Air Canada will make an aggressive push into new international markets next year—if all goes as planned. The carrier is awaiting government approval to begin non-stop Toronto-Istanbul service on June 4, as a gateway to Turkey, Central Asia, the Middle East and Africa through a code-share with Turkish Airlines. This expansion could prove particularly valuable for Air Canada as competition stiffens on its home front, where WestJet's planned new regional operation could significantly undercut Air Canada's fares. Although Air Canada remains confident that its hold in domestic markets will remain strong, the new international markets could be important to its fortunes in 2013.
The merger of Chile's LAN Airlines and Brazil's Grupo TAM in 2012 created Latam, one of the world's largest carriers by market capitalization, and furthered airline consolidation in Latin America. Latam expects demand to remain strong throughout South America and is adding capacity in the region. The carrier is taking a page out of the low-cost-carrier playbook and altering its product on short-haul regional routes to compete more effectively with startups and LCCs. The one blight on the forecast is Brazil, where domestic demand has cooled. TAM is shifting its focus to international routes and pulling capacity out of its domestic Brazil operations, but it is poised to grow, should demand recover.
Whether Mexicana DE Aviacion finally emerges from bankruptcy protection and resumes operations is the story to watch in Mexico this year. Newly inaugurated Mexican President Enrique Pena Nieto vowed on the campaign trail to resurrect Mexicana, but it remains unclear if he will make good on that promise. A bankruptcy court dismissed an investment group that had pledged to recapitalize the airline, and although several investors have expressed interest, the court has yet to approve a new restructuring plan. Since Mexicana's grounding, Interjet has emerged as the country's largest domestic carrier and, along with Volaris and Aeromexico, it has filled the gap left by Mexicana.
A major overhaul of Qantas's international operations is going to have serious ramifications for the other big players in Australia's long-haul markets next year. The most significant change will see Qantas partnering with Emirates, giving the pair a more dominant position in the highly contested Australia–Europe market. The link-up will enhance Qantas's network into Europe but will make life more difficult for carriers, such as Singapore Airlines, that draw a lot of revenue from the so-called Kangaroo routes. Next year will also be important for Qantas low-cost subsidiary Jetstar, which is due to take delivery of the first of its 15 Boeing 787-8s.
Jetstar Japan is on this list as a proxy for the three Japanese low-cost carriers that were established in 2012—the other two being Peach and AirAsia Japan. LCCs are a relatively new phenomenon in Japan, and while their fleets of narrowbody aircraft are still small, they are already having an impact on the market. This will be amplified in 2013 as they add new aircraft and continue their expansion into domestic and international markets. Peach and AirAsia Japan were set up as joint ventures by All Nippon Airways, while Japan Airlines set up the Jetstar Japan joint venture. The coming year will provide more clarity on how much traffic the upstarts will siphon from their mainline parents.
China's Spring Airlines is a budget carrier that is a potential threat to the lumbering state airlines, with service and cost levels closely matched to the needs and wallets of Chinese fliers. The experience of low-cost carriers in Southeast Asia suggests that China is superb territory for this model: Income levels there, though varying by region and city, compare closely with those of Indonesia, Thailand and Malaysia, where budget carriers have become dominant. So far, Spring has not been able to realize anything like its growth potential, as it has only about 30 Airbus A320s. But with a new administration taking control in Beijing, market-based reform in aviation could yet appear—to the benefit of Spring.
Tianjin Airlines is the leader in the current fad of subsidized local subsidiaries of Chinese mainland airlines. It is an offshoot of Hainan Airlines backed by the Tianjin city government. Since Tianjin Airlines was formed in 2009, such carriers have been popping up all over China. How big can they grow? Pretty big, if the ambitions of Tianjin Airlines are anything to go by. Originally an operator of Embraer ERJ regional jets, the carrier now uses mainly Embraer 190s, has begun introducing Airbus A320s and has plans for A330s that it could fly on intercontinental routes. Tianjin is a large and well-developed city, and many others are following its example with locally based subsidiaries of the major carriers.
The AirAsia group appears set to make acquisitions next year so it can expand its footprint farther across Asia. Possible takeover targets include Zest Air in the Philippines and T'way and Eastar in South Korea. The group is also believed to be eyeing potential opportunities to launch a carrier in Cambodia. To help fund its expansion and boost its balance sheet, AirAsia plans to float some of its businesses. Its Kuala Lumpur-based, medium-haul low-cost carrier AirAsia X aims to have an initial public offering early in 2013 on the Kuala Lumpur stock exchange. AirAsia also wants to float its Indonesian affiliate, Indonesia AirAsia, on the Jakarta stock exchange.
Lion Air is set to shake up Southeast Asia's airline industry next year. Its Malaysian affiliate Malindo Airways is due to start flying in the first half of 2013 and will compete head-to-head against Malaysia's AirAsia. Malindo may also capture some traffic from Malaysia Airlines, because Malindo will offer frills such as free checked baggage and inflight entertainment. Lion also recently established a Singapore-based aircraft leasing company called Transportation Partners. The airline has a large order-book for 737-900ERs and Boeing 737 MAX aircraft, and Transportation Partners' remit is to secure aircraft financing and place some of these aircraft with other carriers around the globe.
Singapore Airlines (SIA), under CEO Goh Choon Phong, has been transformed from a carrier focused on the premium segment to an airline group with a range of brands for different market segments. No longer content to be reliant on the slow-growing premium business, the group aims to tap into all market segments with its portfolio: SIA mainline (premium), SilkAir (premium short-haul), Tiger Airways (low-cost short-haul) and Scoot (low-cost medium-haul). Tiger and Scoot plan to add aircraft next year, as does SilkAir. In terms of route expansion, China will be a key focus for the group in 2013. It may also look to strengthen relations with Star Alliance partner Air China as another means of accessing China.