier and its larger-than-life chief executive Michael O'Leary remain something of a lightning rod for consumer issues despite a makeover in recent years. A battle with UK regulators over the carrier's decision to reject passenger compensation claims resulting from the strike action seems unlikely to keep the airline out of the headlines.

All this keeps the pressure on the carrier's talisman O'Leary. UK pilot union BALPA in September called for O'Leary to be replaced ahead of the airline's AGM, and added its voice to those of unions and some of its smaller shareholder groups in opposing the re-election of Ryanair's long-standing chairman David Bonderman.

While Bonderman withstood attempts to unseat him, the dissenting voices came at a tricky time for the airline. In October it was forced to lower its full-year profit forecast after experiencing weaker fare levels, which it partly blamed on strike effects, as well as the impact of higher fuel prices. And that is before factoring in Laudamotion – the subsidiary unit it acquired to strengthen its presence in Austrian and German leisure markets, but which it does not envisage reaching breakeven until its third year of operations.

A respite in fuel prices – and opportunities to secure pilots and cabin crew from the recent run of airline collapses – may prove timely. The airline will continue to expand in 2019, including through the arrival of its first Boeing 737 Max aircraft and a fresh attempt to gain a foothold in the French market. A strong financial performance may help the carrier to avoid more negative headlines around O'Leary and labour upset during 2019.


Almost every year has been a big one for Norwegian's longstanding chief executive Bjorn Kjos since the regional carrier reinvented itself as low-cost operator with long-haul ambitions and a bulging orderbook.

The carrier's model has consistently been questioned by a series of sceptics, and – aided by its new aircraft and slots – it has frequently been touted as a potential acquisition target. That appeared to be happening when IAG acquired shares in the airline ahead of a bid for the carrier last spring, but the offer was rebuffed. IAG has since appeared discouraged, but is not out of the frame.

Norwegian reported some improvements its financial performance across the year – especially at a net level – but remained loss-making at an operating level at the nine-month stage. It has now embarked on a fresh cost-savings push.

It has also shown plenty of churn in its long-haul network, a sector already under scrutiny given the collapse of Primera and the challenges at Wow Air. Norwegian quickly dropped its Singapore-London Gatwick experiment as well as marginal routes from Edinburgh, blaming air passenger duty levels, and is switching Gatwick flights from Fort Lauderdale and Oakland to Miami and San Francisco in pursuit of better yields. This suggests either challenges with the model or an impressive willingness to quickly adapt.

The success of these network changes, together with further moves in Latin America, should become evident in 2019. It could be aided by the fall in oil prices.

All this will contribute to the strength of the hand Kjos has to play should IAG or any other suitor call again.


The fate of Icelandic rival Wow Air is likely to have major implications for Icelandair, even after it pulled out of a deal to acquire the airline. No sooner had Icelandair dropped its proposed bid than investment firm Indigo Partners struck a tentative deal to step in and acquire Wow.

That deal is still be formalised, with due diligence under way. But Indigo's pedigree in the low-cost carrier sector is such that its potential involvement in Wow will add to Icelandair's concerns.

And Icelandair has enough on its own plate without Wow. The latter's more pressing financial woes, which came after the collapse of the Icelandic-backed Primera, overshadowed the challenges at Icelandair and the country's slowing tourism sector, which had made a tie-up a logical step.

In August, Icelandair Group’s long-term chief executive Bjorgolfur Johannsson resigned from his position after the flag carrier was forced to admit that its business strategy was not generating the results intended. The company has cut its full-year earnings forecast again, to $80-100 million – half the figure it had originally projected at the beginning of 2018.

Johannsson conceded that structural changes in the company made in 2017 have "not been implemented well enough", while adjustments in the route network have created an "imbalance" between European and North American flights. These structural problems combined with a slower-than-expected recovery of average fare levels to create problems for the carrier.

The group has also entered discussions over possible breaches of conditions attached to bonds.

