Analysis Reports

More than any other region globally, Europeans are engaged with the concept of sustainability. According to the EU statistics agency Eurobarometer, EU citizens believe climate change is the single most serious problem facing the world, with 93% considering it to be a ‘serious’ problem, and 78% considering it to be ‘very serious’. As a percentage, 94% of Europeans say protecting the environment is ‘important’ to them, and 53% say it is ‘very important’.

This concern about sustainability has an impact on consumers’ behaviour around travel and tourism. A Eurobarometer survey from Oct-2021 found a large majority of EU citizens (82%) are prepared to change at least some of their travel and tourism habits to be more sustainable. This includes choosing transport options based on their ecological impact (36% of respondents), paying more in order to protect the natural environment (35%), and contributing to carbon-offsetting activities (34%).

It should not be particularly surprising that European airlines are among the leaders when it comes to the sustainability and the environmental performance of their business.

The Greek government’s stake in Athens Airport – it has the majority share of the equity, directly or indirectly – was always likely to be reduced once the Greek debt crisis began to recede.

Four years ago the share held by the Hellenic Republic Asset Development Fund (HRADF) was to be disposed by way of a trade sale, but that decision was overturned by the government.

Now agreement has been reached between HRADF and the largest private sector shareholder, AviAlliance, with 10% of it going to AviAlliance, which will put it in a position of control over the airport’s future direction.

The CEO of HRADF, Dimitrios Politis, said recently that the fund had reached an agreement with AviAlliance and AviAlliance Capital to proceed with an initial public offering (IPO) for the fund's 30% stake in Athens International Airport. Mr Politis added that the stake was expected to be valued at between EUR800 million and EUR1 billion.

Air France-KLM's Transavia has grown its capacity relative to 2019 faster than Vueling and Eurowings, which are the other low cost brands of the three big legacy groups in Europe. 

Moreover, Transavia's growth has outpaced that of all the leading independent low cost airlines in Europe. In 2022 it flew 127% of its 2019 capacity, a higher percentage than all of the others.   

Nevertheless, Europe's three leading independent LCC groups – Ryanair, easyJet and Wizz Air – remain significantly larger by absolute seat numbers than the legacy group low cost subsidiaries.

Furthermore, their collective growth compared with 2019 has been stronger, reaching 98% of 2019 capacity in 2022 versus 90% for the legacy subsidiaries in aggregate. Both categories of LCC outpaced the total European market, which reached 82% last year.

This pattern is set to continue in 1H2023, with the three leading independent LCCs and the three low cost subsidiaries of the legacy groups scheduling more than 100% of their 1H2019 capacity (with the independents still outpacing the subsidiaries), while the total Europe market is projected at 91%.

Due to the recent relaxation of COVID-19 restrictions, Cathay Pacific is achieving the strong capacity gains it was targeting – although the airline’s recovery phase could be complicated by competition and labour headaches.

The airline began ramping up its capacity rebound in 4Q2022 following the Hong Kong government’s decision to drop its remaining quarantine requirements.

Moves to restore cross-border traffic flows with mainland China in Dec-2022 provided further impetus.

Although Cathay Pacific had the most to gain from these reopening steps, other airlines will also increase services to Hong Kong. The airline's CEO has warned that competition could intensify in the longer term.

And labour action from flight attendants could signal that unions may want concessions as the airline gains strength.

The World Travel & Tourism Council (WTTC) has published a report on a topic that is slightly unusual: namely, the economic value of tourism to cities, taking into account its contribution to GDP and employment as well as the usual traveller ‘spend.’

The main conclusion is inescapable.

While ‘old world’ cities in Europe still top the list, as well as North American resort cities such as Orlando and Las Vegas, there is a shift in favour of Asia Pacific. Beijing, for example, is expected to more than double its tourism sector value to USD77 billion in the next 10 years, leapfrogging the current first-placed Paris.

Where actual tourist spend alone is concerned, the top two cities in 2022 were Dubai and Doha, both helped by the Soccer World Cup being played in Qatar.

Again, Asia Pacific cities are expected to overtake or challenge them in the next 10 years.

