Analysis Reports

Because of projected traffic growth, climate change is possibly aviation's biggest environmental challenge, in spite of the industry's relatively small current contribution to carbon emissions. The Dec-2018 Climate Change Conference in Katowice heard that the world is in line for global warming of 3C by the end of the century – much worse than the 1.5C goal set by the 2015 Paris Agreement.

Global aviation set targets 10 years ago to mitigate its climate change impact: 1.5% pa fuel efficiency improvements to 2020, carbon neutral growth from 2020 and a halving of emissions by 2050 versus 2005. Its strategy to achieve these goals consists of four pillars: operations, infrastructure, technology and a global market-based economic measure, CORSIA, which is a stop-gap pending technological solutions such as biofuels and new propulsion technology. Jan-2019 marks the start of the reporting phase of CORSIA.

Few other industries have such a comprehensive approach. Nevertheless, aviation is not included in the Paris Agreement and is vulnerable to accusations that it is not doing enough. In Katowice in Dec-2018 the UN Secretary-General António Guterres articulated goals of a 45% reduction in carbon emissions by 2030 and net zero by 2050 (versus 2010). Aviation led the world in setting climate change targets but now looks like a laggard. This needs to change in 2019.

Saudia's low cost subsidiary flyadeal is planning another major push in Saudi Arabia’s domestic market over the next month as it puts into service three additional A320ceos. The LCC’s seat capacity will increase by more than 30%, pushing its share of the Middle East’s largest domestic market up from 11% to 14%.

Flyadeal expects to carry 3.5 to 4 million passengers in 2019 – an impressive achievement, given that the airline is less than two years old. Flyadeal has not yet captured significant global attention, but that is about to change when it announces a major narrowbody order.

Flyadeal is hardly your average start-up: it issued Airbus and Boeing an RFP for up to 50 aircraft (30 firm and 20 options) only a couple of months after it began operations and could issue an RFP for widebody aircraft next year.

AirAsia has regained market share in its original home market of Malaysia after accelerating short haul expansion. Malaysia AirAsia’s in-service fleet has expanded by 10 aircraft this year, driving 17% seat capacity expansion as utilisation and average seat density have also increased.

Malaysia AirAsia’s market share in Malaysia has exceeded 40% for the first time this year as it has benefitted from capacity reductions at Malindo and Malaysia Airlines. As a brand, AirAsia will account for nearly 55% of all passenger traffic in Malaysia in 2018 when an 8% share for Malaysian long haul LCC AirAsia X and approximately a 5% share for the group’s overseas affiliates are included. 

Malaysia AirAsia is planning more double digit capacity expansion in 2019 as it adds another five or six aircraft, including its first A321neo. The short haul LCC is planning to deploy the A321neo on high frequency routes, resulting in a 28% seat capacity increase compared to the A320ceo, or a 24% increase compared to its new A320neo fleet, without having to mount additional flights.

Singapore Airlines (SIA) is slated to receive within the next few days its seventh and final A350-900ULR, completing a dramatic expansion phase which has enabled the airline to expand its presence in the US market significantly and rapidly. All seven aircraft, which are in a low density configuration with 94 premium economy and 67 business class seats, have been delivered in a period of less than three months. 

SIA has used the new A350-900ULR fleet to launch 20 nonstop weekly flights to the US, generating 1,880 weekly one-way premium economy seats and 1,340 weekly one-way business class seats. The premium economy capacity is remarkable, given that premium economy is usually a niche product with 20 to 40 seats per aircraft. 

Singapore Airlines has offered extremely low premium economy fares between Southeast Asia and the US since opening sales of the 20 flights several months ago.

The fares are significantly less than SIA’s lowest premium economy fares in shorter long haul, and even medium haul, markets. In many cases SIA is offering cheaper premium economy fares than regular economy fares on the same routes for the same dates of travel – an unsustainable scenario that could lead to adjustments in SIA’s A350-900ULR operation as early as next year.

Airline groups from Asia, Europe and Latin America have successfully pursued expansion over the years by adopting cross-border strategies. Africa has emerged as the latest testing ground for cross-border joint ventures, with Ethiopian Airlines pursuing several projects.

Ethiopian has had a pan-Africa strategy for several years, starting with the launch of its West African affiliate, ASKY, in 2010. Ethiopian launched a second JV in 2014, in Malawi. However, Malawi Airlines is still tiny, operating only two aircraft, and implementation of the group’s cross-border strategy has, until very recently, been painfully slow. 

The strategy has accelerated significantly this year with the establishment of several new projects. A new JV in Chad launched at the beginning of Oct-2018 and a subsidiary in Mozambique launched on 1-Dec-2018. A JV in Zambia is next in line and Ethiopian is also on the hunt for more new airline projects throughout the vast continent.

CAPA is pleased to announce the initial speaker line-up for the inaugural CAPA Qatar Aviation Aeropolitical and Regulatory Summit in Doha on 5-6 February 2019. 

The two day Summit will bring together aviation regulators, airlines and global suppliers with an interest in aviation market access for high-level discussions as well as a Gala Dinner hosted by Qatar Airways.

San Diego International airport is enjoying record passenger numbers and several new route additions during 2018 are fuelling that growth.

Those rising passenger numbers are forecast to continue for the foreseeable future and the airport is working towards expanding Terminal 1 by 11 gates, as well as adding a new roadway to ease some of the traffic congestion that passengers face in reaching San Diego International.

But some community groups believe more needs to done to ease congestion on travel to the airport, with one local government official proposing the construction of a cable operated tramway. It could take some time to reach consensus on the best remedy for improving transit to the airport but overall, finding ways to accommodate growth is a good problem to face.

Latin American airlines continue to face a level of uncertainty in 2019 as new governments in the region’s two largest markets settle in and navigate trade disputes, geopolitical issues and a potential global economic slowdown.

Currency devaluation in Brazil and Argentina and volatile oil prices are combining to force Latin operators to take a cautious approach to 2019, but domestic demand in each of those markets appears to be stable as customers opt for domestic instead of international travel.

The growth of Latin American ULCCs and low cost airlines continues unabated as new start-ups in Chile and Argentina work to grow their respective market shares domestically; however, yields in those markets are likely to remain under pressure well into 2019.

Although public transport between Paris’ Charles de Gaulle Airport and the city is adequate, with journey times of 30-40 minutes on the suburban RER rail line that operates directly from the airport, it does not compare well with, say, the forthcoming (2019) Elizabeth line or the Heathrow Express in London, which offers a journey time of only 15 minutes.

With the 2024 Olympic Games in Paris on the horizon, a decision was taken several years ago in favour of the ‘CDG Express’, to have a journey time of around 20 minutes over a distance of 32 km. Now a consortium has been selected to operate it.

There are numerous political overtones to this deal, from the selection of an entirely French partnership to the fact that it has been given the green light, not by the Transport Ministry but by the Environmental one.

The opening of Muscat International Airport’s new international terminal earlier this year, which effectively made it a new airport, throws it in competition with some of its peer airports, not only for hub traffic but as a catalyst to increasing tourism.  

Although taking on the big hubs in the region is a huge challenge, the support of the national airline – which has now been bundled with the airport authority as the same organisation – will be crucial, both in doing that and in attracting more visitors to Oman, which has a more diverse tourist offering than the UAE and Qatar.  

There is also the prospect of some form of privatisation on the horizon, possibly including an IPO, with foreign investors and perhaps operators also gaining a stake.