Analysis Reports

India was the fastest growing leading long haul market from Europe in 2018 (using seat data from OAG Schedules Analyser). Nevertheless, India is only Europe's number four long haul market and is small compared with the USA, China and Canada (despite India's population being close to China's).

Europe-India is led by Jet Airways and Air India, both of which are growing quickly. Jet launched Manchester-Mumbai in Nov-2018, and Air India's entry into Denmark and Sweden in 2017 gives it a presence in eight European markets. However, European airlines control more than half of the seats in this market and have stronger connections behind their hubs.

Bilateral constraints notwithstanding, India's long haul potential is gaining tentative recognition with recent LCC entry, a good indicator of underserved, overpriced markets.

WOW air's Dec-2018 launch of Reykjavik-Delhi is the first low cost service between Europe and India, although, due to the carrier's fleet restructuring, this service will be terminated in late Jan-2019. IndiGo is considering services to London (albeit one-stop initially) and is considering services to Istanbul.

Other operators are also starting to challenge incumbents: Alitalia launched Rome-Delhi in Nov-2017 and Air Italy launched Milan to Delhi and Mumbai in Dec-2018. In addition, LOT Polish Airlines may start what would be Central Europe's only service to India.

This CAPA India report examines data on Europe-India capacity and growth, analysed by country and by airline.

Low cost airlines were late to arrive in Asia. At the turn of the century there were only two very small LCCs operating in all of Asia Pacific, whereas LCCs had already captured significant market share in Europe and North America.

LCCs in Asia have since expanded rapidly and successfully, despite fierce resistance from legacy full service airlines. LCCs now account for nearly 30% of capacity within Asia Pacific.

There are still opportunities for further capacity share gains as several major markets in Asia remain well below the global average. China particularly is punching below its weight in terms of LCCs.

US airlines continue to embrace new technologies in 2019. United recently completed a proof of concept that leverages blockchain for ticket settlement, and Delta has opened the first biometric terminal in the country at its Atlanta hub.

United concluded that the proof of concept allowed it to demonstrate the capabilities of blockchain, simplifying the payment and booking process for corporate travellers and their employers. The airline stated that several time consuming processes could be greatly improved.

Delta's is a big step with the opening of the first biometric terminal, but certain global standards need to be adopted in order for biometric usage to become more widespread.

Although the promise of those technologies, and others, continues to build, for now they remain in their early days, and widespread adoption is far off in the future. However, there is growing consensus that emerging technologies can be used in a variety of capacities in the aviation industry to create a promising financial upside. 

There are very few examples anywhere in the world, and none in Europe, of a single airline brand combining long haul widebody operations with short haul regional aircraft, without there also being a narrowbody business sitting between these two extremes.

The bid for Flybe by Connect Airways, a consortium consisting of Virgin Atlantic Airways, Stobart Group and US investment form Cyrus, will do this.

Recommended by Flybe's board and subject to shareholder approval, the deal values Flybe and its website at only GBP2.8 million. It will bring Europe's largest independent regional airline (Flybe) and the UK's number two long haul airline (Virgin Atlantic) under the Virgin Atlantic brand and combine this business with a specialist in providing third party wet lease regional capacity (Stobart Air).

Connect Airways is 40% owned by Cyrus, 30% by Stobart Group and 30% by Virgin Atlantic. In addition to acquiring Flybe, Connect Airways is also expected to buy Stobart Air from Stobart Group. The combination between Stobart Air and Flybe is easier to understand than that between Virgin Atlantic and Flybe.

The field of new ULCCs in Canada has officially widened now that Enerjet plans to launch in 2H2019. The company has always been the quietest among ultra low cost hopefuls in the country but now, with a new group of investors that includes Indigo Partners, Enerjet is exuding a high level of confidence about its prospects in the Canadian market. 

Backing from the ULCC specialist Indigo occurs at an interesting time. In the past Indigo has evaluated opportunities in the Canadian market, including an investment in Enerjet, but has opted not to enter Canada's ULCC fray until now. 

Enerjet’s market entry will likely have little impact in 2019 but with the company’s planned debut, all three ULCCs that have been trying to get airborne for years will finally realise their ambitions. Those airlines are joining WestJet’s new ULCC Swoop, which plans to have a fleet of 10 Boeing 737s by YE2019. However, experiences elsewhere suggest Canada’s market is unlikely to support four ultra low cost airlines, in the longer run.

But the benefits to consumers, airports and the economy will in the meantime justify the disruption.

Africa remains a market of huge potential but even larger challenges. The outlook for 2019 is mostly more of the same, but with some glimmers of hope.

