RwandAir, via its official Facebook and Twitter accounts, announced (01-Aug-2020) it resumed regular operations with Kigali-Dubai service on 01-Aug-2020.
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Welcome to the latest edition of CAPA’s Coronavirus and Aviation global COVID-19 update. We offer this product to our active CAPA Members, as well as visitors to our website to help our industry navigate through this crisis.
The report contains a small selection of news briefs and CAPA commentary from around the world.
Top news headlines:
- Australia's hope of domestic capacity growth on hold;
- IATA CEO: Restrictions 'the most immediate problem' for the recovery of travel;
- CAAC: China air frequencies recover to 80% of pre COVID-19 levels.
Following the aviation summaries, the report contains the latest coronavirus data, globally and by country:
- Global cases breaks 18 million mark.
Although bolstering liquidity and whittling away cash burn remain the top priorities for US airlines as the COVID-19 pandemic wears on, some airlines are using the crisis to make puts and takes in their networks to bolster their competitive positions when demand ultimately bounces back.
Alaska and JetBlue are examining their networks and have opted to make some changes as a result of the pandemic.
Both airlines are developing deep partnerships with American Airlines, and both are opting to build out Los Angeles – a historically fragmented and extremely competitive market. JetBlue’s ambitions in Los Angeles are more robust than Alaska’s, which could result in price skirmishes in an already depressed pricing environment.
Still, even with the tactical changes taking place, both Alaska and JetBlue plan to rightsize significantly as spikes in US COVID-19 cases continue to cloud what was already a highly uncertain recovery in demand.
British Airways faces the threat of strike action by cabin crew after failing to agree new terms with Unite the Union. BA has proposed pay cuts for the majority of flight attendants as a way of saving more jobs, although some newer crew members would receive a pay rise. BA has said that it will dismiss employees and re-engage them on new contracts if no agreement is reached.
In spite of this pressure point in airline industrial relations, the number of news articles on CAPA's website that mention the word 'strike' has dried up to a barely noticeable trickle. This metric, which CAPA has tracked over the past decade, has broadly followed the airline profit cycle, not surprising since labour is typically more demanding when the profit cycle is at its peak (and vice versa).
Both measures look set to plummet to their lowest levels this year.
A fall in industrial action would normally be welcome, but not as a reflection of the economic devastation visited on the airline industry by the COVID-19 crisis.
Ryanair and Wizz Air are the first leading European airline groups to report financial results for the first COVID quarter. As expected, both suffered a dramatic collapse in traffic and heavy losses in the April to June 2020 period. More importantly, both increased their cash balances and have significant liquidity cushions.
After grounding most of their aircraft in the depths of the COVID-19 crisis, Ryanair and Wizz Air are leading the return of capacity. Both view this uncertain and risky period as an opportunity to grow market share, whereas competitors remain more circumspect.
Both airlines are backed by strong balance sheets, low costs (they are, after all, Europe's two leading ultra-LCCs), and large orders of new generation aircraft. Crucially, both are also used to moving quickly in and out of markets according to demand and route profitability.
The crisis has even opened up enough space for both of them in Central Europe, where they have had the most overlap in the past. European aviation has hit the reset button, and Ryanair and Wizz Air are now seeking the first mover advantage.
The Jul-2020 update of the CAPA world airline industry airline operating margin model, the first since the COVID-19 crisis, projects a negative margin on an unprecedented scale for 2020. It forecasts a narrower loss in 2021, but at a lower margin than at any other time in the jet era - already a low hurdle.
Visibility on all the major elements of the model – world GDP growth, oil prices, passenger traffic growth and fleet growth – is extremely limited. At the model's core is capacity utilisation, and this remains the key to airline profitability.
Load factor, share of aircraft in service, daily utilisation hours, all correlate with airline margins. The three indicators combine to produce a measure of overall capacity utilisation, which has a much closer relationship with margins.
This, and its three components, has collapsed, and is likely to remain below normal levels into next year. Fuel prices also play a part, but their decline in 2020 and likely increase in 2021 will matter less to airline margins than capacity utilisation.
Airline survival has been high so far in the crisis, but could be more challenged as capacity and cost grow.
Recorded at CAPA Qatar Aviation Aeropolitical and Regulatory Summit, 5-6 Feb 2020
Airport Slots And Facilities – Implications Of Policy Choices For Airline Competitiveness
• What are the alternative ownership models to privatisation?
