Analysis Reports

The Singapore-US market will be served with 41 nonstop flights in Dec-2018, compared to 21 currently and zero just over two years ago. There is perhaps no market that has benefitted as much from new aircraft technology.

Singapore Airlines (SIA) and United Airlines used the A350-900 and 787-9 to launch nonstop flights from Singapore to San Francisco in 2016. SIA will use the new A350-900ULR to resume nonstop flights to Los Angeles and Newark in 4Q2018, as well as to increase capacity to San Francisco. 

SIA’s business class capacity to the US will increase by 50% over the next few months, and its premium economy capacity will increase by a staggering 150%. Filling more than 3,100 one-way business class seats and more than 2,800 one-way premium economy seats may prove challenging. 

Groupe Eurotunnel (now the Getlink Group) has commissioned a feasibility study by the consultant Roland Berger to introduce 'low cost' rail operations between the UK and France. The study outlines an operating model similar to that of SNCF, (the French state rail operator) and Thalys (a joint high-speed rail venture between SNCF, SNCB [Belgium] and Deutsche Bahn [Germany] low cost rail services in Europe).

A reduction of between 25% and 30% on regular Eurostar ticket costs is expected, at the cost of travel time increasing from 2 hours 20 minutes to slightly more than three hours, according to the study.

This proposal will mean that passengers will need to make their own way to suburban stations to board a train that takes them by a circuitous route on older tracks to the outskirts of Paris, where they then have to board another train to complete their journey. And on multiple tickets. And with no UK provincial connections.

The fundamental difference with budget air travel is that it made it not only cheaper but often more convenient, flying directly from the local airport on one ticket to one at least close to the ultimate destination.

At the end of 2018 Singapore is opening a new terminal at its secondary airport Seletar. The new terminal will be used for turboprop flights to destinations in Malaysia and potentially Indonesia.

Singapore Seletar-Kuala Lumpur Subang in particular has the potential to become a large route following Malaysia’s recent decision to shelve, or at least postpone, the construction of a high speed rail line between Singapore and Kuala Lumpur. Malaysia Airlines' subsidiary Firefly will move its current Singapore-Changi-Kuala Lumpur Subang service to Seletar and the Lion Group affiliate Malindo Air is expected to also serve the Seletar-Subang route.

Singapore is forcing turboprop operators to use Seletar instead of Changi as part of a new policy designed to free up capacity at Changi. Seletar has not had any scheduled commercial flights since 2010.

Hawaiian Airlines, a vocal critic of joint ventures during the last few years, is now seeking an immunised JV with Japan Airlines (JAL) in order to bolster its position in one of its most important geographical markets.

One key point that Hawaiian and JAL make in their request for regulatory approval for their JV is that only the three large US global network airlines enjoy benefits of immunised cooperation, and the addition of another US airline in a JV would bolster the competitiveness of the US aviation industry.

It will be interesting to see if other airlines oppose the market strength Hawaiian and JAL will enjoy in the Honolulu-Japan market. Part of Hawaiian’s criticism of JVs in the past has been the concentration that those tie-ups would create.

But Hawaiian and JAL are arguing that ANA’s planned surge in the Hawaii-Japan market warrants an opportunity for a competitive combination to withstand ANA’s expansion and a newly minted JV between Delta and Korean.

Ethiopia and Eritrea declared their state of war to be over on 9-Jul-2018, after talks between the neighbouring East African countries' leaders.

This move was part of a historic agreement that will see the opening of embassies, the development of ports and resumption of flights. Ethiopia’s Prime Minister, Abiy Ahmed, wasn’t slow to employ the imagery du jour: "We will demolish the wall and, with love, build a bridge between the two countries," he said.

The agreement has paved the way for new daily direct air service by Ethiopian Airlines, starting on 17-Jul-2018.

The erection of a border wall, uncertainty over NAFTA and immigration controversies have all coalesced to create a blanket of uncertainty in Mexico-US relations, which have resulted in knock-on effects in the transborder aviation market.

