CAPA News Briefs

European Commission (EC) and EU consumer authorities announced (30-Apr-2024) they sent letters to 20 airlines "identifying several types of potentially misleading green claims", following an alert from the European Consumer Organisation. The national regulators involved are Belgian, Dutch, Norwegian and Spanish. The Consumer Protection Cooperation Network (CPC) and the EC stated the misleading practices included:

• Creating the incorrect impression that paying an additional fee to finance climate projects with less environmental impact or to support the use of alternative aviation fuels can reduce or fully counterbalance the CO2 emissions;
• Using the term 'sustainable aviation fuels' (SAF) without clearly justifying the environmental impact of such fuels;
• Using the terms 'green', 'sustainable' or 'responsible' in an absolute way or use of other implicit green claims;
• Claiming the airline is moving towards net zero greenhouse gas emissions or any future environmental performance, without clear and verifiable commitments, targets and an independent monitoring system;
• Presenting consumers with a 'calculator' for the CO2 emissions of a specific flight, without providing sufficient scientific proof on whether such calculation is reliable and without the information on the elements used for such calculation;
• Presenting consumers with a comparison of flights regarding their CO2 emissions, without providing sufficient and accurate information on the elements the comparison is based on.

The companies were invited to provide a response within 30 days, outlining their proposed measures to address the concerns. After receiving the replies, the EC will organise meetings with the CPC network and the airlines to discuss the solutions proposed by the companies. The EC will monitor the implementation of the agreed upon changes. If the airlines involved do not take the necessary steps to solve concerns raised in the letter, CPC authorities can decide to take further enforcement actions, including sanctions. [more - original PR]

AirAsia Cambodia received (01-May-2024) its air operator's certificate (AOC) on 30-Apr-2024 and will officially commence operations on 02-May-2024. The LCC will operate a fleet of two A320 aircraft from its hub of Phnom Penh International Airport. It will initially serve Siem Reap, Sihanoukville and beyond through hubs in Kuala Lumpur and Bangkok. Capital A CEO Tony Fernandes stated: "The wealth of opportunities present in Cambodia, a country with huge economic potential, is truly compelling given its strategic location within the ASEAN region". Mr Fernandes added: "AirAsia's expansion into Cambodia underscores our profound grasp of the ASEAN market". [more - original PR]

IATA reported (01-May-2024) total global passenger traffic in RPKs maintained a positive trajectory in Mar-2024, growing 13.8% year-on-year, mostly carried by the strong momentum of international traffic. Passenger load factors were higher than previous years, while available seat capacity continued to follow increases in demand. Details include:

• Domestic traffic increased 6.6% year-on-year, with China remaining the fastest growing market with 17.6% growth. All markets recorded solid increases in RPKs, maintaining the industry total growth within the pre-pandemic average pace;
• International traffic continued to show resilient momentum, with 18.9% growth in RPKs across the industry. Traffic from Asia Pacific still surged at a rapid pace, while other regions recorded consistent results;
• International air services from and to China saw great improvements in comparison to Mar-2023, although connectivity to North America remained impacted by geopolitical tensions. [more - original PR]

US Department of the Treasury and the Internal Revenue Service released (30-Apr-2024) guidance on the Sustainable Aviation Fuel (SAF) Credit established under the Inflation Reduction Act. The guidance clarifies eligibility for the SAF credit, which aims to incentivise the production of SAF that achieves lifecycle greenhouse gas emission reductions of at least 50% compared with traditional jet fuel. SAF producers are eligible for a tax credit of between USD1.25 and USD1.75 per gallon. [more - original PR]

CAPA - Centre for Aviation, in a report entitled: 'Fleet issues prove to be too much of a hurdle for troubled Bonza', stated (01-May-2024) Bonza may never get the chance to prove whether its niche business model could have been successful in the longer term. After struggling to secure enough aircraft to carry out its plans and making significant network cutbacks, the airline grounded its fleet on 30-Apr-2024 and entered voluntary administration. It is unclear whether Bonza will be able to restructure and continue in some form. It certainly faces some major hurdles if it is to do so. A major question is whether Bonza's current owner 777 Partners had the resources, or the appetite, to adequately fund Bonza through its first years of development. [more - CAPA Analysis]

KLM reported (30-Apr-2024) revenues of EUR2.7 billion and an operational loss of EUR290 million for 1Q2024. The carrier noted that while the first quarter is traditionally a "low season", costs are also rising and "fleet deployability was below par in Jan-2024 and Feb-2024", although measures taken to resolve this resulted in an improvement in Mar-2024. Key issues during the period included:

• Aircraft needed to spend longer in the hangar waiting for parts, affected by global supply chain problems;
• Aircraft had to be hired to accommodate the longer maintenance time, while the cost of concluding and extending aircraft leases rose significantly due to global shortages;
• Costs associated with compensating and caring for passengers affected by disruptions;
• Increased labour costs due to the collective agreements concluded in 2023, compounded by KLM not yet being able to operate the corresponding capacity;
• More engineers and new pilots have been hired to catch up after the pandemic, partly because additional pilots are needed in the cockpit on certain routes to Asia due to overflights to avoid Russia and the conflict in the Middle East.

