CAPA

China airport wrap: Beijing still not #1 while western China airports lead double-digit growth

Mon, 20 May 2013 00:24:00 GMT

A slowdown in Chinese traffic at the end of 2012 resulting from decreased activity in line with the government’s leadership transition saw Beijing Capital Airport miss a widely-held projection that it would overtake Atlanta Hartsfield airport for the title of world’s largest passenger airport. Beijing remained in the #2 spot after breathtaking growth that saw it enter the world’s 10 largest airports only in 2006.

Growth at Beijing and other major Chinese airports will slow as slots become increasingly difficult to secure. The highest growth amongst major Chinese airports is occurring in China’s west and northeast regions, home to airports including Chongqing, Shenyang and Urumqi.

They are a fraction of the size of Beijing, Shanghai and Guangzhou, which account for 31% of passenger movements, but will increasingly garner international attention.

airberlin 1Q losses widen, but restructuring will deliver benefits later. Pain now for gain later

Fri, 17 May 2013 05:38:00 GMT

airberlin’s losses widened in 1Q2013 on restructuring costs, but the message from CEO Wolfgang Prock-Schauer is that today’s pain will lead to tomorrow’s gain as the group’s “Turbine 2013” restructuring programme starts to show in the results.

Capacity cuts, network refocusing, headcount reductions and supplier renegotiations are all under way and the positive impact should be more visible from 3Q2013 onwards. Meanwhile, codeshare relationships with Etihad and oneworld partners are delivering growing passenger numbers.

Etihad, airberlin’s 29% shareholder and benefactor, has ploughed close to EUR500 million of cash into its German partner since last year. airberlin’s efforts on many fronts will need to translate into profits and a strengthening of airberlin’s flimsy balance sheet if Etihad is to see a return. Etihad's network traffic feed has been stimulated by the partnership, but it will want to see airberlin profits in due course.

Indian Aviation in 2013/14 Part 3: Global operators bid for Chennai and Kolkata airport management

Fri, 17 May 2013 00:00:00 GMT

This is the third in a four-part series of extracts from the full 200+ page India Aviation Outlook Report for 2013/14. The first extract looked at the changing dynamics of the airline sector on domestic and international routes, while the second examined the policy vacuum that persists in India and the impact this has on the viability and development of the sector.

This third part addresses key issues in airport and airspace infrastructure, in particular the AAI's challenges in offering management contracts for two of India's major airports and the prospects for regional hub operations - or not.

The next and final extract will consider this year’s outlook for traffic, capacity, yields and airline profitability.

Delta Air Lines aims to usher in lasting business model change with new shareholder rewards

Thu, 16 May 2013 14:10:00 GMT

Delta Air Lines’ scheme to return USD1 billion to shareholders during the next three years is the latest example of how the carrier is widening the competitive distance as its merger with Northwest Airlines is essentially done and dusted. The airline unveiled its plans for shareholder returns after months of prodding by investors that have watched Delta pare down its debt, keep capital spending costs in line and generate solid free cash flow.

At the same time the carrier has set new debt reduction targets, it hopes all its efforts to get its financial house in order will lay the groundwork to achieve investment grade status, something Delta admits it will not attain anytime in the near future.

Through its latest moves Delta is also attempting to prove that the newfound stability in the US airline business has staying power after a decade of bankruptcies and economic turmoil have forced airlines to undergo a major reset.

easyJet sets course for record FY profits - and another clash with Sir Stelios...

Thu, 16 May 2013 12:17:00 GMT

easyJet’s 1H2013 pre-tax result improved by GBP51 million to a loss of GBP61 million. This puts it comfortably on course to achieve the current consensus forecast for record pre-tax profits of GBP410 million in FY2013. It may also be on another collision course with founder and largest shareholder Sir Stelios Haji-Ioannou over aircraft orders.

CEO Carolyn McCall believes easyJet can take further market share from non-LCCs on point-to-point routes. At its top 20 existing airports, where easyJet has 46 million seats (a share of 22%), she puts this potential additional market at 86 million seats. This analysis appears to pave the way for a large aircraft order after easyJet completes a review of its future fleet strategy later this year, although it insists that no decision has yet been taken.

This would not please Sir Stelios who said: “Good things happen to airlines that don’t order more aircraft.” Under Ms McCall's guidance easyJet's share price has more than doubled over the past year and not just because it didn't grow. It may be time for Sir Stelios to let go.