Steering a path through these issues is new group chief Bogi Nils Bogason. Speaking in October, while still acting in an interim capacity, he said the capacity situation has been "corrected" in the flight schedule for next year. He also cites moves to implement a new revenue-control system. "There are numerous opportunities available, both on the revenue and expenditure side," he says.

Icelandair also aims to carry out a capital hike in the first quarter of 2019. The group says it is attempting to "further solidify" its financial position with the share issue, in order to prepare the company for further expansion and enable it to "seize opportunities that may present themselves".

After overcoming the bankruptcy of the country almost a decade ago – a move that at a stroke turned the country into the tourism hotspot on which much of Icelandair's and Wow's business models have been built – Iceland has been through worse before. But 2019 still looks to be a challenging year.


With hopes for a new Mexico City airport dashed and difficult macroeconomic conditions in the airline's home country, Aeromexico chief executive Andres Conesa faces a challenging year in 2019.

The decision by Mexico's new government to respect the outcome of a public referendum to scrap the construction of Mexico City's new airport has confounded airlines in Latin America, but Aeromexico looks set to bear the brunt of the consequences. The lack of a new airport to replace the congested facility serving the Mexican capital will make it difficult for Aeromexico to become the bigger global player it had aspired to be.

Aeromexico, like most Mexican airlines, has remained largely silent since the vote in October to pull the plug on the new airport. But in a previous interview with FlightGlobal, Conesa had said that improved infrastructure was sorely needed for future growth.

"We see some airports, particularly Mexico City airport which is congested, so growth is limited," he told FlightGlobal. Having a new airport in Mexico City would significantly ease those constraints, he said.

Aeromexico Conesa

Creative Services Management

The SkyTeam carrier holds a 40% share of the capacity at Mexico City airport, making it the largest player at the airport. A joint venture with partner Delta Air Lines had envisioned more connections between Aeromexico's hubs – including Mexico City – and that of Delta in the USA.

"The idea today is even though we connect Mexico City to LA, or New York, we can improve not only in terms of the number of frequencies but to have the right flight time in terms of departures and arrivals, to have better connections in the hubs," said Conesa previously.

The plan to scrap the new airport compounded an already challenging 2018 for Aeromexico. The airline reported a net loss of Ps1.23 billion ($6.53 million) for the first nine months of the year, after facing "one of the most challenging" periods in the third quarter, in Conesa's words.

It has announced plans to retire aircraft early and will suspend service on at least nine routes in 2019.

Driving the revenue weakness is the depreciation of the Mexican peso, which plummeted further following the news that Mexico City will no longer receive a new airport, sending uncertainty rippling through the investment community.


Will 2019 be the year in which Alaska Airlines finally begins to reap the benefits of its merger with Virgin America? Chief executive Brad Tilden in November laid out a plan to recover the financial strength that was eroded after the 2016 acquisition of its rival.

"We have done a lot of the messiest work of the integration and it's now time… to really focus on market and financial performance," Tilden says. "We should be earning margins of 13% to 15% on pre-tax basis. That is an appropriate return. That is what we are attempting to do."

His comments came almost two years after Alaska's $4 billion purchase of Virgin America – a deal some investors worried would overburden a company that had long returned industry-leading financial results. In both 2015 and 2016, Alaska earned net profits of more than $800 million and pre-tax margins of 24%.

Its results started slipping in 2017 – a trend that continued into early 2018. Executives say several factors pushed down profits, including unexpected costs from integrating Virgin America, increased competition, new labour contracts, lower yields, higher fuel prices and the cost of Alaska's own rapid expansion, particularly in California.

Alaska expects that in 2019 it will finally start reaping significant rewards from its integration of Virgin. The company also laid out cost-cutting and revenue-generating initiatives.

Alaska says 80% of the potential value created by merger "synergies" remains untapped – good news for a company looking for a significant financial boost.


