Executive Appointments
CAPA also publishes worldwide executive appointments news in its exclusive report, Aviation Executive Monthly.
Hot Issues
Fares and Discounting
See also the CAPA profile on Yields.
Financial Results
The International Air Transport Association (IATA) expects airlines to post a global profit of USD2.5 billion in 2010 (Jun-2010 forecast). This is a major improvement compared with IATA’s previous (Mar-2010) forecast of a USD2.8 billion loss. Industry revenues are forecast to be USD545 billion in 2010, due to recovering demand and yields. This is up from the USD483 billion in 2009, but still below the USD564 billion achieved in 2008. See full report.
CAPA also publishes the exclusive Aviation Investor Daily and Airport Investor Monthly reports.
Fleets
CAPA also publishes the exclusive Aviation Investor Daily report.
Global Alliances
See below the list of current and pending members of the Global Alliances.
Liberalisation and Open Skies
The pillars of international commercial aviation
- Chicago Convention 1944 - Multilateral. It sets out the basis for standardised international practices and procedures. Almost every state in the world is party. It goes NOT grant any commercial rights
- International Air Services Transit Agreement 1944 - Multilateral. It grants 1st and 2nd Freedom rights. Most, but not all states are party
- Bilateral air services agreements - about 2,000 of these since 1945. States bilaterally grant each others’ designated airlines (“flag carriers”) commercial rights to fly between their respective states - 3rd and 4th Freedoms. A growing number also grant 5th Freedom - see column for information on the 'Freedoms of the Air'.
National ownership of airlines
The Chicago Convention says airlines must have national ownership (originally, mainly to ensure adequate technical supervision). Bilateral agreements set out what this means - typically “substantial ownership and effective control” of the “designated airline(s)” requirement in ASAs (but this is changing - for example, to base ownership on where the primary place of doing business is and where the management decisions are made).
So long as airline rights are defined by ownership, the old, protective bilateral system will continue. However, many countries are now actively liberalising aviation access to drive economic and trade growth.
Low Cost Carriers (LCCs)
A key structural change in aviation over the past decade has been the proliferation of low-cost carriers (LCCs). The low-cost model has overwhelmingly been the favoured mode of airline start-up over the period, and their spread around the world, into both short- and long-haul markets, has caused a fundamental shift in the competitive dynamic of the industry.
'Classic' characteristics of the low-cost model include:
- High seating density;
- High aircraft utilisation;
- Single aircraft type;
- Low fares, including very low promotional fares;
- Single class configuration;
- Point-to-point services;
- No (free) frills;
- Predominantly short- to medium-haul route structures;
- Frequent use of second-tier airports;
- Rapid turnaround time at airports.
Market Share
Market share (or capacity share) is the percentage or proportion of the total available market or segment that is being serviced by a company. For the airline industry, this is usually measured as a percentage of revenue, traffic or capacity, eg on a certain city-pair route. As a highly competitive and increasingly commoditised sector, the airline industry's profitability has been plagued throughout its history by aggressive strategies by airline managements to gain or retain market share.
MRO - Maintenance, Repair & Overhaul
Maintenance, Repair and Overhaul providers (MROs) play an essential role in sustaining the world’s airline fleets. MRO is the blanket term for all the services relating to assuring aircraft safety and airworthiness. It is estimated that the global market is worth up to USD50 billion. MRO providers exist all around the world, with the majority of the market being occupied by North America (35%), Western Europe (26%) and Asia Pacific (17%). Indeed, most of the world’s top 10 MRO providers are headquartered in these regions.
The largest providers typically offer the three main MRO capabilities: airframe, engine and component services. Engine maintenance makes up the largest proportion of the global market (35%), followed by component (22%) and airframe heavy maintenance (13%). Line maintenance accounts for just over one-fifth of the global market (22%), with modifications making up the balance. Most major providers cater only for only commercial customers with the minority offering services to government and defence clients. Maintenance accounts for approximately 10% of airlines’ costs.
MRO providers can be categorised into four groups: in-house (e.g. Qantas Engineering); independent third party (e.g. ST Aerospace); airline third party, which serve both their parent airline and other clients (e.g. Iberia Maintenance); and Original Equipment Manufacturers, or OEMs (e.g. Honeywell).
In the past, most maintenance work was conducted in-house, with a movement in the 1990s towards outsourcing the work to independent and airline third party providers, led by the emerging LCCs. These days, the majority of line maintenance is conducted in-house. Engine services continue to be dominated by OEMs with other providers holding an evenly-divided share, with component services divided in a roughly equal proportion. Airframe maintenance is mainly conducted in-house, with a negligible contribution from OEMs. Most airlines which outsource work to a third party do so to allow them to focus on their core business, commercial flying.