Analysis Reports

Etihad expands sustainable loyalty programme with Corporate Conscious Choices

Jet2.com and Jet2holidays introduce carbon offsetting scheme as part of sustainability strategy

Gazpromneft-Aero supplies sustainable aviation fuel for Ural Airlines service

Swedavia implements fossil free diesel incentive scheme at Stockholm and Gothenburg airports

Ross Aviation begins offering SAF at Thermal Jacqueline Cochran Regional Airport FBO location

London’s City Airport, close to the financial districts of what claims to be the world’s premier financial centre, has thrived in the past on the needs of the business community.

But that community went AWOL during the coronavirus pandemic, with the exception of the third quarter of 2021, when air travel picked up a little. Many users have got used to online communication, and despite ‘Zoom fatigue’ it may be difficult to entice them back.

Nevertheless, the airport’s management is persevering with its strategy of encouraging corporate travel and the airlines that will support it, against a background of hardly any political support for it being there at all, and the anticipated opening of a rail line which could connect many of its existing passengers to Heathrow Airport, where there are greater frequencies.

Having said that, it is probably doing more behind the scenes to develop leisure travel demand than meets the eye.

A culmination of events has spurred an uncertain start for US airlines as 2022 begins, ranging from staffing issues triggered by the Omicron variant of COVID-19 to operational challenges ushered in by typical winter weather. 

Even with the challenges stemming from the coronavirus pandemic, domestic air travel recovery in the US continues as the virus moves towards part of regular life - despite some 2,000 daily deaths from COVID-19. OAG and CAPA data suggest the country’s domestic ASKs will surpass 2019 levels at the start of the summer 2022 high season, by which time it is hoped the worst of the Omricon strain will have washed through.

Some of the country’s airlines are scaling back their near term schedules to alleviate the pressure caused by staffing, and other challenges. But over the longer term US operators remain bullish on their prospects for 2022, despite the rocky start to the year.

In spite of the near term challenges US airlines face, they remain optimistic about demand trends throughout 2022.  

According to a number of media reports, Lufthansa is talking to Italia Trasporto Aereo (ITA Airways) about the possible acquisition of a 15% to 40% stake in the Italian airline. Discussions include cooperation on purchasing and the development of Rome Fiumicino as a hub.

Italy's new national airline, ITA was launched in Oct-2021 to take over from the perennial loss-maker Alitalia, which ceased operations at the same time.

Based on data from OAG and CAPA for the week of 10-Jan-2022, ITA is the 17th biggest airline group by seats in Europe and Lufthansa Group is fourth. Lufthansa Group's fleet is 13 times bigger than ITA's, and the Lufthansa airline has almost 12 times as many routes as ITA.

Both sides have previously indicated interest in a partnership, although ITA has followed its now defunct predecessor Alitalia in joining SkyTeam. ITA chairman Alfredo Altavilla has described his airline as a "pretty bachelorette" and hopes "Lufthansa will be one of those handsome and rich admirers who might be interested".

ITA could benefit from a strategic investor, but Lufthansa needs to satisfy itself of ITA's potential for sustainable profitability.

A multitude of CAPA reports in the last five years have attempted to identify the direction that the privatisation of Vietnam’s airports is taking.

A deal with Groupe ADP that would have seen investment and management across the board fell through in 2017, and since then attempts have been made to attract smaller, indigenous investors, including airlines, to engage in PPP projects on individual airports, or in small groups.

The procedures have been revived once again with airports being segregated into groups and clusters, but they are complicated and potentially off-putting.

The government also faces the fact that Airports Corporation of Vietnam’s (ACV's) profits will be severely limited by the pandemic through to 2015 at least, and that it must balance its privatisation strategy with the need to complete the Long Thanh green field airport project at Ho Chi Minh City as soon as possible.

Slowly but surely Indonesia is privatising some of its smaller airports.

Indonesia is a country where some foreign operators and investors are wary to tread for a variety of reasons. But with the Lombok Airport deal having attracted a large number of interested parties, the conclusion of a 25-year concession to operate, maintain and extend the Batam Hang Nadim Airport on the Riau Islands, close to Singapore, will give more hope to the two state airport operating companies that they can find more takers Especially where a local and largely state-owned minority partner can be found, as in this case.

That partner will provide engineering resources to the major one, Incheon International Airport Corporation.

