Analysis Reports

Canada appears to be slowly moving toward embracing testing in lieu of mandatory quarantines, now that the province of Alberta is working with the national government to conduct a pilot programme for testing at Calgary International airport. 

Although it is a small step, it is welcome news for the country’s airlines, which have been pushing the government to consider alternatives for the quarantines that have resulted in Canada’s connectivity becoming essentially non-existent. 

The country’s aviation sector has been working feverishly to persuade the government to change its stance regarding the restrictions, arguing that the industry in Canada is suffering more intensely than in other regions. 

Asia Pacific is the second most important intercontinental region for European airlines, accounting for almost 15% of their total ASKs in 2019. For those operating on Asia Pacific routes, the region was a fifth of their ASKs. This gives a reasonable indication of the revenue importance to European airlines of Asia Pacific, second only to the North Atlantic among long haul markets.

COVID-19 has depressed all long haul demand even more than short haul. This is particularly bad news for European airlines, as they have a greater percentage of ASKs on long haul than North American and Asia Pacific airlines. Within long haul, Europe-Asia Pacific has been even harder hit than the North Atlantic.

Not surprisingly, the big legacy airlines had the most pre-crisis capacity to Asia Pacific among European operators. Among non-Russian operators, Finnair had the highest exposure as a percentage of its ASKs, while Air France-KLM and Lufthansa Group had a bigger exposure than IAG.

It is time the industry and governments faced up to the fact that restoring the status quo ante is no longer an option.

This was the key takeaway from the introductory presentation at CAPA Live on 11-Nov-2020.

As we look ahead through the next decade, it is time for a reality check - a reality check nine months on from when the horrible COVID-19 disaster beset the world, in turn looking at a new platform for building for the next decade.

That is to say, the new starting point as 2021 beckons.

What will be the platform for the future growth? And what will shape that growth as industry revenues slump by more than half 2019 levels in 2021?

Lufthansa Cargo operates first CO2 neutral freight service

All Nippon Airways and five other companies start studying carbon recycling business models

Amazon: Uber, JetBlue and Boom Supersonic among new signatories to The Climate Pledge

Wizz Air CO2 emissions up 21% in Nov-2020 on a unit basis and down 82% in total

London Stansted Airport and Manchester Airport seek zero emission aircraft

Korean Air’s plan to take over rival Asiana Airlines will cause one of the biggest-ever shakeups in the South Korean airline industry, and the competitive implications will also be felt elsewhere in the Asia-Pacific region and globally.

The purchase is seen by the government and Asiana’s creditors as the best way to ensure the continuation of Asiana’s operations, albeit under another airline’s identity. Asiana was struggling even before COVID-19 emerged, and the onset of the pandemic torpedoed an earlier buyout attempt by another corporation.

Merging the two airlines will reduce competition, but there are very few alternative paths available that would retain Asiana as a strong competitor. There is limited appetite for outside investment into airlines thanks to COVID-19, particularly for carriers that were financially shaky before the pandemic.

Absent this deal the most likely outcome for Asiana was dramatic downsizing or perhaps eventual collapse. The government has obviously decided that reducing competition was preferable to mass job losses.

The government’s support for a merger of this magnitude would have been difficult to imagine before COVID-19. But this is yet more evidence that the pandemic has shaken up industry norms.

Exciting news on COVID-19 front-running vaccines is welcome for the world and the global aviation industry. But there will be a long, complex road ahead in the vaccine rollout phase. For anyone dreaming of a rapid snap-back to ‘2019 normal mode’ for the aviation and travel industries, it’s wake-up time. Recovery will be slow, lumpy and challenging.

CAPA offers a regular and predictable programme in these unpredictable times with CAPA Live, our virtual monthly programme spanning the whole of 2021, delivering great content, news, data and opinions from the leaders of the industry.

Airport privatisation in the U.S. is at a crossroads, and depends on the as-yet unresolved presidential election for its future direction.

But that has not prevented the slightly unusual pairing of one of Europe’s leading airport operators with a U.S. alternative investment fund which specialises in turning around firms that are on their knees; both of them seeking potential deals in North America.

Unusual, but a sign of the times, and possibly the first of many.

How many such deals will actually arise in the U.S. is unclear, but a new market could emerge in Canada, where many regional airports are in clear and present danger.

IATA launches aviation carbon offsets trading platform, with JetBlue completing first trade

IATA calls on governments to support SAF development

Embraer and EDP enter partnership for electric aircraft research

Lufthansa Cargo commits to five sustainability goals under United Nations framework

United Airlines reports consumers more mindful than ever of environmental impacts

Right across the globe, long haul traffic and business travel are suffering the most in the COVID-19 crisis, while short haul and leisure traffic (more specifically, visiting friends and relations) are leading the recovery. This works to the strengths of low cost operators, and Europe's big LCCs (with the exception of Norwegian) are mainly performing better than their full service competitors.

Russia has Europe's biggest domestic market, where capacity grew back above 2019 levels in the peak summer weeks of 2020. This has helped Russia to become Europe's biggest aviation market by total seats, with 50% of 2019 capacity operating in the week of 23-Nov-2020. This is more than any other leading European country, and compares with an average of 26% for all Europe.

The strength of Russia's domestic market, and increased price sensitivity among consumers, has given a boost to Pobeda, Russia's only LCC. Since Jul-2020 the Aeroflot Group subsidiary has achieved positive year-on-year growth in passenger numbers for four successive months. Other Russian airlines are now considering the LCC model too.

Air Arabia CEO Adel Ali is optimistic about travel in the Middle East region, with the coronavirus largely under control. Travel may be down on 2019, but compared to earlier in the summer the LCC is experiencing strong demand.

Testing within the UAE is widespread and compulsory before travelling on Air Arabia. With protocols in place the number of flights the airline can operate is reduced, but that means load factors are high. There is plenty of pent-up demand, and as more flights are able to get online, the capacity is absorbed quickly.

The joint venture with Etihad is working well, as Air Arabia provides a service to those customers who want to pay less but still fly on short and medium haul routes. The LCC currently sees no need to delay long haul narrowbody aircraft orders which are due in 2024, as by then the LCC expects that demand will have recovered, and they will need those aircraft for their expansion.

Talking at the CAPA Live on 11-Nov-2020, Air Arabia’s CEO Adel Ali spoke with CAPA’s chairman emeritus Peter Harbison. Some of the key highlights can be found below.