Now more than a year into the role, South African Airways chief executive Vuyani Jarana has at least provided more stability at the carrier following its recent history of management turmoil and interim chiefs. New ministers are also in place to oversee its restructuring, but SAA's predicament remains perilous and all too familiar.

Battling against long-standing issues, including debt levels, the airline has again required a capital injection to meet its financial obligations. The further bailout reignited the debate in South Africa around taxpayers' money being used to keep the carrier afloat, even prompting the country's new finance minister Tito Mboweni at the start of November to suggest the airline should be shut down.

The scale of the task at hand for SAA, which has not turned a profit since 2010, was made clear by Jarana before a parliamentary committee in November, when he disclosed the carrier will incur a loss of R5.2 billion ($364 million) for the 2018/19 financial year, and R1.9 billion in 2019/20.

A statement from the committee says Jarana blamed a weak balance sheet and negative equity, liquidity challenges, "negative publicity" about SAA, previous boardroom dynamics that were "not helpful", suppliers having "lost confidence" in the carrier, and forensic reports pointing to "rampant corruption and banks closing credit lines".

Jarana said the Star Alliance carrier had now "revised" its turnaround plan and expected to reach a breakeven position by 2021 rather than 2020 as previously forecast.

But Jarana and his team, which includes Peter Davies as chief restructuring officer, say the carrier's strategy implementation is "on track" and there are "green shoots" from its network overhaul.

"Whereas there is more work to be done to implement the strategy, we are encouraged by the progress we are making to turn the company around," the airline says. "There is every resolve to address long-standing legacy issues, to improve the performance of the business, to regain its market share and to provide its customers continued and improved service."

Perhaps crucial to SAA's ability to do so sustainably will be opening the door to an equity partner, something SAA has been told to prepare itself for.


Known unknowns continue to dominate Etihad's future.

Chief executive Tony Douglas has largely flown under the radar since he took up the role in January 2018, as he focuses on transforming a business that suffered heavy losses in recent years.

In mid-2018, he took direct control of the group's core airline, amid a major restructuring effort. But questions still surround the group's remaining equity investments in Jet Airways (now symbolic of airline woes in India), Virgin Australia, Air Serbia and Air Seychelles.

Etihad's experiences with Air Berlin and Alitalia were chastening, but Douglas will know that for all its failings, James Hogan's buying spree was at least strategically logical for an airline that is ex-alliance and facing tough competition on its doorstep from Emirates and in many markets.

The question for Douglas is whether its current investments can form part of a coherent, successful strategy, or whether it will have to look elsewhere.

Tony Douglas Etihad


A potential future focus on working more closely with neighbouring airlines was hinted at in November, when Etihad and Gulf Air said they were able to explore "deeper co-operation". That is an opportunity for Douglas to make a success of a partnership he has instigated.

The tie-up came a couple of months after rumours of an Etihad and Emirates merger again hit the newswires. Both parties denied the reports, but Douglas will continue to face existential questions about Etihad until there is evidence it can be financially successful on its own terms.

Meanwhile, FlightGlobal schedules data shows how firmly Etihad has put the brakes on its capacity expansion in a bid to improve profitability. In December, for example, its flights and ASKs are both down by 10% year-on-year.

The challenge here is ensuring capacity discipline does not cost the airline too much momentum.

Ultimately, Douglas will be judged in 2019 on whether his strategy – including cost-saving initiatives, business restructuring and network adjustments – improve the group's financial performance.

Most indicators suggest he is unlikely to get much help from the economic and political environment.


A difficult 2018 for Jet Airways showed little sign of easing as the year closed and the Indian carrier's efforts to restructure and recapitalise continued.

In a grim year for Indian carriers generally – in which Air India's privatisation garnered no bids and even the previously profitable IndiGo slipped to a first-half loss – Jet was hardest hit.

Warning signs emerged when Jet was forced to delay publication of its first-quarter results in August. A swing to a heavy loss for the period confirmed the scale of the challenges, underlined by further losses for the second quarter.