On the surface, other reasons why the airport needs to be extended quite so quickly are hard to identify. It may signify a change in emphasis which seeks to put smaller regional airports like this that are advantageously located into a position where they can help relieve the pressure on the creaking Jakarta Soekarno-Hatta Airport.

And that might be realistic, or fanciful.

Just as most Australian states open up their internal borders, soaring COVID-19 case numbers are disrupting the network recoveries achieved in recent months by the country’s major airlines, proving once again how fragile such rebounds can be.

In Australia there have been record numbers of COVID-19 infections, thanks to the rapid spread of the Omicron variant of the virus. Virgin Australia was first to announce network capacity cuts in response to the latest coronavirus pandemic wave, with Qantas following soon after by scaling back its domestic and international capacity plans.

The two airlines had essentially reached pre-pandemic domestic capacity levels over the holiday period, but they will not be able to sustain this success in the first quarter of 2022 due to Omicron. It would not be a surprise if further cuts are also announced.

The main ray of hope is the possibility that the Omicron outbreak could be quicker to peak and subside than the previous Delta variant wave, allowing the airlines to resume their recovery trajectories.

The main question is when this will occur.

Allegiant Air’s strategy of flying from small to mid-sized cities using lower cost, used aircraft has served the airline well for more than a decade. That business model has curried favour with investors, reflected in Allegiant’s stock trading at a premium to those of other airlines operating under more traditional business schemes. 

Now that the airline has opted to order new Boeing 737 MAX narrowbodies, Allegiant’s management is stressing that the move is not a deviation from its proven blueprint but is more an opportunistic evolution to support its growth. Simply put, obtaining used aircraft to Allegiant’s planned scale is not a viable option going forward. 

Nevertheless, markets are not reacting positively to the news, so it could take Allegiant some time to convince investors that this opportunistic purchase is a logical fit for the airline.

However, Allegiant remains bullish about the prospects for the MAX. 

CAPA has compiled a table of the Top 50 airports in 2020 and compared with existing data for the whole of 2021 or in some cases for parts of 2021, such as Jan- to Nov-2021.

As China has largely kept COVID-19 at bay domestically, its airports have seemingly defied gravity while global airports have offered only mixed results. Seven of the world's 10 busiest airports in 2021 were in China.The other three in the top 10 are US airports, also on the back of a strong revival of domestic travel, albeit while almost 1 million Americans have died of the virus.

This report examines the top 50 airport performances by region.

While ‘official’ passenger statistics for 2021 at the world’s leading airports have not in many cases been revealed, sufficient data has been made available to CAPA to make substantial validatory assessment about growth rates compared to 2020.

Although some parts of the world have witnessed quite strong growth in 2021 at these top airports (for example in Europe and North America), the Asia Pacific region remains a hotchpotch of conflicting data, with some airports also experiencing good growth but others stuck in a nuclear winter of constantly plummeting statistics. Indeed, there are some airports that could take many years to regain their previous status – if they ever do.

It is also clear that the statistics continue to be influenced by the anti-pandemic measures forced upon different countries, or within those countries on states or provinces or regions, with passenger numbers varying sometimes quite wildly, accordingly.

Numerous major US cities have secondary airports but Phoenix’s (Mesa Gateway) is often overlooked. That may be partly because it has been regarded as a general aviation facility and also because the existing terminal is a temporary one which dates back to when it became a commercial facility too, at the expense of the air force base it had been previously.

But it had 1.7 million passengers in 2019, which is not to be sniffed at, and has long-standing phased plans through to beyond 2030 by which it might cater for over 20 million ppa. The Phoenix area is the nation’s fifth largest conurbation and Phoenix the fastest growing city.

Those plans have been thrown out of kilter by the coronavirus (COVID-19) pandemic, but it looks as if the first stage will go ahead – a ‘state of the art’ five-gate terminal.

But there are two issues here.

Firstly, is it what the low cost carriers who use it (100%) actually want? And if not, is there enough latent demand from the full service/network airlines that might welcome such a facility?

Secondly, who is going to pay for a scheme that has not yet been fully costed, let alone the full ‘Gateway 2030’ scheme which could run to USD1.4 billion or more?

There may be some help forthcoming from the recently passed Infrastructure Bill for this first phase, but even that could come with caveats.