Now the election of a leftist and populist president in Mexico is adding to that uncertainty, and on a broader scale, creating potential roadblocks to crucial progress needed in tackling infrastructure constraints and changing governmental mindsets about the benefits of aviation to Latin America.

One of Andrés Manuel López Obrador’s (AMLO) campaign pledges was to stop construction of the new Mexico City airport scheduled for completion in 2020.  Hopefully he will not follow through on that promise, but the precedent set by his comments should be worrisome to the evolution of Mexican aviation. In the immediate aftermath of Mr López Obrador's election, there have been mixed messages, a mildly positive development.

The International Air Transport Association (IATA), along with organisations such as the trade association Airlines for Europe (A4E) – especially those within Europe – has been on the attack, with privatised airports in their sights. Each regards such airports as monopolies that need stringent price regulation to protect airline passengers, and they regard privatisation itself as an unnecessary evil.

An independent U.S. organisation has found that of the 100 largest airport groups, 40 were either fully or partially privatised and 62% of them were included in the world’s hundred best airports as judged by passengers.

There have been some privatisation failures, of course, and there is still a sense of retail overkill at some privatised airports.

This report examines both sides of the argument.

Since as far back as the 1980s, global economies have generally shifted from being led by government expenditure towards greater involvement by the private sector. Whether for infrastructure, research and development, financing or technology, the expansion of the private sector is still rampant in many facets of both developing and developed economies. Sales of state enterprises worldwide reached USD185 billion at the end of the 1980s and, more recently, privatisation revenues have risen from approximately USD110 billion in 2008 to USD266 billion in 2016, according to the Organisation for Economic Co-operation and Development.

For infrastructure, the need for substantial investment has been well documented. The McKinsey Global Institute estimates USD3.3 trillion should be invested p/a through 2030 just to support expected global rates of growth, though most countries are not investing nearly enough, with there being an expected annual global shortfall of USD350 billion.

The Trump Administration published ‘Delivering Government Solutions in the 21st Century’ on 21-Jun-2018, a sweeping reform plan and proposals for regulatory restructuring. Nestled within the document is a rebooted attempt to shift air traffic control (ATC) responsibilities from the Federal Aviation Administration to a private, non profit entity.

Ryanair faces the threat of coordinated strikes by cabin crew in Spain, Portugal, Italy and Belgium. The LCC officially recognised unions for the first time in Dec-2017 after crew rostering problems and Ryanair's need to win employee support to resolve them gave the upper hand to labour. It managed to avert strikes at the time and has held talks with several unions in different countries across its network to reach new collective agreements.

Cabin crew industrial action will add to Ryanair's labour relations challenges, since the airline's Irish pilots have announced a strike for 12-July-2018. Ryanair's strike worries come after damaging pilot strikes at Air France earlier this year, which led to the resignation of Air France-KLM CEO Jean-Marc Janaillac.

CAPA has tracked the number of articles on its website that mention the word 'strike'. This metric has broadly followed the airline profit cycle in the past – not surprising, since labour is typically more demanding when the profit cycle is at its peak. However, a surge in the number of strike-related articles in 1H2018 is running ahead of the cycle.

Iceland is the fastest growing trans-Atlantic market to the US in 2018 and the country as a whole will have another year of double digit airline seat growth this year. The two Icelandic airlines, Icelandair and the low cost WOW air, both offer Europe-North America connections via the Reykjavik hub. Their current focus on North American growth is helping to balance their network capacity between that region and Europe.

The two airlines are opening up new markets, both on a point-to-point basis and based on one-stop connections between Europe and North America. Among Icelandair's five new US destinations this summer is Kansas City's first non-stop trans Atlantic service. WOW air has added six US airports this summer, including the first European service to St Louis.

Icelandair Group is feeling the pinch after six years of relentless growth by WOW air. The Group is going through a period of transition, characterised by corporate restructuring (including the sale of its hotels division) and slower growth than in recent years (it is cutting capacity to Europe).

However, although point-to-point overlap between Icelandair and WOW air is quite high, the number of overlapping one-stop Europe-North America connections is lower.