Dube embarked on restructuring measures, including a network overhaul, while efforts to raise capital began. Progress on that has yet to materialise, though, and the airline's troubles have mounted. In December, credit agency ICRA downgraded its long-term rating on Jet Airways for the third time in less than four months, citing delays in the implementation of proposed liquidity initiatives.

Jet also confirmed that its key lender, the State Bank of India, had ordered a forensic audit into Jet's finances between 2014 and 2018.

The irony for Jet is that its challenges have come in one of the fastest-growing air travel markets in the world. FlightGlobal schedules data shows seat capacity in the Indian domestic market running around 16% higher in 2018. While Jet is looking to tighten its capacity – seats are 5% up and the number of flights virtually unchanged – IndiGo has increased its seat capacity more than a fifth.

But this capacity has been added at a time when Indian carrier costs were spiralling – having taken the double hit of of rising oil prices and the weakness of Indian currency against the US dollar – in a market where competitive pressure meant fares did not rise accordingly. While fuel prices have eased back, neither the high-dollar environment nor the aggressive expansion of rivals show signs of easing in the near term.

Speaking in November, Dube said Jet intends to protect its turf as the largest player in Mumbai, despite undertaking a network consolidation to counter the adverse operating climate in the country. "There will be no shift from being a hub-and-spoke carrier," he says, adding that Jet will look to connect more tier-two and tier-three cities from its primary bases.

Central to Jet's future, however, will be the question of where fresh investment comes from. Existing partner Etihad Airways has been touted as one source, while Vistara co-owner TATA Group also held talks. But will long-standing owner Naresh Goyal have to relinquish control as the price of securing the necessary capital?


Air China chief executive Cai Jianjiang will need to formulate a strategy for the airline to defend its turf in Beijing, as the city opens a second airport in September.

The Star Alliance carrier has its main base at the Chinese political and historical centre, dominating the key lucrative routes out of the market. Besides having some shielding from government, by dint of its status as flag carrier, it has also been somewhat protected from competition, given the slot constraints at Beijing Capital International.

This, however, looks set to change, with the upcoming opening of Daxing International. Since the announcement of the new airport, airlines big and small have been looking at how to cash in on the additional capacity that a new airport will bring.

The country's two other state-owned operators – China Eastern Airlines and China Southern Airlines – have been designated anchor operators at the new gateway. This will give the duo a chance to compete head-on with Air China.

Both carriers have announced plans to base hundreds of aircraft at the new gateway. China Eastern plans to serve the USA, Europe, Australia, Southeast Asia and North Asia from the airport, bringing new connectivity to its existing network. China Southern meanwhile wants to build the airport into its second hub, with connections to both regional and international destinations.

Interestingly, the Civil Aviation Administration of China has also moved to ease its policy of having only one operator on each long-haul route, paving the way for greater competition in the segment. While the "one route, one airline" policy prevented carriers from competing too aggressively on the same sectors, airlines can now possibly operate on an existing long-haul route should there be sufficient consumer interest, and if it helps in hub development and improving service quality.

Air China reaches seven points in North America and 10 points in Europe from Beijing, FlightGlobal schedules shows. By comparison, China Eastern does not have any intercontinental routes out of Beijing, while China Southern reaches only Amsterdam and Istanbul from the capital city.

FlightGlobal schedules data shows that Air China accounts for 37% of all seats out of Beijing, followed by China Southern (13%) and China Eastern (12%). Air China's top routes out of Beijing are to domestic destination such as Shanghai, Chengdu, Guangzhou and Shenzhen.

If it wants to maintain its dominant position in Beijing, Air China will need to up its game.


Hainan Airlines continues to be impacted by the troubles at its parent company.

As business goes on as usual at the airline, HNA Group's struggle to pay down its debt has weighed on the carrier's ability to raise debt cheaply.

