10 Airlines to Watch in 2016

Ed Perkins, December 29, 2015
Fares from Washington DC:

    You can expect a good bit of turmoil in the airline marketplace in 2016 as big lines consolidate their merger gains and smaller lines protect their niches. And you can expect aggressive poaching of important routes, maybe some fare wars, maybe some further mergers. The one thing you won't see is any widespread improvements in the coach-class product, which will keep sinking. Here are 10 airlines that warrant particular attention.

    Delta

    Delta's recent moves point to a strategy aimed at operating a single self-contained global air service system. Various national laws will continue to block cross-border all-out mergers for the foreseeable future, so Delta is pursuing the next best approach: highly integrated joint ventures with foreign lines cemented by partial ownership.

    It already owns a substantial share of Virgin Atlantic, a smaller share of Aeromexico, and has a joint venture with Virgin Australia that could morph into a partial ownership position. Although Delta has shunned Emirates, it might well cozy up to Etihad, which owns a share of partner Virgin Australia. Meanwhile, it is distancing itself from the world interline network.

    The result for consumers is increasing numbers of destinations on which Delta customers will be able to reach on Delta flights, either on its own or partner flights. And it means maybe having to buy two tickets if you need to connect Delta to a non-partner line. Delta will likely start a long-term effort to standardize fare and service "brands" across all its partners. And it will dump lots of seats on any routes where it wants to limit competition.

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    But Delta (and United, too) face a challenge to respond to American's move to add true premium economy, resulting in a five-cabin configuration for some intercontinental flights. Delta will almost certainly do it. United probably will.

    Norwegian

    Norwegian has signaled that it intends to be a major transatlantic player—and, more specifically, a major London player. It moved the starting date for its new Boston-London/Gatwick flights up from May to late March. It will start new Boston-Copenhagen and Oakland-London/Gatwick flights in May. It is forming a new operating company based in the U.K. to ease entry into several markets. And it still wants to establish an operating company in Ireland, which as far as I can tell it has every right to do.

    It has a lot more 787s on order, and chances are that most of them will be flying transatlantic. Norwegian's biggest problem in expanding U.S. flights is lack of adequate slots/gates at some congested U.S. airports, including JFK, Newark, and Chicago/O'Hare. But there are lots of other good U.S. airport destinations.

    Norwegian's expansion is good for U.S. and Canadian consumers. What's not to like about low-fare transatlantic flights in 787s?

    WOW

    Iceland is hot! For six decades, the only flights from the U.S. to Reyjkavik/Kleflavik were on Icelandair and its predecessors. But suddenly EasyJet started flying to Iceland in 2013, Delta started flying from New York in 2014, and WOW started flying from Boston in 2015. Also in 2015, WOW announced some big expansion plans: It bought two 340-passenger A330s, which it plans to use from Los Angeles and San Francisco starting summer 2016.

    Why this sudden interest? Some is certainly based on Iceland's appeal as a tourist destination, with its unique scenery and culture. But Iceland's total national population is about the same as that of the Eugene, Oregon, or Green Bay, Wisconsin, metro areas, and the island's tourist infrastructure is woefully inadequate to support a huge visitor surge. Instead, it appears clear that WOW plans to use Iceland as a distribution point for routes from diverse North American cities to diverse European cities; in effect, to do the North Atlantic equivalent of what Emirates, Etihad, and Qatar do in the Gulf. In fact, WOW says it might move its hub elsewhere if Iceland doesn't improve the Keflavik airport, although it's hard to figure where it might go.

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    WOW's competition is good for U.S. and Canadian consumers. As in the past, WOW will offer some flights as low as $99 each way. Although you aren't likely to see round-trip itineraries for anything close to $198, you will see some very good deals. The only cloud in the outlook is whether all those lines are adding so many flights that one or more will have to quit.

    British Airways

    Following the 2015 purchase of Aer Lingus, British Airways will start integrating Aer Lingus into the overall BA system in a big way. Given Heathrow's congestion, that means more connections through Dublin. Overall, that's a benefit for consumers: Heathrow is one of the world's least favorite connecting airports.

