SAS CEO Rickard Gustafson stated (03-Dec-2020) there were signs demand recovery during the summer schedule, however as EU and North American coronavirus cases accelerated in Sep-2020 and Oct-2020, renewed travel restrictions reversed a positive trajectory. At Q4FY2020, approximately 40% of SAS' pre-coronavirus markets were under travel restrictions, growing to over 65% by the end of the quarter. To adapt to the recent developments, the carrier reduced offered seat capacity to well below 40% by the end of Oct-2020. [more - original PR]
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Premium Analysis
Europe-Asia Pacific is Europe's hardest-hit airline marketAsia Pacific is the second most important intercontinental region for European airlines, accounting for almost 15% of their total ASKs in 2019. For those operating on Asia Pacific routes, the region was a fifth of their ASKs. This gives a reasonable indication of the revenue importance to European airlines of Asia Pacific, second only to the North Atlantic among long haul markets.
COVID-19 has depressed all long haul demand even more than short haul. This is particularly bad news for European airlines, as they have a greater percentage of ASKs on long haul than North American and Asia Pacific airlines. Within long haul, Europe-Asia Pacific has been even harder hit than the North Atlantic.
Not surprisingly, the big legacy airlines had the most pre-crisis capacity to Asia Pacific among European operators. Among non-Russian operators, Finnair had the highest exposure as a percentage of its ASKs, while Air France-KLM and Lufthansa Group had a bigger exposure than IAG.
It is time the industry and governments faced up to the fact that restoring the status quo ante is no longer an option.
This was the key takeaway from the introductory presentation at CAPA Live on 11-Nov-2020.
As we look ahead through the next decade, it is time for a reality check - a reality check nine months on from when the horrible COVID-19 disaster beset the world, in turn looking at a new platform for building for the next decade.
That is to say, the new starting point as 2021 beckons.
What will be the platform for the future growth? And what will shape that growth as industry revenues slump by more than half 2019 levels in 2021?
Lufthansa Cargo operates first CO2 neutral freight service
All Nippon Airways and five other companies start studying carbon recycling business models
Amazon: Uber, JetBlue and Boom Supersonic among new signatories to The Climate Pledge
Wizz Air CO2 emissions up 21% in Nov-2020 on a unit basis and down 82% in total
London Stansted Airport and Manchester Airport seek zero emission aircraft
Korean Air’s plan to take over rival Asiana Airlines will cause one of the biggest-ever shakeups in the South Korean airline industry, and the competitive implications will also be felt elsewhere in the Asia-Pacific region and globally.
The purchase is seen by the government and Asiana’s creditors as the best way to ensure the continuation of Asiana’s operations, albeit under another airline’s identity. Asiana was struggling even before COVID-19 emerged, and the onset of the pandemic torpedoed an earlier buyout attempt by another corporation.
Merging the two airlines will reduce competition, but there are very few alternative paths available that would retain Asiana as a strong competitor. There is limited appetite for outside investment into airlines thanks to COVID-19, particularly for carriers that were financially shaky before the pandemic.
Absent this deal the most likely outcome for Asiana was dramatic downsizing or perhaps eventual collapse. The government has obviously decided that reducing competition was preferable to mass job losses.
The government’s support for a merger of this magnitude would have been difficult to imagine before COVID-19. But this is yet more evidence that the pandemic has shaken up industry norms.
Exciting news on COVID-19 front-running vaccines is welcome for the world and the global aviation industry. But there will be a long, complex road ahead in the vaccine rollout phase. For anyone dreaming of a rapid snap-back to ‘2019 normal mode’ for the aviation and travel industries, it’s wake-up time. Recovery will be slow, lumpy and challenging.
CAPA offers a regular and predictable programme in these unpredictable times with CAPA Live, our virtual monthly programme spanning the whole of 2021, delivering great content, news, data and opinions from the leaders of the industry.
At a time when the aviation industry is searching for up-to-the-minute market intelligence, news, trend analysis and thought leadership, CAPA - Centre for Aviation delivers a monthly virtual “Summit”, jam-packed with information, data and live interviews. CAPA experts, global airline CEOs and other cutting-edge industry leaders present live from a next-gen virtual event platform.
The next CAPA Live event is in 4 days on 9-Dec-2020, and features the below speakers. Find out more
Greg McCarthy
ANZ CEO, Corporate Travel Management
Tony Fernandes
Group CEO, AirAsia
Martin Gauss
Chairman of Executive Board & CEO, airBaltic
John Strickland
Director, JLS Consulting
Guillaume Halleux
Chief Officer Cargo, Qatar Airways
Recorded at CAPA Live October, 14 Oct 2020
Aviation Insiders Panel – Aviation returning to the 1930s
There’s been much talk about the post-COVID industry reverting to the profile of the 1970s, with its reduced traffic levels, the prospect of more active government intervention, smaller networks and higher prices. But in two very important ways the real time frame to compare is the 1930s. There are important lessons to be learned from industry and government behaviour 90 years ago.