Mexico had reached some level of stability before 2020 as the country’s passengers were divvied up among two ultra-low cost carriers – Volaris and Viva Aerobus – and the country’s only full service operator – the Aeromexico Group. 

Due to Mexico’s more relaxed COVID-19 policies, the country’s ULCCs resumed their capacity growth by the end of 2020, and Aeromexico emerged from Chapter 11 restructuring in late 2022. 

But as 2023 gets under way: potential new entrants, a proposed government-owned airline, and a regional operator with aspirations to operate electric aircraft, could inject some new dynamics into the market that at some point could potentially create overcapacity in Mexico’s aviation sector. 

Air India is moving closer to finalising the aircraft orders it needs to support its growth ambitions. These deals will further expand the massive backlog of narrowbodies destined for the Indian market.

The airline is expected to place orders for about 500 new aircraft, as Air India’s new owner carries out its plans for a long term upgrade and expansion of its fleet. Reuters reports that the total will comprise more than 420 narrowbodies and 70 widebodies, split between Boeing and Airbus. 

If these numbers are correct, it means that Indian airlines will soon have more than 1,200 narrowbodies on order collectively. While there is undoubtedly huge potential in the Indian market, these orders will also increase competitive pressure.

Air India’s goal is to strengthen its market share in the international and domestic arenas, as well as improving the standard of the existing fleet. The impending (and recent) fleet moves show that the new owners are obviously committed to invest the vast sums needed to achieve these goals.

When Swansea Airport, in South Wales, last hosted scheduled services many airports in the UK were operated by surface transport operators (e.g. buses) or real estate companies. Indeed, nearby Cardiff, the Welsh capital, was home to the realtor TBI, a then-major operator which was later absorbed by Spain’s Abertis.

Even Cardiff Airport has had its problems at times, and Swansea’s route network was always limited – it closed to commercial flights in 2004. But unlike other UK airports that have succumbed to economic reality (Ipswich, Plymouth, Manston, Sheffield City and recently Doncaster-Sheffield, for example), Swansea looks set to host scheduled service again from Mar-2023.

It is starting small, with just one route, and will assuredly remain small. There is local opposition even to this tiny increase in activity, the infrastructure is basic, and the management could change in the future.

But just getting going again (as with Manston) is a feather in its cap.

In the week of 16-Jan-2023 the North Atlantic market is at 95% of its seat capacity of the equivalent week of 2019. However, the low cost segment has reached only 45%. 

Nevertheless, this masks a renewed dynamism in the Europe to North America low cost market, which has undergone a reboot since the depths of the COVID-19 pandemic.

There have been four new entrants since 2021: JetBlue, Eurowings Discover, Norse Atlantic and PLAY.

Three low cost operators left the North Atlantic market in 2019 and 2020: WOW air, Norwegian and Eurowings.

Low cost seat share on the North Atlantic is projected at more than 4% in the first six months of 2023, only two years after falling to zero. During the first phase of low cost disruption from 2013 it took four years for LCC share to exceed 4%, in 2017, before reaching a peak of more than 8% in 2018.

LCC gains in seat share are mainly at the expense of non-aligned airlines. However, there are also signs that the immunised North Atlantic joint ventures are starting to suffer some erosion of their share.

Earlier in Jan-2023 CAPA published a report summarising the state of the world’s airlines “in 15 numbers”. The airport business does not have quite the same propensity for mathematical evaluation, but the figures below, which are offered “in 11 numbers,” will be of interest all the same.

Perhaps the most impressive numerical statistic is that passengers boarded at the world’s airports in 2022 amounted to 83% of the 2019 figure, despite the ravages of the pandemic.

Things are definitely looking up, but as Stephen Carter, CEO of Informa plc (CAPA’s parent company), said this week, “If the last few years have taught us anything, it is that we should not take anything for granted... the world outside us remains uncertain, economically and geopolitically, causing pressures and strains in many countries and for many communities”.

Note data on cargo airports has been omitted as reliable statistics and sources remain at a premium for 2022/23. A report on that sector will follow. Data on subjective matters such as ‘airport quality’ were also overlooked.