Analysis Reports

To some degree, the environment movement has temporarily been sidelined during the global COVID-19 pandemic. But that was never going to be the case for long.

Many airports have taken the opportunity to revisit their position on environmental concerns, and the first out of the blocks in the UK is the fifth busiest airport: at Luton, north of the capital, which has set out its stall to be Britain’s ‘most sustainable airport’.

Luton is the UK’s fifth busiest airport by passenger numbers, behind London Stansted, which is 50 miles (80 km) away to the east.

London Luton Airport has outlined an ambition to become the most sustainable airport in the UK over the next 20 years. London Luton Airport Ltd (LLAL) has already been working to consider how expansion of the airport will meet the terms of both the Paris Agreement and the recommendations of the Committee on Climate Change.

On the matter of the global pandemic, LLAL is currently working to support its operator and airlines with ongoing safe travel and passage through London Luton. At the same time, Luton Council is preparing an emergency budget to deal with the loss of airport-related and other incomes, and costs experienced during the response to coronavirus.

Aeromexico’s recent bankruptcy filing reflects the bleak outlook for Latin America as the region battles the spread of COVID-19, and governments in the region have largely opted not to offer financial assistance to their respective airlines.

Aeromexico is the third airline in Latin America to seek Chapter 11, joining other full service operators Avianca and LATAM Airlines Group in being forced to rightsize through a formal restructuring. 

Demand in Latin America will take longer to recover compared to other regions of the world, however long term opportunities remain robust, and those airlines that emerge from the crisis intact could be in a prime position to take advantage of a rebound when it occurs. 

The general media hasn’t been slow to ask if the pandemic signals the end for low cost carriers, jumping on any evidence it can find to support that view.

LCCs are generally supported by airports that can be considered ‘low cost’ themselves, because they host more than 50% of their seat capacity on that business model. Some have a designated low cost terminal.

Earlier this year, in a report that focused on Brussels South Charleroi Airport, CAPA analysed eight of those airports in Europe – those that have the largest passenger throughput, between five million and 16.5 million passengers per annum.

Returning to them now, it can be seen that although they are struggling along with the rest of the industry, their position overall is no worse than that of their ‘primary’ level peers.

While many airports have closed altogether during the coronavirus pandemic, the larger ones have taken to shutting down individual terminals and runways, which have often been used as parking areas in the past three months.

One sign of an improvement in the situation is the reopening of runways at some of Europe’s biggest hubs, which also means that the aircraft that have been parked on them will have to find a new home – preferably in the air.

On 24-Jun-2020 Amsterdam Schiphol Airport announced plans to reopen runway 18L-36R for commercial air traffic from 06-Jul-2020, and Frankfurt Airport’s Northwest Runway (07L/25R) will go back into operation on Wednesday, 08-Jul-2020.

Frankfurt Airport has been ready to step up flight operations since mid May. Frankfurt's airport operator Fraport has implemented extensive anti-infection measures in the areas currently in use in Terminal 1, in line with all health authorities’ regulations.

France ended its overall lockdown more than a month ago, and internal travel within France has now resumed. Spain, very heavily reliant on international tourism, has now reopened its borders, with a series of ‘air bridges’ being opened with selected countries to allow two-way travel without the need for quarantine.

According to UNWTO research, Europe is ahead of other regions in easing travel restrictions as the region moves into what is historically its peak quarter for aviation. Moreover, World Health Organisation data on weekly COVID-19 case numbers in Europe have fallen from their Apr-2020 peak.

Europe's total airline seat capacity is scheduled to have been reduced by 71.9% year-one-year in the week commencing 29-Jun-2020, according to schedules from OAG combined with CAPA Fleet Database seat configurations.

Africa now has the deepest cuts, down by 77.4%, fractionally more than Latin America's 77.1% cut. Seats have been cut by 65.2% in Middle East, 62.9% in North America and 45.7% in Asia Pacific.

Europe's cut is 7.7ppts narrower than last week's 79.7% drop and the fourth consecutive week of a tightening trend.

However, the curve of Europe's COVID-19 case numbers is no longer falling, and a Jun-2020 survey by IATA shows that worldwide traveller confidence has slipped since Apr-2020.

Summer 2020 schedules continue to be trimmed, but this year's summer peak will not be like any other year for Europe's airlines.

Demand is returning in Europe, albeit more quickly at the intra-regional level than the intercontinental, due to ongoing travel restrictions in major travel markets, and trip options remain temporarily limited to each country's own backyard. 

With the largest domestic market in the region, it is not surprising that the two airlines with some of the largest operational fleets are Russia's Aeroflot and S7 Airlines.

However, British Airways has overtaken both, to have the largest active fleet in Europe at this time.

Norwegian is cancelling outstanding orders for 92 737 MAX aircraft and five 787s. Frustrated by a lack of progress in commercial negotiations with Boeing, Norwegian has filed legal claims seeking the return of pre-delivery payments and compensation for losses related to the MAX grounding and 787 engine issues.

Its Apr-2020 business plan included the grounding of the vast majority of its fleet until Mar-2021 and a smaller 'new Norwegian' after the recovery.

Some short haul capacity is resuming ahead of Norwegian's base case scenario, with the return of routes from Gatwick and Edinburgh to Oslo and Copenhagen, in addition to some Scandinavia-Europe routes. Norwegian seat capacity is set to be 15% of 2019 levels in Jul-2020, compared with 6% in 2Q2020, according to OAG/CAPA data.

However, even after a capital restructuring and state aid, Norwegian is Europe's least liquid listed airline group. Even after the cancellations, Norwegian still ranks ninth in Europe by outstanding aircraft orders (down from second – to Wizz Air).

It does not need its aircraft orders, but it does need cash.

The world’s second largest aviation market, the USA, could be close to another turning point as COVID-19 cases spike across the country. The reopening of US state economies and lifting of stay at home orders had driven a slight uptick in air travel demand and airlines added more near-term capacity than expected, offering low fares to encourage travel.

But COVID-19 cases have recently surged, placing the outlook under even more uncertainty. Experiences in other domestic markets suggest that surges in cases provoke a slowing of capacity growth.

New CAPA modelling projects domestic US seat capacity to be down by 60% year-on-year by the middle of August - the summer peak - and down by almost half of last year’s level of capacity by Thanksgiving in November - but even this level of production could be hampered by the rampant spread of the virus in the US.

The world’s premier gambling cities and the airports that support them have taken a huge hit from something they could not have predicted for all their algorithms – the arrival and rapid spread of the coronavirus.

Las Vegas is one of several airports around the world where traffic figures are heavily influenced by gambling activities. Others include the competing Nevada resort city of Reno, Atlantic City in New Jersey, Monte Carlo (Monaco) on the Mediterranean Sea, and Macau in Southeast Asia, which is regarded as the world’s #1 gambling city.

But gamblers are a hardy bunch, and resort cities like Las Vegas are seeing an upturn in demand and capacity. This report looks at what is happening there and at other comparable cities/airports in the U.S., Europe and Asia.

A little more than a year ago one of the largest private equity deals in the history of aviation emerged, with Onex Corporation outlining its plans to purchase Canada’s second largest airline WestJet. 

It was one of the more surprising developments in the industry during the last few years, and WestJet had concluded that going private would allow it to focus more on its long term strategy, rather than being at the mercy of short term demands from analysts and investors. 

Of course the world has changed dramatically during the time since, and Onex and WestJet had no way of predicting the COVID-19 pandemic, and the benefits they hoped to achieve from the deal are being pushed off into the future. And for now, they are just attempting to withstand the devastating effects of the pandemic on the worldwide aviation industry.