First of all, essentially that all borders were closed to foreign aircraft and permission became necessary even to overfly. Secondly, in the earlier, barnstorming days of aviation the biggest inhibitor of commercial air travel expansion was safety and people were unwilling to embark on such a dangerous mode of transportation.
- How has this previously unimagined level of disruption impacted the aviation industry?
- What impact has the closure of borders had on international recovery?
- How will the industry encourage passengers back into the air?
- Business and corporate travel will be subdued by a combination of weak economic conditions, employer concerns over duty of care, what impact will this have?
- The industry profile will change drastically, affected by the reduction in high yield business travel, as airlines disappear or reinvent themselves and as opportunistic new entrants appear. What will it look like?
- Airports will need to adapt, expensively and innovatively: Are they prepared?
- Are environmental issues still being addressed and can it impact regrowth?
- The industry will resort to a greater reliance on loyalty programmes, IT solutions and E-commerce – and partnerships.
Royal Air Maroc, via its official website, stated (02-Dec-2020) it will offer free COVID-19 medical insurance for eligible passengers for up to 31 days after departure. The scheme includes coverage for up to EUR150,000 in medical expenses for passengers diagnosed with COVID-19 while travelling with the airline. Passengers required to quarantine will also be eligible to claim up to EUR100 per day for the period under the scheme.
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4-Dec-2020 3:13 PM
Norwegian outlines plans to reduce fleet, convert debt to equity and raise EUR376m in stock issue
Norwegian Air Shuttle, in a stock exchange filing, announced (03-Dec-2020) a proposed plan to secure current and future travellers and potentially enable the company to exit its Irish Examinership process through measures to "right-size the company operations at a level of proven profitability". Details include:
- Measures involve reducing the fleet size and reconstructing the company's balance sheet to attract new investors and potentially support from Norway's Government;
- The company will perform a "reverse split" of shares in the ratio of 100:1 and reduce the nominal value of each share from NOK10 (EUR0.94) to NOK0.01 (EUR0.001);
- The company will undertake a debt to equity conversion, which will include aircraft financing or leasing liabilities, vendor and supplier liabilities, bond obligations and potentially arrangements that will require Norwegian to only pay for aircraft on a power by the hour basis until 2022;
- The final step in this process will be an equity issue of up to NOK4 billion (EUR376 million) in common stock and/or hybrid equity instruments to existing, new and other potential stakeholders;
- Should these actions be successful, shareholders and debtors will become "meaningful minority shareholders" of the company.
Norwegian will hold an extraordinary general meeting on 17-Dec-2020.
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4-Dec-2020 1:19 PM
International arrivals to Kenya down 72% for Jan-2020 to Oct-2020, gradual recovery since Aug-2020
Kenya's Tourism Research Institute reported (03-Dec-2020) international visitor arrivals decreased 72% year-on-year to 470,971 for Jan-2020 to Oct-2020. Performance in Jan/Feb-2020 was comparable to 2019, but this was followed by a "drastic decline" in Mar-2020 and a "total collapse" from Apr-2020 to Jul-2020. Gradual growth in arrivals was recorded since the reopening of Kenya's borders and airspace in Aug-2020. The top source markets for Jan-2020 to Oct-2020 were as follows:
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4-Dec-2020 12:29 PM
CAAB approves airlines to resume services from 13 countries to Bangladesh from Dec-2020
Civil Aviation Authority of Bangladesh (CAAB), via its official website, announced (30-Nov-2020) airlines are permitted to resume scheduled international services from Bahrain, China, Saudi Arabia, Kuwait, Malaysia, the Maldives, Oman, Qatar, Sri Lanka, Singapore, Turkey, the UAE and the UK to Bangladesh, commencing 05-Dec-2020.
Perth Airport welcomed (30-Nov-2020) Australia's Federal Government approval for 'Perth's New Runway' project. Perth Airport submitted a comprehensive and detailed draft Major Development Plan (MDP) to the Federal Government for approval, detailing engagement with airline partners, stakeholders and all levels of government on a range of issues including aviation operations, airspace management and flight corridors, aircraft noise, heritage and environmental issues. The project will see approximately AUD520 million (USD386.8 million) of investment with almost 500 jobs created during construction. The new runway will underpin the airport's future operations, with expectations it will inject approximately AUD2 billion (USD1.5 billion) into the tourism sector in its first two decades of operation. Perth Airport CEO Kevin Brown said the airport was committed to ensuring the Munday Swamp heritage site remains protected and accessible to current and future generations of Noongar traditional custodians, and "significantly modified the design of the runway to ensure the Munday Swamp indigenous heritage site will be protected". [more - original PR]
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Find Out MoreAviation returns to the 1930s
Issue 53
- There has been much talk about the post-COVID-19 industry reverting to the profile of the 1970s, but in two very important ways the real timeframe to compare is the 1930s.
Global Outlook 2020: A look into the coming decade, expect massive change
Issue 52
- If the first two decades of the century were transformational for the aviation industry, the 2020s will be revolutionary.