CFO Bas Brouns commented: "To achieve our ambitions, we need to improve our profit margin and reduce unit costs". Mr Brouns said the 1Q2024 results "have brought pressure to bear on our financial position and therefore make these additional measures necessary". He added: "In a drive to reduce labour costs, we'll be critically assessing indirect positions and suspending or discontinuing them wherever possible. We will also be scrutinising and reconsidering investments where necessary". [more - original PR]

Lufthansa Group reported (30-Apr-2024) an operating loss of EUR849 million for 1Q2024, compared to a loss of EUR273 million in 1Q2023. CFO Remco Steenbergen stated: "We cannot be satisfied with the operating result for 1Q2024", adding: "At more than EUR350 million, the various strikes had a significant impact on our result". Mr Steenbergen said: "Nevertheless, cash flow was positive due to the continuing high demand for air travel", with passenger traffic up 12% year-on-year. The group's airlines expanded seat capacity by 12%, despite the strike related cancellations, reaching 84% of the 2019 level and around 5pp lower than originally planned. The group noted that "despite the significant increase in capacity, the load factor remained consistently high due to high demand", with passenger load factor reaching 79.7%, in line with the 1Q2023 level. [more - original PR]

Lufthansa Group reported (30-Apr-2024) its passenger airlines recorded an adjusted EBIT loss of EUR918 million in 1Q2024, compared to a loss of EUR512 million in 1Q2023. Strikes had an impact of around EUR300 million. Yields decreased 2.5% year-on-year, "partly due to the strike related uncertainty on the customer side and the corresponding lack of high priced last-minute bookings". Unit revenues decreased 6.3%, "also influenced by lower cargo revenues and significantly higher compensation payments to passengers due to the strike". Due to the high losses in the core brand Lufthansa in 1Q2024, the carrier "has initiated measures to strengthen the result this year in the short term". It stated: "Among other steps, it is planned to reduce operating costs, stop new projects and assess the need for additional staff in administrative areas". [more - original PR]

Air France-KLM reported (30-Apr-2024) its 1Q2024 operating loss of EUR489 million, which was EUR189 million below 1Q2023, was "impacted by disruption costs and cargo unit revenue reduction". The group noted the impacts were partly compensated by a lower jet fuel price, including ETS cost, and higher passenger unit revenue. The company reported an increase in yield across all long haul areas, except for Asia and Middle East, where capacity grew by 32%, while short and medium haul yield also increased. Group revenues totalled EUR6.7 billion, up 5.1% year-on-year. CEO Benjamin Smith commented: "Despite a challenging start to the year with persistent geopolitical tensions, Air France-KLM recorded further revenue growth this quarter, capitalising on a structurally robust travel demand". Mr Smith continued: "However, as anticipated, our operating income was impacted by disruption costs and a slower cargo business". He added: "We nonetheless remain confident in our ability to achieve our 2024 unit cost outlook, and are focused on executing our strategic roadmap to deliver our mid-term commitments". [more - original PR]

Australian Securities and Investments Commission, via its official website, reported (30-Apr-2024) Bonza entered external administration on 30-Apr-2024. As previously reported by CAPA, the LCC suspended all services scheduled to be operated on 30-Apr-2024. CEO Tim Jordan stated Bonza was in discussions regarding the "ongoing viability of the business".

European Commission (EC) approved (29-Apr-2024) EUR95.3 million in restructuring state aid for TAROM. The aid comes with safeguards to limit distortions of competition in the Single Market, including the reduction of the number of aircraft and routes that TAROM operates during the restructuring period, until 31-Dec-2026. EU Competition Commissioner Margrethe Vestager said the aid will help maintain regional connectivity for Romanian citizens and businesses, adding: "Following our in depth investigation, we concluded that TAROM's restructuring plan will ensure that the airline becomes viable in the long term". [more - original PR]

Rolls-Royce and Turkish Airlines signed (29-Apr-2024) a joint statement, following the carrier's orders for 80 A350 aircraft, 120 Trent XWB-84 engines and 40 Trent XWB-97 engines. The recent orders will position Turkish Airlines as the world's largest operator of the Trent XWB engine. As part of Rolls-Royce's long term strategy and commitment to Türkiye, the company is exploring the implementation of a number of industrial initiatives. These include the potential development of MRO capability and further supply chain sourcing. Rolls-Royce will work with suppliers to investigate expanding its sourcing activities. The companies also unveiled the Strategic Türkiye Enhanced Programme, which was created by Airbus, Turkish Airlines and aerospace companies in Türkiye to develop the Turkish aerospace industry and create economic value over the next 15 years. Turkish Airlines chairman Ahmet Bolat stated: "Today marks the commencement of our efforts to help cultivate Turkish aviation companies into prospective suppliers, aligning closely with Airbus' strategic objectives and their newly identified business domains". [more - original PR] [more - original PR - II]