Analysis Reports

Eurowings Discover, Lufthansa Group's newest airline, operated its inaugural flight on 24-Jul-2021. An Airbus A330-200 flew from Frankfurt via a short stopover in Mombasa on Kenya's Indian Ocean coast to Zanzibar in Tanzania.

The airline's name and livery are consistent with being a sub-brand of Lufthansa Group's Eurowings subsidiary.

However, Eurowings Discover has its own AOC, its own code (4Y) and its own CEO (Wolfgang Raebiger, who also served as captain on the inaugural flight). Moreover, it is a direct subsidiary of Lufthansa, rather than of Eurowings, and will operate on both long haul and short/medium haul.

It is positioned as a leisure airline, but with full service features. Frankfurt-based, it will add services from Munich from summer 2022. By the end of 2021 it plans to be operating seven medium haul and 10 long haul routes (competing with Condor on seven of these long haul routes). Its fleet plan targets 11 A330s and 10 A320s by mid 2022.

Eurowings Discover addresses the problem of Eurowings' withdrawn long haul network. It may also help to focus Eurowings on efficiency on short haul.

As India’s devastating second wave of COVID-19 subsides, domestic airline capacity is once again rebounding strongly. Airlines have been adding back service in response to easing travel and capacity restrictions, and load factors are also increasing.

The second wave spike began around Mar-2021, and quickly propelled India into a state of crisis. Daily cases were higher than in the first wave that struck in mid-2020, and the official death toll rose above 420,000 – although it is believed that the actual total may be higher.

The second wave stalled what had previously been an impressive traffic recovery in Indian domestic markets. Now the airlines are looking to return quickly to those levels, and eventually move beyond them.

In the past five weeks Europe has risen from worst-performing region ranked by seats as a percentage of 2019 levels to third out of six. The key driver has been an easing of international travel restrictions.

Europe's total seat numbers are 36.5% below 2019 levels in the week commencing 26-Jul-2021.

Although this is not very different from last week's -37.0%, Europe has moved from fourth to third in the regional ranking this week. The Middle East, where seat capacity is down by 46.8% versus 2019, remains at the bottom. This week (week commencing 26-Jul-2021), Africa is down by 39.8%, Asia Pacific by 38.7%, Latin America by 28.7%, and North America by 23.5%.

Yet Europe's progress on both capacity and easing travel restrictions has been stronger in the EU than in the UK.

In addition to providing more certainty and consistency over its green/amber/red lists, the UK needs to address the issue of testing – in particular the cost of testing and its necessity for fully vaccinated travellers.

Sometimes, the completion of even the first stage of a brand new international airport can mean problems for existing, competing airports, where infrastructure might not be considered adequate, or where they are in the ‘wrong part’ of a city.

There are few new airport projects anywhere that compete in size and scope with the new Istanbul Airport, which was built not only to improve on the capacity limitations of its predecessor, but also openly to challenge the Gulf airports for wider regional pre-eminence, also supporting a broader future for Turkish Airlines.

That might have meant curtains for Istanbul’s ‘other’ airport, Sabiha Gökçen, but it has established such a powerful position during the past decade that it can influence and decide its own fate, rather than being at the mercy of Istanbul Airport.

Although international travel recovery remains a distant prospect, some Asia-Pacific countries are looking ahead and developing scenarios for reopening borders. Such roadmaps will help give the airline industry clarity on how the international market might re-emerge when the COVID-19 pandemic finally subsides.

Australia, Singapore and Thailand have all revealed their approach to removing restrictions once vaccination rates reach certain levels – and in the case of Thailand, first steps have already been taken. All three countries have been hit by new COVID-19 outbreaks that have set back their recovery efforts, but they also recognise the importance of laying the groundwork to move to a new normal.

Key details are yet to be set for the Australia and Singapore plans, such as timelines and vaccination rates required.

However, these two and Thailand are some of the key Asia-Pacific aviation markets, and their planning moves may prompt others in the region to follow their example.

The Cape Verde islands, in the Atlantic Ocean off the West Coast of Africa, need a competent air service to keep them connected, as there is no obvious high-speed transport alternative.

