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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.


 

44,292 total articles

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Hawaiian Airlines' favourable geography helps it post a PRASM performance that outshines its peers

28-May-2016 8:17 PM

Hawaiian Airlines’ unique geographical positioning is helping the airline to deliver a passenger unit revenue performance that is outstripping its peers, who are more exposed to a lack of pricing traction and growing capacity on many domestic routes on the US mainland. Demand to Hawaii remains solid and competitive capacity growth in Hawaiian’s markets remains reasonable.

Hawaiian’s capacity expansion has been tempered during the last couple of years after a massive push into long haul markets earlier in the decade. Its planned capacity growth for 2016 is 2.5% to 5.5%, and expansion in 2017 is expected to remain in the low single digits. The airline plans to use existing capacity to support additional services to Tokyo Haneda, which will allow the airline to improve its service offering in one its most important markets – Hawaiian estimates that Hawaii is the end destination for one in four passengers travelling from Japan to the US.

Alaska Air Group’s intention to purchase Virgin America and merge with its rival has fuelled speculation about other potential M&A deals in the US market. Hawaiian believes that its attributes could create value for another company but stresses that it is not for sale, and many opportunities remain for the airline to grow independently.

Aegean Airlines: wider 1Q loss exposes growing seasonality. Ryanair maintains competitive pressure

28-May-2016 12:38 PM

The Aegean Airlines group suffered another fall in its operating result in 1Q2016, when winter losses widened. As is the case for almost every other European airline, it suffered a fall in unit revenue. However, whereas many others managed to lower unit costs at a faster rate, Aegean's cost efficiency gains were not enough to offset the RASK decline, in spite of lower fuel prices. This adverse RASK versus CASK trend seems to have established itself and Aegean has now had six successive quarters of contraction in its operating margin.

One of Aegean's biggest structural challenges is the high degree of seasonality in its business. The summer quarters, particularly 3Q, are much more significant than the winter to its capacity and traffic and must generate sufficient profits to offset winter losses. Moreover, the extent to which Aegean depends on a strong summer is growing.

By contrast with Aegean, ultra LCC Ryanair, which is the second largest airline in Greece, is now enjoying year-round profitability and margin expansion. Ryanair is matching Aegean's overall rate of growth in Greece and gaining market share in the domestic market. Aegean is unlikely to see an end to downward unit revenue any time soon.

Wizz Air: more strong FY results for ultra-LCC. A321 to solve problem of further unit cost reduction

26-May-2016 3:50 PM

Wizz Air's second annual results since its Feb-2015 IPO show it going from strength to strength. Almost all the key indicators moved positively in FY2016. Capacity and revenue grew rapidly once more and load factor went up. Wizz Air's market share in Central/Eastern Europe increased. Net profit was higher and operating margin expanded. Moreover, unit cost fell.

However, behind the headlines, Wizz Air cannot sit back and relax. Firstly, after years in which unit revenue was driven by strong ancillaries compensating for weak ticket pricing, total RASK fell in FY2016. Ancillaries remained strong, but not strong enough to offset falling fares. The RASK outlook remains weak. Secondly, unit cost only fell because of lower fuel prices. Ex fuel CASK has barely moved for six years and is already the second lowest in Europe. It is difficult to cut non-fuel costs further (although containing them, as Wizz Air has done, is a creditable achievement).

Of course, well-managed companies do not sit back and relax. Wizz Air's is building its future on the A321, whose greater seat count will give lower unit costs versus the A320s. Wizz Air judges that this unit cost benefit will compensate for the larger aircraft's dilutive impact on yield.

Virgin America leaves a lasting product legacy as it readies for absorption by Alaska

25-May-2016 6:47 PM

The pending merger between Alaska Air Group and Virgin America has generated many questions about brand, product, aircraft and network composition. Those are among myriad elements that need evaluation as the two airlines unify to become a more competitive force in a post- consolidated US market place.

One issue that Virgin America believes the merger cannot rectify is enlarging access for smaller airlines at slot- or space-constrained airports in the US. However, with the combined scale, Virgin America believes the two airlines can compete more effectively against the US major airlines that dominate those facilities.

Virgin America is on the cusp of being absorbed by Alaska at a time when its unit revenue performance, albeit negative, remains better than the industry average. Since the merger announcement Virgin America’s stock has spiked, which seems to indicate that while some do question the airline’s USD2.6 billion price tag, Virgin America’s inherent value lies in its ability to be acquired.

Ryanair's best margin since 2005 illustrates the success of 'Always Getting Better' programme

24-May-2016 7:00 PM

Ryanair achieved another strong increase in net profit in FY2016, following up on FY2015's 66% growth with a 43% gain. Passenger growth accelerated to 18% – its highest rate for seven years, helped in no small measure by a second successive 5ppt gain in load factor, taking it to 93%.

This was achieved with only a 1% fall in average fares, demonstrating the success of the customer service and network improvements that Ryanair has introduced over the past two years under its 'Always Getting Better' programme. Overall, Ryanair managed the rare combination of an increase in revenue per seat and a fall in cost per seat (although the latter owed much to lower fuel prices). This gave it its highest operating margin since FY2005.

Looking into FY2017, Ryanair expects profit growth to slow down, but at a figure around 13% it still aims for a double-digit rate. Moreover, it is likely to retain its position as the airline with Europe's highest operating margin.

LATAM’s merger: despite tough conditions, a watershed moment in Latin American aviation

23-May-2016 4:56 PM

LATAM Airlines Group reached a milestone in early 2016 when it operated its first flights under the LATAM unified brand – almost six years after LAN and TAM declared their intention to merge, and four years after the merger closed.

The merger of LAN and TAM was one of the most significant developments in the history of Latin American aviation. Their combination creates a regional powerhouse, with the merged entity representing nearly 50% of system ASKs in South America.

But the region’s fortunes have taken a sharp downturn since LAN and TAM embarked on their merger six years ago, which has led to questions over whether the original logic for the merger remains intact. Arguably, the combination creates a much stronger force to withstand the economic strife that has swept Latin America.