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Old 3rd Jan 2016, 22:02
  #3978 (permalink)  
Join Date: Sep 2002
Location: Manchester
Posts: 1,106
Welcome to 2016.

Happy New Year, everybody.

And in writing that, I am reminded that this is the time of year when I generally enrage many here by suggesting that despite all the new service announcements made over the last three months, real growth will be weaker than you've been led to anticipate. One year ago I called for 'modest rather than swashbuckling growth' in 2015. I was widely condemned for that line, but it was a fair assessment of the way the year panned out. As I've said before, I report what I expect to see rather than what I would like to see. Head before heart.

Well, the good news is that circumstances permit me to spare myself alot of abusive hate-mail this year. Because 2016 is looking very positive indeed. Those 'hidden factors' which often undermine the good-news new service headlines are actually swinging into MAN's favour this year. Let's take a brief look at some of the detail.

Amongst the wider public, impressions for the year ahead are generally drawn from headlines reporting new service announcements, especially those involving carriers new to MAN (such as Hainan Airlines). But that can be highly misleading, because we don't get offsetting press releases when carriers cut services or withdraw from MAN completely. We really have to delve into the numbers to reveal the true picture.

At this point, Hainan Airlines is the only new name to confirm introduction of a scheduled service to MAN (4 x A332 Weekly to Beijing). Some others have indicated that they will follow, including Air China, Shaheen Air, Air Blue and possibly National Airlines. But confirmation of these is awaited. By this measure, airports such as BHX appear at first glance to be outperforming MAN by attracting more new carriers to their tarmac. However, that does not tell the whole story. Whilst these new names are helpful to the statistics, the real engine of growth is the based fleet. How will these affect MAN in 2016?

EASYJET: Two additional based aircraft, fully utilised.
RYANAIR: One additional based aircraft, fully utilised. Plus many flights originating at overseas bases.
JET2: Looks like two additional based aircraft (to be confirmed); several new weekly flights. 200+ departures weekly at peak?
MONARCH: Likely fleet nine based, one extra. Growth here is particularly important, as MON cutbacks were the biggest single impediment to MAN growth in 2015.
THOMAS COOK: Probably two extra based, eventually including one more A330-200 [CFG B763's expected to cover in the short-term]. Very substantial expansion to the USA including new destinations LAX and BOS. MAN's biggest ace this year, far ahead of new carriers to China which have been dominating the headlines.
FLYBE: Some chopping and changing of routes as usual. But a decent capacity hike expected overall when the dust settles. Two more based?
THOMSON: Very much 'as you were' but with a bias towards cautious expansion.
VIRGIN: Also little change here. Maybe an additional frequency at the margins.

So, from the eight passenger carriers maintaining large year-round bases at MAN, six are anticipating strong growth with additional based aircraft. And the other two are biased towards cautious growth. NONE of the 'Big 8' are anticipating serious cutbacks (unlike 2015 when MON cuts were a huge drag on the stats).

Seasonal based carriers Summer 2016:
CONDOR: Yes, they do the odd flight from MAN in Winter. But they're mainly a Summer player. Looks like one based B753 again in S2016 but maintaining a busier schedule. Note that CFG B763's covering TCX schedules are accounted for under TCX.
GERMANIA: Anticipate a broadly similar operation as in S2015.
SMALL PLANET: Two based A320's expected. But one of these is a straight swap for Enter Air's B738. ENT appear to have lost their MAN contract to Small Planet for S2016. Still looks like healthy underlying growth.

And that list above is the main reason MAN can anticipate a strong 2016. How much of that has been grabbing the headlines?

Speaking of grabbing the headlines, the established long-haul carriers appear to be stable or growing at MAN for 2016 based on information available so far. Emirates and Qatar Airways have confirmed capacity enhancements [UAE larger equipment, QTR two additional frequencies plus type changes]. Saudia switches to (smaller) B789's but plans additional frequencies when the new type is established. Etihad, Cathay, Singapore have indicated no changes so far. Westbound, United shows unchanged, American introduces the B788 to ORD and runs B763 on JFK, A332 to PHL. Delta upgrades to B763 on JFK. Air Transat and Air Canada Rouge look broadly similar to S2015.

European non-based scheduled carriers: the bulk of missing detail is awaited from this sector but the early signs are good. No major carriers have announced cutbacks of note (that is important). Some have already confirmed growth, others are likely to do so. Austrian Airlines and Iberia Express will be operating their first full summer season at MAN. Vueling is adding significantly to its S2015 schedule.

The most likely casualties for 2016 are EgyptAir, who could still return but don't look a good bet, and Iraqi Airways. Whilst they say they would like to resume services to MAN, the return of their safety accreditations is likely to be a slow bureaucratic process. Other lost routes generally come from the portfolios of MAN's based carriers, and their aircraft have been fully redeployed on alternative services.

Main risk factors going forward:

1) Some carriers still have programmes committed to resorts in Egypt. Will these happen? Will pruning be necessary? Can aircraft be redeployed in time? Will the public show confidence in these destinations if programmes are put on sale in full? Will anyone book Tunisia?

2) We must acknowledge that some other key resort areas are vulnerable to similar attacks. And the public will decide where they are prepared to book with confidence. Operators must adjust their programmes in response or lose money. The big tour operators will be keeping fingers crossed that 2016 does not see repeats of evacuation airlifts from former favourite resorts as occurred last year.

3) The oil price is a huge positive for the airline industry this year. Low prices could extend throughout 2016, but eventually they will rise again. Airlines will inevitably react to this when it happens. Marginal routes will be pruned.

