Analysis Reports

Norse Atlantic has launched a daily London Gatwick-New York JFK service. The long haul low cost operator is competing with British Airways and JetBlue on the route, and with British Airways, American Airlines, Virgin Atlantic, Delta Air Lines and United Airlines on other London-New York airport pairs.

The start-up's Gatwick launch was followed in the same week by two US routes from Berlin, after four previous US route launches from its Oslo base.

Norse Atlantic is the North Atlantic's only all-economy class widebody low cost operator, a niche Norwegian vacated in 2020 when it retrenched around its short haul network after six years of unprofitable long haul operations. Coincidentally, seat capacity between London Gatwick and North America is now the same as it was before Norwegian's 2014 entry prompted rapid growth.

Following the entry of JetBlue in Sep-2021, Norse Atlantic brings the total number of Gatwick-North America airlines to six, which is two more than in Aug-2014. This signals that this market may be poised for a renewed period of growth.

Vienna has always been at the nucleus of power in central Europe, long before the days of the Austro-Hungarian Empire. Today, while not a financial centre, it is the seat of organisations such as the United Nations, OPEC and the Organisation for Security and Co-operation in Europe (OSCE).

Vienna's airport is the most prestigious in central/southeast Europe and its high rate of full service passenger traffic was always going to be attractive to external investors – who include Australia’s Industry Funds Management (IFM), whose subsidiary AGE has an almost 40% stake in Flughafen Wien, which has already been increased from the original investment, and that totals three airports.

Now that subsidiary, buoyed no doubt by IFM’s success in buying the publicly floated Sydney Airport, seeks to increase its stake to almost 50%, but it will not be at the expense of the city and the province. Instead, it is likely to come from institutional shareholders, Vienna Airport ironically having been one of the first airports to have had its shares floated on a stock exchange. Flughafen Wien has responded by urging those shareholders not to accept the offer.

The purported transaction may also raise questions about IFM’s ambitions with regard to its other major investment in Europe, into Manchester Airports Group, where equity ownership is on a similar level to that of Flughafen Wien, but where a different set of circumstances apply.

This is part two of a two-part report.

Vienna has always been at the nucleus of power in central Europe, long before the days of the Austro-Hungarian Empire. Today, while not a financial centre, it is the seat of organisations such as the United Nations, OPEC and the Organisation for Security and Co-operation in Europe (OSCE).

Vienna's airport is the most prestigious in central/southeast Europe and its high rate of full service passenger traffic was always going to be attractive to external investors – who include Australia’s Industry Funds Management (IFM), whose subsidiary AGE has an almost 40% stake in Flughafen Wien, which has already been increased from the original investment, and that totals three airports.

Now that subsidiary, buoyed no doubt by IFM’s success in buying the publicly floated Sydney Airport, seeks to increase its stake to almost 50%, but it will not be at the expense of the city and the province. Instead, it is likely to come from institutional shareholders, Vienna Airport ironically having been one of the first airports to have had its shares floated on a stock exchange. Flughafen Wien has responded by urging those shareholders not to accept the offer.

The purported transaction may also raise questions about IFM’s ambitions with regard to its other major investment in Europe, into Manchester Airports Group, where equity ownership is on a similar level to that of Flughafen Wien, but where a different set of circumstances apply.

This is part one of a two-part report.

This regular CAPA report provides a summary of recent aviation sustainability and environment news. This latest issue features:

Air Canada issues first TCFD report

Neste and Hellenic Petroleum commence SAF supply for Aegean Airlines at Athens

London Stansted Airport commences airside electric bus trial

Cebu Pacific reaffirms sustainability commitments

Silk Way West Airlines unveils innovative features on its new website

Europe's capacity recovery from COVID-19, expressed as a percentage of 2019 levels, has been tracking sideways for almost three months. Moreover, airline schedules filed with OAG currently indicate that the rest of 2022 is projected to remain at a similar level of around 87%.

However, the 4Q2022 schedule has grown modestly since last week (from 86% to 87%), which is the first time an increase has happened for a future quarter since before the COVID-19 pandemic.