LATAM Airlines Group continues to battle pressure in long-haul and Brazilian domestic markets

Thu, 16 May 2013 11:42:00 GMT

Weakness in long-haul markets from Brazil continued to pressure LATAM Airlines Group during 1Q2013 as competitive capacity increases triggered depressed loads and unit revenues in its international network. But LATAM’s efforts to restore strength in the Brazilian domestic market and the relative strength in the group’s Spanish speaking companies should help to offset some of the continuing pressure in LATAM’s international network.

The company’s attempts to bolster international service during the last year to offset some of the continuing weakness in the Brazilian domestic market have faltered somewhat due to competitive capacity increases by American and United in the US-Brazil market, and LATAM’s own expansion of supply in the market. The company’s overall capacity increase in its international markets during 1Q2013 was 12.3%.

Iberia: a new hammer can crack an old nut, but sometimes the new ones taste better

Thu, 16 May 2013 04:22:00 GMT

Following Luis Gallego’s promotion in Mar-2013 from CEO of Iberia Express to be CEO of Iberia, changes to Iberia’s management structure had been anticipated. On 10-May-2012, Iberia announced changes aimed at better implementing its Transformation Plan and restoring competitiveness and profitability to the carrier. While it is often worth taking a new hammer to crack an old nut, IAG has simultaneously been squirreling away some tastier new ones.

Based on comments at CAPA’s Airlines in Transition conference by Willie Walsh, CEO of Iberia’s parent IAG, that Iberia Express has ex fuel unit costs 40% lower than Iberia’s, we estimate that its CASK is similar to those of easyJet and Vueling. Mr Walsh also said that it is better to restructure what you have than to start something new. However, given fierce resistance to change at Iberia, he has given himself a good deal more leverage by establishing Iberia Express and also by taking over Vueling. Iberia Express has even helped the group to grow its passenger share in Madrid this year.

South Korea-Japan airline market sees structural change from LCCs, political tension & weakening yen

Thu, 16 May 2013 00:30:00 GMT

The once tidy and highly profitable Japan-Korean market is undergoing fundamental change – accompanied by double-digit yield declines.

It is difficult to identify precisely which ingredients are provoking the greatest change in the South Korea-Japan airline market. First, in mid/late 2012 the market was transformed as new airlines entered and others added capacity; these were mainly LCCs with unprecedented low fares. Then late 2012 saw Japanese outbound tourist numbers fall sharply due to political tensions between South Korea and Japan over largely uninhabited but disputed islands.

In 2013 the Japanese outbound market remains soft as the yen weakens. While the international political situation will eventually cool down, the Korean response has been to target individual tourists rather than tour groups, a change that was long overdue in any event.

But the difference now is that those individuals have LCCs to provide for their needs. These carriers are here to stay, and they will grow – for the usual reasons, but also due to the weakening yen. While the economic and political factors favour the Korean side, it is the Japanese side that has a larger share of the market.

Gol shows some signs of financial improvement despite posting a 1Q2013 loss

Wed, 15 May 2013 13:41:00 GMT

Brazil’s second largest carrier Gol recorded mixed fortunes during 1Q2013 as its overall losses widened year-over-year but yields and unit revenues improved at what appears to be at the expense of load factor. After recording annual losses for the last two years Gol is hoping an aggressive capacity reduction in the Brazilian domestic market place and a significant reduction in its workforce will help the carrier slowly improve its fortunes.

But Gol faces challenges in achieving its turnaround as company management believes it is uncertain that Brazil will record 2.5% GDP growth in 2013 while inflation is rising. The carrier feels positive about its position heading into the slow season in South America, but the timing of a full recovery for the carrier seems far from uncertain.

Qantas-Emirates alliance: the last piece of the puzzle falls in place across the Tasman

Wed, 15 May 2013 08:31:00 GMT

The final piece of the Qantas-Emirates alliance has fallen into place with the New Zealand minister of transport Gerry Brownlee giving his belated approval for the two carriers to extend their union across the Tasman by authorising a master coordination agreement. This will to all intents and purposes turn the Tasman market between Australia and New Zealand into a duopoly between the Qantas-Emirates Group and Air New Zealand-Virgin Australia partnership.