4) Strikes hit a number of carriers during 2015, notably Lufthansa. Air France appears to be next up at this point.

5) Insolvency. One can never rule out the possibility of an airline or major tour operator going bust. But the conditions in this industry are about as benign as it gets right now. Any airline which fails here is either a hopeless basket-case or the victim of a warzone.

Drags on growth at MAN for S2016:

This is the good bit. Bearing in mind the caveats above, there are remarkably few cuts working through the calendar undermining growth statistics going forward. In 2015, massive cutbacks by Monarch plus the withdrawal of Little Red and BMIR had to be completely offset before any percentage growth could hit the bottom line. This time around, the Monarch cuts have worked through the calendar already - they're actually contributing to growth again. And the Little Red and BMIR cuts will cease to affect the figures beyond late Spring 2016. The anticipated loss of services by EgyptAir and Iraqi Airways are small-fry in comparison. And axed routes such as Bournemouth and Moscow are already offset by redeployment of the based aircraft involved to alternative destinations.

Over the last decade, another rarely mentioned heavyweight drag on MAN's growth stats has been the constant erosion of capacity on the MAN-London route. A decade ago we had 50+ departures daily serving four London Airports. Each year a number of these frequencies were axed, and types on the remaining LHR Shuttle gravitated towards smaller Airbus narrowbody types. Now we have reached the point where the last man standing - BA - is left with little more to cut. Unless they want to sacrifice their remaining foothold in traffic-feed from MAN. So, at last, the decline of MAN-LON services will no longer be a significant drag inhibiting MAN growth (it still was in 2015).

The question everybody is asking now is can MAN surpass 25 Million passengers during calendar year 2015? That would require growth of less than 10% to achieve. Actually, around +8.25% should do it. In the light of everything above, my conclusion is YES, THIS IS A REALISTIC TARGET FOR 2016. And that comes from the guy who most on here like to label as the perennial arch-pessimist! Let's hope that deranged terrorist nutters or reckless gambling bankers don't manage to wreck this prognosis over the coming months.

However, there is one note of caution which I must add. This year comes as the economic cycle is at its most favourable for the airline industry. We are enjoying very low fuel prices and a relative economic 'feel-good' factor amongst the travelling public. These 'Goldilocks' conditions should underpin the strong growth we crave in 2016. But it would be a huge (and very common) mistake to project gains driven by a year like this indefinitely into the future. There will be another recession eventually and fuel prices will rise again. So when considering long-term commitments such as the TP, beware of concluding that because we've added 2.5M pax in 2016 (we can hope!) the same will recur in every subsequent year. The economic cycle doesn't cooperate like that!

Also, don't pin your hopes to MAN becoming a mainstream hub airport. We are too far West to interest the bulk of intra-European transfer journeys. And for Europe-Transatlantic hubbing, MAN is surrounded by strong incumbents with heavyweight based-carriers in-situ. MAN can nibble at LHR, AMS, DUB, CDG and FRA for this business, but only at the margins. There is a role for carriers such as FlyBe to feed regional UK via MAN to Domestic / European and Long-haul. They are essential to communities such as IOM. Thomas Cook offers potential for feed onto the Transatlantic routes, but not at the level of BAW, EIN, KLM etc. There will always be some scope for niche interchange at MAN, but those who hope to replicate the model of geographically-blessed hubs such as MUC and IST will be disappointed.

My wishlist for MAG's commercial team at MAN in 2016 is:
1) Conduct a sales mission to Poland (MAN underperforms woefully in this particular market, though the flights we do offer are invariably rammed), and Romania (tumbleweed). Continue discussing both markets with Ryanair etc as well. Wizz Air and Blue Air may still be a lost cause but worthy of continued regular harassment given their recent moves into larger airports elsewhere.
2) Pitch year-round LYON to the usual based carriers.
3) Keep up the good work in pursuit of long-haul prospects.
4) Give some TLC to our forgotten CARGO sector. MAN was THE airport for UK air cargo to the Far East just eight years ago. Now we have ZERO dedicated freighters going there. In fact, Lufthansa Cargo and FedEx stand alone with their regular freighter operations from MAN ... arguably DHL too if they don't take the mick again with another sequence of never-never launch dates following their recent brief cameo. Underfloor cargo is great, but it cannot meet NW demand alone. Cargo throughput at MAN is way below peak levels achieved in the past with little hope of significant improvement (CargoLogicAir switch-sold to STN?). It would really help if MAN had a dedicated cargo sales team, as opposed to being represented by a STN-based MAG (group) executive who is personally responsible for attracting cargo to two of MAN's biggest UK competitors (STN & EMA) as well. Including the airport outside his office window. Cargo at MAN has never truly recovered from the outrageous sacking of Gordon Griffiths (and others) by that clown who parachuted-in his mates from East Midlands in their place. Thank goodness we've got Cornish and O' Toole these days. They give cause for hope.

I do realise that MAG would argue that freighters serving STN and EMA represent 'in-house' MAG business anyway. But if MAN is to play its crucial and indispensable role as a keystone of the 'Northern Powerhouse' initiative, then internal inertia must be set aside in favour of allowing MAN to fulfil its inherent potential in the cargo market. The 'Northern Powerhouse' concept promises huge dividends for MAN, but in return MAG must not hinder MAN in favour of bulking-up cargo business at STN. Uncompromising commitment to the NP initiative in its own right is required. MAN/MAG will reap rewards in return.

Meanwhile, enjoy the good times. Happy New Year.
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