• What do governments need to consider when deciding whether airports should be privatised?
• What form should regulation take, in order to strike a balance between national and private interests?
• Who ‘owns” airport slots? How should slot policy be regulated and developed?
• What future is there for managing airport capacity that cannot meet demand? To prevent chaos and one that limits growth?
CAPA Australia Pacific Aviation SummitMore
Upcoming Event
2
Sep
Sydney: CAPA Australia Pacific Aviation Summit
As a cornerstone and pre-eminent strategic event in the CAPA Summit global series, we are pleased to announce the virtual CAPA Australia Pacific Aviation Summit, beaming in a high calibre of local and international speakers from all corners of the globe.
CAPA World Aviation Outlook SummitMore
Upcoming Event
2-3
Dec
London: CAPA World Aviation Outlook Summit
CAPA’s World Aviation Outlook Summit, held in conjunction with the CAPA World Aviation Awards for Excellence Gala Dinner provides a global aviation outlook that reviews the commercial and operational pillars to drive strategic decision-making in 2021.
Air Canada announced (31-Jul-2020) a workforce reduction of approximately 20,000 employees in 2Q2020, accounting for more than 50% of staff. These reductions have been achieved through layoffs, terminations of employment, early retirements and special leaves. A provision of CAD76 million (USD56.7 million) was recorded due to these measures, with CAD6 million (USD4.5 million) in payments having been made to date. The provision includes the estimated notice of termination and severance costs under Air Canada's collective agreements and the Canada Labour Code. The carrier also recorded CAD36 million (USD26.9 million) in termination benefits and curtailments related to the pension and benefit obligations. [more - original PR]
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3-Aug-2020 3:18 PM
Air Canada CEO: 'Tremendous urgency' for Canada to reopen and 'restore economic activity'
Air Canada reduced (31-Jul-2020) capacity by 92% year-on-year in 2Q2020. Air Canada president and CEO Calin Rovinescu stated: "Today's reported declines in revenue of nearly 90% and in passengers of over 96%, should reinforce the tremendous urgency for governments in Canada to take reasonable steps to safely reopen our country and restore economic activity. Other jurisdictions globally are showing it is possible to safely and responsibly manage the complementary priorities of public health, economic recovery and job preservation and creation". The carrier expects capacity to fall by approximately 80% in 3Q2020, compared to previous estimations of 75%. Air Canada attributes this change in capacity estimations to the continued extension of blanket travel restrictions in Canada. [more - original PR]
ASKY Airlines, via its official Facebook account, announced (01-Aug-2020) plans to resume services from Lomé to Abidjan, Bamako, Bangui, Bissau, Conakry, Cotonou, Dakar, Douala, Freetown, Libreville, Monrovia, N'Djamena, Niamey, Ouagadougou and Yaounde on 03-Aug-2020. Togo's Government reopened the country's airspace for regular domestic and international services from 01-Aug-2020. The airline will gradually restore its network as more foreign airports reopen. [more - original PR]
Kenya Airways, via its official Facebook and Twitter accounts, announced (01-Aug-2020) it resumed regular international services on 01-Aug-2020, ending a suspension in place since 28-Mar-2020. The carrier estimated it will handle 8000 passengers in the first week of resumed operations. The airline will resume services to 30 international destinations, including Addis Ababa, Dakar, Dubai, Kigali, London and Lusaka (EABW News/Reuters, 01-Aug-2020).
Kuwait's Directorate General of Civil Aviation (DGCA), via its official Twitter account, announced (02-Aug-2020) non Kuwaiti passengers of all nationalities are prohibited from entering Kuwait if they are arriving from India, Iran, China, Brazil, Colombia, Armenia, Bangladesh, the Philippines, Syria, Spain, Singapore, Bosnia and Herzegovina, Sri Lanka, Nepal, Iraq, Mexico, Indonesia, Chile, Pakistan, Egypt, Lebanon, Hong Kong, Italy, North Macedonia, Moldova, Panama, Peru, Serbia, Montenegro, the Dominican Republic or Kosovo, whether arriving directly from these countries or transiting through from other countries. If transiting through prohibited countries, passengers must settle in non prohibited countries for a period of 14 days before before being permitted to enter Kuwait, and provide a PCR test which proves negative and is valid for 72 hours.
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