Capacity on the North Atlantic is up for a second consecutive year, but with expansion this summer focusing away from hub-to-hub service

Frequencies and capacity on the North Atlantic are up again this summer, marking a second year of growth after two years of pull-backs, but the nature of the expansion appears considerably different from 2004. There is less new hub-to-hub flying and more concentration on developing hub-to-spoke and point-to-point routes.

Overall seat capacity growth on the North Atlantic is on course for a cautious 5% rise this summer, according to Airline/Aircraft Projects president Craig Jenks, who monitors changes on the market each year. This year's rise follows a 6% growth last summer after two post-11 September declines.

Jenks characterises the capacity growth for both years as "pretty modest", adding that the carriers are benefiting from stronger yields. "There has been discipline. They haven't gone back and just added capacity," Jenks says. "They are looking to the North Atlantic to generate at least some measure of profitability."

The overall number of new flights scheduled to be introduced at the peak of this summer season in July is not that high compared with a year ago – representing a net gain of some 18.5 daily flights. However, just a third of these are on hub-to-hub routes. That was almost the exact opposite last year, when carriers seemed to focus additional services on intra-hub routes, which offered codeshare opportunities with their global alliance partners. This was especially true of members of the evolving SkyTeam alliance.

Innovative moves

The number of new flights for 2005 may be conservative, but the underlying strategy behind some of them is decidedly not. "Where new flights are added, a fair number are reasonably aggressive and innovative," Jenks says. Eight of them involve new cities for transatlantic routes and five other cities already on the "transatlantic map" are getting more service in one form or another. "There's a dramatic shift from last year," he says. In the latter category, Jenks includes the move of Star member Austrian Airlines to boost its Vienna-New York service from seven to 11 times a week. It is a bold move, he says, given Star's perceived lack of strength in the New York area.

Particularly striking in 2005 is the number of new routes to cities that had no non-stop transatlantic services last summer. Continental Airlines is the most active in this category, with new daily non-stops from its hub at New York Newark to Bristol, Belfast, Berlin and Hamburg. Continental has also started a new daily service between Newark and Stockholm and added substantial capacity on routes to Edinburgh, Glasgow and Manchester.

Charter roots

Other newly linked cities are New York-Bologna and New York-Naples, being operated three times a week by Eurofly, using Airbus A330-200s. The Italian carrier, with roots in the charter business, is also offering a once-a-week New York-Palermo flight. Finnair, operating a high-density 227-seat Boeing 757, is also beginning a twice-weekly service, summer only, between Boston and Helsinki with a stop at Stockholm's low-cost Skavsta airport in both directions.

The new services are important for the cities involved in terms of tourism and business connections, and may represent some of the market fragmentation so often foretold by Boeing. Continental's new service to Bristol is being promoted as "the gateway to south-west England", and could mean traffic that used to flow to and from Bristol via the British Airways hub at London Heathrow or KLM's at Amsterdam may now fly non-stop. "This is the opposite of last summer, when most of the growth was hub-to-hub, playing on strengths," Jenks says. "Most of this year's new service is fanning out into enemy territory, from your hub into someone else's turf."

One factor potentially making service to new cities attractive may be the phasing out of old pro-rate deals in favour of sector pricing. This means the consumer pays the full cost of the extra sector to get to the final destination. The cost of buying a flight from the gateway to another destination now varies, depending on the competition. On some routes, it could be quite inexpensive thanks to the presence of low-cost carrier competition, which has led to a substantial fall in fares on many intra-European routes. But Jenks suggests that transatlantic passengers booking sectors without low-fare carrier presence may be paying more than in the past for the total trip from the USA to their final European destinations.

Among other interesting new services this year are the non-stops being operated between New York and Düsseldorf by LTU, the German carrier with roots, like Eurofly's, in the charter business. LTU will operate the route six times a week using A330s in a two-class configuration. India's Jet Airways is also planning daily flights between Newark and Brussels, originating in Mumbai. Following the recent Indian liberalisation it plans to launch the flights, its first to the USA, on 23 June, using new Airbus A340-300s.

Overall, US carriers are on course to grow most strongly this summer, with seat capacity up another 7% after 9% last year. European carriers and others have kept their capacity rise in the 3% range. In terms of frequencies, the US carriers are planning an even stronger rise of 10.4% this summer, while frequencies to the USA are up just 3%.

Behind these figures lies a marked difference in the size of aircraft being operated by carriers on either side of the Atlantic. All Continental's new flights are being operated with 172-seat 757s, and other US airlines are generally using Boeing 767s seating 181-218 passengers. Northwest Airlines is the only US carrier flying larger aircraft, with a 273-seat McDonnell Douglas DC-10 for added services this summer to Amsterdam, although it is in the process of phasing out the trijet in favour of A330s.

In contrast, European carriers generally have been adding services over the past few years with much larger aircraft – A330s and A340s and Boeing 777s and 747s – seating 253-420 passengers. Finnair is the only European carrier using a 757 for its new service this year.

Low-fare services

On a broad spectrum, Eurofly and LTU can be considered lower-cost and perhaps lower-fare than their established competitors. What is notably absent this summer is the once-heralded beginning of low-fare US carrier services across the Atlantic. SkyLink Airways, renamed MAXjet Airways, has tentative Department of Transportation approval to start low-fare transatlantic service using 767s. But the carrier, still reportedly raising funds and seeking FAA certification, will almost certainly miss most, if not all, of the summer season deemed so critical to gain a toehold before the less-travelled off-season sets in. Another potential "alternative airline", as it called itself, was Riviera Jet Airways, but all has been quiet on that front.

The largest concentration of low-fare services across the North Atlantic is being operated by various charter carriers between the UK and Orlando's Sanford airport. Eight different carriers, led by Air Atlanta Europe and MyTravel Airways, are operating an average of more than seven daily flights to the USA from UK and Irish cities this summer for tour operators. The flights are largely being operated as inbound charters to the USA with very little traffic originating in Orlando. Last year there were around 930,000 return passenger journeys between Orlando Sanford and the UK/Ireland compared with just over 1 million via scheduled service at Orlando International.

One new carrier, possibly making its debut this summer, is Atlantic Express. The proposed start-up, headed by former BA executive David Spurlock, has plans to begin offering an upscale service between New York and European destinations using 757s. When it applied last November for US authority, it said it planned to inaugurate service in August.

Summer bookings on the North Atlantic are strong, the carriers say, with fares considerably higher this year than they were last, despite the added capacity. The growth is coming at a time when tourism from the USA to Europe is strong, despite the disadvantage of the weak dollar.

Tourism from Europe to America, however, is not so strong even though Europeans enjoy a powerful advantage from a currency standpoint. Tourism to the USA was up last year, but the US share of the growing tourism market worldwide has not kept pace. Officials of the Travel Industry Association of America, meeting last month in New York, said unpopular US government policies, combined with perceived overly stringent security and increasingly difficult visa procedures, have caused potential visitors to go elsewhere.


Source: Airline Business