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Traffic and Capacity

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Airlines seek to match capacity (supply) with traffic (demand), to produce consistently high load factors, to help them maintain their pricing and yields (see CAPA's Aviation Glossary for more background in traffic terminology). It is a difficult balancing act, made more challenging by volatile global economic conditions. Traffic is generally growing much faster in the emerging markets of the Asia Pacific, Middle East, Africa and Latin America and Eastern Europe regions, compared to the more mature aviation markets of Western Europe and North America.

CAPA covers hundreds of traffic reports from airports, airlines and industry bodies every month. Our Diamond Members can opt to receive them as they happen via CAPA Alerts.


44,648 total articles


2,021 total articles


Eurowings develops innovative partnership approach, but CASK reduction may not go far enough

19-Jun-2016 2:07 PM

In a 10-Jun-2016 presentation to equity analysts in London Lufthansa's Karl Ulrich Garnadt, the executive board member responsible for Eurowings, talked of his excitement for this "very ambitious, far reaching, very important" project for the Lufthansa Group. The group is developing an innovative partnership approach to allow other airlines to join its LCC activities under the Eurowings brand.

In 2011 the combined Lufthansa/Germanwings non-hub point-to-point network served 110 destinations and offered 24 million seats, of which only approximately nine million were operated by the LCC subsidiary. In 2016 the new Eurowings network has 135 destinations and offers 26 million seats (this comprises those operated by Eurowings and those yet to be transferred from Germanwings, while none are operated by Lufthansa).

The transfer of traffic from Lufthansa to Germanwings helped to turn around losses of more than EUR200 million. Germanwings' traffic and fleet are now progressively being transferred to the lower-cost Eurowings – the umbrella brand for the group's LCC operations. Germanwings/Eurowings achieves a RASK premium compared with other European LCCs. However, its low margin suggests that this is not enough by comparison with its CASK, which will remain higher than those of other LCCs.

SAS: 2Q losses widen after six quarters of improving results. LCCs & SAS growth depress unit revenue

17-Jun-2016 6:54 PM

After improving its underlying profit in FY2015 and narrowing its losses in the seasonally weak 1Q2016, SAS suffered a widening of losses in 2Q2016. This was the first year-on-year deterioration in its underlying result for six quarters. It benefited from lower fuel prices and from its own cost savings programme, but experienced plummeting unit revenue.

This reflects the ongoing growth of LCC competition in short haul markets, but is also the result of its own capacity increase. SAS' growth is led by rapid expansion on long haul, where Norwegian is also providing LCC competition. SAS is investing in its network and product and growing its revenue from higher-yielding loyalty scheme members, but these measures do not appear to be giving sufficient support to unit revenue.

These trends are unlikely to dissipate any time soon, and there is now the real prospect that its FY2015 result represented a cyclical peak for SAS. The company recognises the need for further change in order to improve its competitiveness. Strategies to seek labour cost reform can be expected, in spite of a strike call by Swedish pilots.

Struggling Brazilian LCC Gol places its financial fate in the hands of bondholders

17-Jun-2016 11:41 AM

Brazil’s political unrest and severe economic deterioration have essentially closed off credit markets to companies based in the country. One of its largest airlines, Gol, was fighting losses as Brazil’s economy started its slow downward trajectory, beginning in 2012. By mid-2015 Gol was forced to undertake a restructuring that included equity injections, renegotiating with suppliers, and, more recently, an attempt to restructure unsecured bonds, which the company stresses is crucial for completing all the facets of its restructuring.

Aside from attempting to create a reasonable financial foundation to weather the economic crisis, Gol continues to cut its capacity and has suspended eight routes in its network. However, Gol argues that its smaller Brazilian competitors have continued to expand their capacity, which has offset the benefits of capacity reductions undertaken by Brazil’s largest airlines – TAM and Gol.

Gol has suffered on all fronts from Brazil’s economic crisis, which shows no signs of improving for at least two more years. It is tough to predict the composition of Brazil’s aviation industry at that time, but Gol, with some help from its partner Delta, is working feverishly to ensure that it retains its leadership position in the market once the recovery begins.

Flybe: back in profit, but still one of Europe's least profitable listed airlines

16-Jun-2016 6:03 PM

Flybe returned to profit in FY2016 – according to its latest definition of adjusted pre-tax profit, this was its first positive result since before its stock market flotation in 2010. Quibbles over profit definitions aside, it is apparent that Flybe's restructuring under CEO Saad Hammad since 2013 is continuing to make progress. Nevertheless, with an operating profit margin of just 1.4%, Flybe was one of the least profitable listed European airlines in 2015 (or nearest financial year).

Flybe is now into what Mr Hammad calls the 'Profitable Growth' phase of its turnaround. In FY2016 it returned to capacity and revenue growth after declines in the previous year. In FY2017 it is accelerating its capacity growth at a time when market conditions are producing very soft yields, but Flybe is determined to maintain cost discipline.

Of course, the achievement of profitability is only the first step in profitable growth. FY2016 will benefit from fuel cost tailwinds and this should help it to take the next step – even if it faces unit revenue headwinds.

Air Malta: perennial loss-maker struggles with rising LCC competition. Alitalia considers investing.

12-Jun-2016 9:26 PM

On 27-Apr-2016, Alitalia signed an MoU with the Maltese government over the possible acquisition of up to 49% of Air Malta. The two airlines are linked through geographical proximity and by cultural and commercial ties between Malta and Italy. However, both are perennial loss-makers and Alitalia is focusing on its own turnaround eighteen months or so after receiving investment from Etihad. The Italian national airline will only proceed if it is confident that Air Malta can both complement its strategic development, yet not compromise its own restructuring programme.

Air Malta is now a Europe-only airline. Under its Nov-2015 three year plan, it is cutting overall capacity in 2016 and has discontinued its North Africa routes. Compared with 2013, when CAPA last analysed Air Malta in detail, its seat capacity this summer will be lower by 9% and it has reduced its fleet size by two, to eight aircraft. Air Malta's highly seasonal and strongly leisure-focused network is facing growing competition from LCCs. It has struggled to compete profitably with a short haul, non-premium, point-to-point product that has little with which to differentiate itself.

WestJet expands Encore’s fleet and adds widebody flights as it braces for negative 2Q unit revenues

9-Jun-2016 8:31 PM

In the midst of heightened scrutiny over its performance on long haul routes to London and its handling of economic weakness in Western Canada, WestJet has chosen to exercise options for an additional nine Bombardier Q400 turboprops – for operation by its regional subsidiary Encore. The options are the last that WestJet holds with the manufacturer, and once deliveries are complete in 2018 Encore will reach WestJet’s targeted maturity of 45 aircraft.

During its three years of existence Encore has grown rapidly, and now offers 168 daily flights to 36 destinations. WestJet’s execution in developing and growing Encore has largely been successful, stimulating traffic in smaller markets previously dominated by a single airline.

In addition to Encore’s expansion, WestJet continues to court business travellers through its enhanced Plus product while attempting to navigate a weak unit revenue environment. The airline believes its negative performance will improve sequentially through 2016, but it is unlikely that WestJet can achieve a positive result in that metric this year.