The Australian Competition and Consumer Commission (ACCC) had already granted Qantas and Emirates conditional approval for the trans-Tasman leg when it gave the final green light for the pair’s broader global alliance in Mar-2013. Mr Brownlee, who under New Zealand law has the authority to rule on arrangements between two airlines where this involves price or capacity fixing of international air services, had originally been expected to make his decision by the end of Mar-2013.

Portugal’s SATA seeks partners as it considers trans-Atlantic expansion, short-haul transformation

Wed, 15 May 2013 06:00:00 GMT

SATA, the ambitious and successful airline based in the Azores chain of islands west of Portugal in the Atlantic Ocean, is seeking a role amongst Europe’s establishment of smaller, niche carriers. Driving this, the airline’s entry into IATA’s billing settlement plan is a further step towards an expanded presence. SATA has built up a number of interlines and is looking to expand those and increase two-way codeshares.

Its focus is bringing tourists to the Azores and is therefore a niche long-haul operator but it still faces competition from European LCCs. It is hoping that a product unbundling will help it compete more effectively in short-haul markets while codeshares will increase long-haul traffic, which it may grow with additional widebodies or next-generation narrowbodies that can cross the Atlantic. It has favourable geography for connecting traffic in some markets and would like to increase this incremental revenue.

European airline consolidation to enhance financials? Few deals to be done, at least locally

Wed, 15 May 2013 05:52:00 GMT

European airline margins have underperformed other regions for years. There are many reasons for this, but our analysis suggests that Europe’s relative lack of consolidation may be a significant one, since margins appear to be correlated with market concentration. Even after a number of significant deals over the past decade, the European market is less concentrated than North America, where consolidation has gone further, to the benefit of margins. Europe is also less concentrated than Asia-Pacific (analysed as its sub-regions), whose margins have consistently been the highest.

If consolidation brings structural benefits, are there still European deals that can make a difference? Europe has a long tail of small carriers, which are unlikely to have a significant impact, but comparison with North America points to the potential for further combinations among the top five. Nevertheless, there are hurdles to such deals, not least of which are the ongoing restructuring programmes at Europe’s Big Three and the incompatibility of LCC/FSC mergers, but some second tier groups could be targets.

CAPA World Aviation Yearbook 2013: Country, Airline data in a comprehensive 1,000 page report

Wed, 15 May 2013 03:30:00 GMT

CAPA has today issued a world first 1,000 page CAPA World Aviation Yearbook 2013. We are happy to provide the report, in 10 parts to allow easier management, for free download by industry leaders.

The 2013 Yearbook contains a global overview, with extensive summary data for the largest 50 aviation countries and detailed analysis of more than 70 leading airlines, covering all regions of the world.

Full data sets are included for each airline and region, covering fleets, orders, delivery dates, capacity by route/region and premium profiles, making the CAPA Yearbook an invaluable resource.

Air freight opportunities in Papua New Guinea attract Qantas and Skyforce as economic boom unfolds

Wed, 15 May 2013 03:12:00 GMT

Growing demand for air freight capacity to cater to Papua New Guinea’s booming resources sector and seafood exports appear to have encouraged carriers Qantas and Skyforce to apply for dedicated freight allocations from the Australian International Air Services Commission.

Qantas through its subsidiary Express Freighters Australia and Sydney-based Skyforce Aviation have applied to the IASC for a total of 53 tonnes of freight capacity per week each way on the Australia-Papua New Guinea route. A total of 77.5 tonnes capacity per week in each direction is currently available under the bilateral air services agreement between the countries which allows for a total of 100 tonnes per week.

Currently Pacific Air Express has the market to itself after HeavyLift Cargo Airlines collapsed in 2012. The state of Queensland is a major source of supplies for PNG’s mining sector, while also serving as a transit point for some of the country’s Japan-bound fresh tuna exports.

After 'engine change in-flight' bmi Regional looks to re-grow partnerships – and profitability

Tue, 14 May 2013 11:15:00 GMT

bmi Regional is a familiar name now undertaking a very different strategy after what management terms an “engine change in-flight” when the carrier was sold off from IAG and had to migrate to its own IT systems, new office, IATA code and BSP in a matter of weeks.

During that time the focus was to keep the carrier operational, and with the transition settled down, bmi Regional is now looking to re-establish partnerships, grow its network focused on point-to-point traffic rather than the approximate quarter of traffic it received from Star Alliance, which it is no longer a member of. The carrier is viewing an open future across Europe, not just the UK, where sub-100 seat services are needed. A320 and 737 operations are not its focus, at least for now.