New start-ups and most existing airlines will struggle to overcome the obstacles that have repeatedly prevented most African airlines from succeeding. Foreign airlines dominate the African market and have a huge competitive advantage. Africa is an extremely challenging market for any LCC or new start-up. However, a long list of airline failures has not dissuaded more start-ups from entering the market. Nigeria's Green Africa Airways is the latest to seek to break the logjam, well funded and with strong credentials.

Africa’s current commercial aircraft fleet consists of 1,700 aircraft, according to CAPA Fleet Database, and there are only 257 aircraft on order from African airlines. Ethiopian has the largest order book, and although Green Africa Airways has not yet started operating it has the second largest order book, with almost as many orders as Ethiopian. 

Ethiopian Airlines has been a standout and is growing rapidly with a pioneering cross-border model. Royal Air Maroc has also emerged as a standout, and is now preparing to become the first African member of oneworld. With a new well-funded LCC entering the Nigerian market, 2019 may at last offer new hope for change.

To paraphrase Charles Dickens, Ryanair is the best of airlines, it is the worst of airlines.

Ryanair carried more than 10 million passengers during the Christmas period alone. That total, achieved in four weeks between 11-Dec-2018 and 8-Jan-2019, would rank among Europe's top 20 airline groups for the whole year. Ryanair's figure of 139 million passengers in 2018 is almost 40 million more than Europe's next biggest airline, easyJet.

Ryanair carries this traffic at an industry leading load factor of 96% and with the highest profit margin in Europe. The key to its success is its ultra low unit cost, but it has also developed its digital business to enhance its commercial offer.

However, Ryanair is experiencing turbulence. For six years, the consumer organisation Which?  has rated Ryanair the worst short haul airline to/from the UK. In Oct-2018 Ryanair issued a profit warning following unprecedented pilot strikes and labour relations challenges. Brexit adds to its uncertainties this year and, in Central Europe, it is feeling the heat from an increasingly competitive Wizz Air.

In a SWOT analysis six years ago CAPA praised Ryanair's maniacal focus on being the lowest cost producer. This report takes a fresh look at Ryanair's strengths weaknesses, opportunities and threats.

Despite the near-mediaeval nature of aviation’s regulatory structure, it is only relatively rarely that politics intervenes to disrupt airline connections. Perhaps it is the socio-humanitarian nature of the industry’s role that often places mere political differences in the shade.

A trade war between the US and China scarcely ruffles the waters of the airline relations between the two great powers (although China has been known to use the might of its outbound tourism value occasionally to dampen traffic flows, when Korea or Japan was being castigated for one reason or another). Generally, frosty political relations tend not to overflow into air services.

Commercial roadblocks are frequently applied certainly, for example Russia’s imposition of overflight charges, or many countries’ selective use of slot shortages; yet these scarcely discriminate on political grounds.

But nowhere has politics made such inroads into efficient air service operations as in the Middle East. Israel for example has for many years been selected for traffic restrictions by many of its neighbours, and some other bilateral animosities have limited mutual services.

Just as Iran, with an educated population of 80 million and a wide diaspora, appeared set to recapture its former place in global aviation, the US withdrew from the JCPOA, confining Iran and its airlines to a minimal role. And the impact of the Saudi Arabia/UAE/Bahraini blockade of Qatar has reverberated in the air as well as on the ground.

The partial government shutdown in the US is creating havoc across many industries, from the financial sector right through to small businesses operating near the country’s National Parks.

The aviation industry is also facing pressure from the shutdown on numerous fronts – ranging from the high profile “blue flu” sick-ins from TSA workers to FAA safety inspectors suspending their oversight functions.

Anecdotes from airlines are already emerging, including uncertainty in achieving ETOPS certification and delays in putting aircraft into service.

The overall effects of the shutdown on the airline business are tough to predict, but the economic effects of a prolonged partial closure of the government will no doubt trickle down to many facets of the US’ aviation and aerospace industries. 

There is justifiably a good deal of analysis and media coverage of aviation's impact on climate change.

Fewer column inches have been given to the impact of climate change on aviation.

The main expected impacts of climate change on aviation result from changes in temperature, precipitation (rain and snow), storm patterns, sea level and wind patterns. In addition, climate change is expected to lead to increased drought, impacts on the supply of water and energy, and changes in wildlife patterns and biodiversity. Consequences for aviation include reduced aircraft performance, changing demand patterns, potential damage to infrastructure, loss of capacity and schedule disruption.

According to a late 2018 survey by EUROCONTROL, a large majority of European aviation industry respondents (86%) consider that actions to reduce the impacts of climate change on aviation may be necessary now or in the future. However, almost half (48%) have not begun planning for adapting to the impacts of climate change.

There are strong operational, business and regulatory reasons for participants in the aviation industry to take steps to adapt to the impacts of climate change. As 2019 begins, a climate change risk assessment should be near the top of the list of New Year's resolutions for aviation industry participants.