The main airline that provides that service has also been tasked with international flights for far-flung expatriates, building international business and tourism, and offering a mid Atlantic hub where it was possible, almost as a sideshow.

Latterly the airline that specialises in exactly that in the North Atlantic, Icelandair, was recruited to oversee the future development of the Cape Verdean airline, but that arrangement seems to have floundered, with the government seeking to regain its shareholding, at least temporarily.

At least the Transport and Tourism Minister has been quick to step in. On the back of a recent consultant's report he has committed to improving the domestic air hub at the island of Sal, utilising PSO route support where necessary, and to use that as a springboard to beefing up an international hub.

There is some potential for that to happen at Sal, which is well situated for several international travel flows, but it has been the intention of numerous previous administrations (including the construction of a new airport for that purpose) and endless studies over the years. The time for action is now.

Vancouver International Airport announces participation in ACI Long Term Carbon Goal Study

Kuehne+Nagel reports growing demand for 'ecologically-friendly solutions'

UK Govt launches net zero aviation consultation

Universal Hydrogen and Deutsche Aircraft partner to study hydrogen technology for aviation

Textron Aviation announces order for 100 Cessna Grand Caravan EX aircraft from Surf Air Mobility

Europe's airlines are losing the battle against new aviation taxes and increased costs associated with mitigating their climate change impact. On 14-Jul-2021 the European Commission (EC) announced proposals to reduce net greenhouse gas emissions by at least 55% by 2030 relative to 1990.

Perhaps the most significant proposal for aviation is the ending of jet fuel's exemption from taxation for intra-EU flights. Aviation's free allowances within the EU's emissions trading scheme (ETS) will also be phased out. In addition, a growing proportion of sustainable aviation fuel (SAF) taken on at EU airports will be mandated.

Earlier this year the UK adopted a recommendation by the independent Climate Change Committee (CCC) to include international aviation in its CO2 emissions targets. The CCC's recommendations also include aviation tax reform to constrain growth, no net increase in airport capacity, and encouraging continued online communications in place of business travel.

The UK government is in the process of developing its Aviation Decarbonisation Strategy and the CCC is likely to be influential.

Within the past few weeks there have been takeover attempts launched for Sydney Airport, a publicly stock-market listed company, on the basis of greater economic certainty for investors, and for part of Budapest Airport, the latter emanating from the Hungarian government and for outright political reasons.

After a lengthy period with very little M&A activity in the sector these two potential transactions took it by surprise, and they suggest that there may be more to come.

Listed companies are the easiest target because there may be private investors to be swayed along with institutional ones that are ‘in airports’ because they once felt they should be, but which are open to an offer they can’t refuse in these uncertain times. But there are comparatively few of those.

This report examines examples of other airports and groups that might be takeover targets or open to minority investment from new sources, and at how the coronavirus pandemic might have changed the outlook for the privatisation of airports – including in some countries where there is little of it so far.

Travelport, the travel retail specialist, and Amazon Web Services (AWS) have now entered into a strategic, long term collaboration to use advanced cloud technology to accelerate the digital transformation of retailing in the travel industry.

The collaboration, which unites globally renowned expertise in travel technology, cloud technology, and hyper-personalised retailing, will focus on optimising Travelport’s recently launched next-generation platform: Travelport+.

It will also drive innovation in travel merchandising with the launch of a new accelerator program that will incorporate talent from the tech start-up community.

“The travel industry has struggled to keep up with the pace of change in digital retail”, acknowledged Greg Webb, chief executive officer at Travelport. “This landmark collaboration is specifically designed to address just that.

According to Mr Webb, AWS’s retail heritage “makes them uniquely qualified” to optimise digital retail platforms, simplify complex environments, and “enable game-changing innovation” in the travel retailing space. “With AWS as our preferred cloud partner, we are going to create a simpler, smarter, and better future for travel retailing”, Mr Webb says.

As part of the long term collaboration, Travelport will migrate its global platform that connects travel agencies and travel suppliers to AWS. It will also use AWS technologies, including High Performance Compute (HPC), storage, security, analytics, machine-learning and databases to deliver a faster, easier, and more personalised travel booking experience.

In addition, Travelport will use AWS Managed Services to provide trusted operational expertise to help optimise platform efficiency and security.