    In 2015, BA launched at least two short-fuse sales in business class, with round-trip fares well under $2,000—which was less than premium economy on some routes.

    You may see more in 2016: Just about all the business-class blogosphere has decided that BA's business product does not come up to the standard of American, Delta, United, or Virgin Atlantic, and BA may feel some pressure to do a bit of price-cutting. BA won't announce these sales in advance, and the sale window is likely to be no more than a day or two, so if you're interested, you have to be alert.

    Alaska and Hawaiian

    As two of the four remaining conventional-service niche lines, Alaska and Hawaiian have yet to adopt the pay-based frequent flyer earning formula that American, Delta, and United have adopted. On those lines, you still earn a mile for every mile you fly, even on the cheapest tickets. That formula is clearly beneficial to typical leisure travelers. But will the two lines adhere to it, or instead emulate its giant competitors? So far, neither line is hinting anything either way.

    Virgin America

    Virgin America is now the only conventional-service line in the U.S. without an extra-legroom coach cabin. It's hard to see how Virgin can hold out on what seems to be a popular offering.

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    Allegiant

    Allegiant has gotten fat on its unique formula of flying "nowhere to somewhere" two or three times a week. But it's running out of both "nowheres" and "somewheres" to sustain its growth. So far, the giant lines have left Allegiant alone to follow its formula because it hasn't stepped on any important toes. But the more it grows, the more likely it is to attract retaliation. As to new somewheres, my guess is Mexico/Caribbean or a dark horse New York City area through Islip or Stewart fields. Despite its abysmal product quality, Allegiant provides a very important service for folks who travel to/from the many "nowheres" it serves.

    WestJet and Porter

    You can expect some important developments north of the border in 2016. Canada's number two carrier, WestJet, is looking to some big expansion, including Hawaii and transatlantic, with its recently acquired 767s. Consumers always gain from increased competition.  

    The new Canadian government landed a body blow on Porter Airlines' long-term hopes for jet service. At least for the foreseeable future, the government will not allow Toronto's convenient Billy Bishop Airport to lengthen its runway, so Porter won't be able to fly the new Bombardier C-Series jets from that convenient field. The question then becomes one of how Porter will react: Will it take the new jets, anyhow, and fly them from either Pearson or some other Canadian airports, or will it say "no thanks" to Bombardier? Either way, consumers lose: Flying those C-Series jets from Billy Bishop would have upgraded Porter's product and been a great option for travelers to/from Canada's primary city.

    No Start-up Airlines

    New domestic start-ups? Nah. As the Business Travel Coalition's Kevin Mitchell points out, the big three have shown that they will ruthlessly destroy any upstart line that threatens their primary markets to any substantial degree. What they've done is classic predation: add lots of flights and cut the fares until the new line has to quit, then cut back on the flights and hike fares back as high as or even higher than previous levels. The airline graveyard is full of corpses that fell victim to that sort of behavior. And although it passes the "duck" test for predation, it doesn't pass the legal test. So the big lines are free to do it. Any new low-fare lines you see to/from the U.S. will probably be European or Asian. And the outlook isn't very good.

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    The Three Gulf Giants

    You're probably aware that the big three U.S. lines are trying to block Emirates, Etihad, and Qatar from any more flights to/from the U.S. The claim is that the three Gulf lines receive "unfair" subsidies from their governments. The U.S. lines say they're already losing some business from the U.S. to India and Central Asia to the subsidized competition. The loss of customers is especially troublesome in highly profitable business class, where the Gulf lines consistently offer superior products. But those are relatively small markets; what really terrifies the U.S. lines is the prospect of more flights from the U.S. to the Gulf that stop—and carry traffic to and from—Western Europe, as Emirates does from New York to Milan on its way to Dubai.

    For now, the Gulf lines don't offer much for consumers. Their economy services are not any better than services on U.S. lines. The business-class battle, however, might get really rough.

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    Read the original story: 10 Airlines to Watch in 2016 by Ed Perkins, who is a regular contributor to SmarterTravel.

    (Photo: Air plane wing via Shutterstock)

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