Hainan’s coupon rates on its bonds issued this year have hovered around the 7.5% mark, despite the company being rated "AAA" by Chinese agencies. In a September US bond issue, it was only able to attract $100 million of funding at a whopping 12%. It raised $300 million at 6.35% in its 2017 US-dollar bond issuance.

The carrier will also take a three-year CNY7.5 billion ($1.1 billion) loan from a syndicate of seven Chinese banks. The main operators that will tap on the loan are HNA-related carriers to meet operational needs.

The situation continues to be complicated by HNA. Early in 2018. plans were announced to acquire stakes in a number of HNA Group companies as well as a CNY7 billion share sale, but this was was dropped in November, with the airline attributing it to uncertainties in the macro-economy and fluctuations in the Chinese securities market.

There have also been reports that the debt-ridden HNA has held talks to sell Hainan Airlines to state-owned Air China. HNA has, however, denied the discussions, adding that the airline is not for sale. Over the past year, the airline's share price has dropped close to 40%.

Who will have the task of leading the airline through these challenges remains unclear. The airline in December announced the departure of its chief executive Liu Lu and president Zhou Zhiyuan. No successor to either role has yet been appointed.

While troubles at HNA have complicated and weighed on Hainan's business, the airline continues to expand its international footprint, launching services to Europe and North America – at times from less obvious Chinese cities such as Changsha, Guiyang and Xian.


The mood was celebratory as Garuda Indonesia executives gathered for lunch in London on 14 December, a day after the carrier resumed its Heathrow service.

Amid the festive cheer that pervades the UK capital during Christmas-party season, there was pride in the airline's burnished international credentials. But when Garuda chief Ari Askhara was asked about his priorities in the role he has held since September, his thoughts turned to home – and the challenges posed by Indonesia's fiercely price-competitive domestic market.

Ari doesn't mince his words. The situation is "not healthy", with the nation's carriers "all in minus", so there's a need to "fix the ecosystem".

November's agreement on "operational consolidation" with Sriwijaya Air Group is part of Garuda's efforts in this direction. The combined group, with a 51% market share, will be able to engage in joint procurement and avail of boosted negotiating power, with lessors for example. However, to avoid anti-trust issues, the tie-up will exclude price or route harmonisation, Ari stresses.

In his analysis of the Indonesian market, he looks to distinguish the flag carrier from rival Lion Air and its "mostly LCC" operation. Garuda’s intent, he says, is not to compete on cheap prices but to "improve the service in order to improve the prices".

Improving the service, in turn, require a focus on employees. Ari says he is aiming to "transform the human capital" at Garuda.

A drive to enhance revenues has meanwhile led the airline to develop new subsidiaries. Ari cites a tyre-manufacturing venture for which Garuda has partnered with Dunlop to capitalise on Indonesia's strength in rubber production. The carrier has also established a centralised MRO and procurement unit, targeting efficiencies in areas such as oil trading, waste management and centralised spare-parts buying.

Ari sees an imperative to "redefine" costs rather than engage in traditional forms of cost-cutting. He points to investment in a fuel-efficiency application for the Boeing 777 fleet which, he says, is saving the airline $4 million a month.

Plainly, there are plenty of challenges to be addressed both in the local market and internally within the organisation. But, even between multiple courses at a London restaurant, it was clear that Garuda's appetite for international adventures had not been sated.

The carrier is, says Ari, negotiating with South Korean regulators as it seeks to serve Los Angeles via Seoul Incheon, and is targeting Turkish approvals for routes from Istanbul to Jeddah and Paris.

Meanwhile, Garuda's service from Heathrow to Indonesia's capital will at the end of this month transform into one which serves Denpasar in Bali – becoming the UK's first nonstop to that destination, says the airline – and which returns to London via Jakarta.

Reporters: Graham Dunn, Lewis Harper, Jon Hemmeringer, Niall O'Keeffe, Mavis Toh, Ghim-Lay Yeo

Source: Cirium Dashboard