Europe's total seat capacity is at 87.3% in the week commencing 15-Aug-2022, or a shortfall of 12.7% against the equivalent week in 2019. Europe remains fourth in the regional ranking, above Asia Pacific, where capacity is down by 21.3% versus 2019, and the Middle East, where capacity is down by 13.3%. North America capacity is down by 10.0%, Africa by 9.1%, and Latin America is down by 4.8%.

The main issue now keeping Europe from making the next upward step in the capacity recovery is the staff recruitment bottleneck and other supply chain constraints.

Concerns over COVID-19's direct impact on demand have faded: European aviation is now largely post-pandemic.

The recovery in Brazil’s aviation market is well under way, and the country’s airlines believe that the momentum will continue for the foreseeable future.

Both Azul and GOL posted record revenues during 2Q2022, which is typically the slower time of year in the Brazilian market. 

Now, as a busier season is under way, the pricing environment should remain robust. And it appears that Brazilian operators are behaving in a rational manner in their capacity deployment. 

But familiar challenges remain – fuel costs volatility and pressure from currency fluctuations.

Those headwinds pushed Azul and GOL into losses for 2Q2022, and could possibly continue to pressure profitability. 

Construction of Vietnam’s USD16 billion, 100 million passenger per annum new airport for Ho Chi Minh City, the most populated city-region in the country, is at last under way, seven years after it was first mooted.

It will be one of the largest airport projects in the Asia Pacific region and the most expensive piece of infrastructure in Vietnam’s history.

Even now, it is subject to further possible delays as the government grapples to get 40 transport infrastructure projects back on track, some of them in preparation for an anticipated surge in foreign visitors.

But the most pressing issue remains the need to get the private sector on board; if not now, at least when the airport is operational, and there might be an opportunity for PPP financing and operation of future terminals.

There’s never a dull moment in the Indian civil aviation sector and especially so with its airports.

India’s population is set to overtake that of China in 2023 to make India the most populated country on Earth and its airport system, weighed down by the intense bureaucracy without which the country probably couldn’t function, consistently has to adapt to new challenges.

This report considers how the government is going about increasing capacity and attracting the private sector to run more airports, while majoring on the recently concluded deal by which Flughafen Zürich will operate the Delhi Noida International Airport under construction.

Meanwhile, a new airport in the tourist haven of Goa is set to open shortly and a site has been selected for a second airport at Chennai.

Although international capacity recovery has started to accelerate for many Asia-Pacific countries, the region as a whole continues to lag other parts of the world by a significant margin.

The international capacity rebound is happening much more slowly in Asia-Pacific than in any other global region. This trend has been evident since the early days of the industry recovery and while the gap is starting to narrow, it looks as if it will remain for the medium term at least.

There are multiple reasons for this dynamic. Asia-Pacific governments were more reluctant to ease entry restrictions than those in other regions, while some Asia-Pacific airlines were forced to undertake major restructuring exercises under bankruptcy protection, which resulted in fleet cuts in many cases.

The Asia-Pacific region is vast, and some parts are lagging more than others. For example, the international capacity recovery has been stronger than the region’s average in South Asia and the Southwest Pacific. But it has been weakest in Northeast Asia, where borders in China, Hong Kong, Japan and Taiwan have been slower to reopen.

Europe's capacity recovery as a percentage of 2019 levels remains on the plateau it has occupied since the last week of May-2022. This appears to be helping an improving load factor trend.

Europe's total seat capacity is at 87.1% in the week commencing 8-Aug-2022, which is a shortfall of -12.9% against the equivalent week 2019.

Europe remains fourth in the regional ranking, above Asia Pacific, where capacity is down -21.6% versus 2019, and the Middle East, where capacity is down -14.0%.

IATA data show that European airline load factor was 86.0% in Jun-2022, only 1.5ppts short of the Jun-2019 level. The gap to 2019 load factors has narrowed every month since Apr-2022 and the trend has been broadly improving for more than a year.

The capacity recovery may have lost momentum, but load factor gains show that supply is now more closely balanced with demand.