Analysis Reports

India’s two largest airlines have unveiled high-profile CEO hires, underlining the fact that the country’s airline sector is entering a new phase with a dramatically altered competitive landscape.

Air India and IndiGo have both selected experienced airline leaders from airlines outside the country, while other Indian airlines have also made CEO changes recently. This will give the Indian airline industry a very different look in the post-pandemic period.

The leadership reshuffle is fitting, as in many cases the airlines themselves have been shaken up by restructurings, ownership changes and relaunches. It looks as if the Indian airline sector will be one of the most interesting – and dynamic – to watch over the next few years.

Jet fuel prices are up almost USD100 a barrel compared with May-2021. This is projected to add at least an additional USD50 billion to airline industry costs this year. It could even approach USD100 billion.

This compares with the most profitable year ever in airline history, when the industry scraped USD38 billion in profit (nearly half of which was made by the major US airlines).

So what does this mean for the airline outlook? And where will the traffic and profitability growth be over the next two or three years?

These are key questions for the industry, coming off the biggest loss in its history and already deeply indebted.

Thailand, where tourism historically accounts for 12% of GDP, took the full force of the COVID-19 pandemic.

But measures belatedly taken by the government have enabled Airports of Thailand (AoT), the biggest operator and one which is in the process of expanding from six to nine airports, to publish financial statements that at least document a steadying of the boat financially.

Originally a state enterprise, AoT was corporatised in 2002. A subsequent partial IPO (30%, institutional and retail investors) was held in 2004, the state retaining 70% through the Ministry of Finance.

AoT’s results are released against the back drop of Thailand’s slow emergence from the COVID-19 pandemic and the associated lockdowns and travel restrictions.

The problem is that the company has started to increase revenues and narrow its losses just as the main tourist season ends, placing an onus on the Tourist Authority to find new markets, quickly.

Corporate travel procurement increasingly will be decided not just on traditional metrics, including price, airline network, schedule, flexibility, and loyalty rewards, but also on the stated sustainability strategies of airlines and the demonstrated outcomes of decarbonisation commitments.

To ensure that a company’s sustainability objectives are also supported by the actions of travel suppliers, including airlines, it is critical that corporate procurement divisions have access to meaningful and detailed performance data from airlines to demonstrate not only the existence of sustainability strategies, but also demonstrated actions and evidence of outcomes.

A new Business Travel edition of the Airline Sustainability Benchmarking Report 2021, jointly prepared by CAPA - Centre for Aviation and Envest Global highlights some of the core elements of sustainable aviation, methods of quantifying individual airline sustainability credentials, and emissions.

The private airport sector organisations in Latin America that are most often in the news are those like Corporación América and the European operators that have taken a stake in various Brazilian airports.

But there are a number of smaller ones based there which play an important role in expanding the sector throughout the region.

One of them is Odinsa; Odinsa is progressing a ‘new airport’ project in Cartagena, Colombia, which is allied to the existing airport there and is scheduled to open within three years.

It may also help sustain a pre-pandemic tourist boom in Colombia, a country once considered taboo by western tourists.

While Japan has moved more slowly than many other Asia-Pacific countries to reopen its borders, it is now taking important steps to ease border restrictions. The expected demand boost means Japan’s major airlines can see a path back to profitability for the current fiscal year.

Foreign travellers have generally been barred from entering Japan since the early days of the coronavirus pandemic. This prohibition was removed in early Apr-2022, but effectively only business travellers and students could enter, whereas foreign leisure travellers were still excluded.

Now the Japanese government has signalled it will soon start allowing tourists to enter. This could start with a trial programme for organised tour groups this month, and the Prime Minister has said the government intends to allow a broader reopening for vaccinated tourists from Jun-2022. Details of these steps are yet to be revealed, however.

In this second part of this feature we consider the outlook for Japan Airlines (JAL) as it seeks to bounce back to net profit in the fiscal year as international markets open and its network is rebuilt.

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

IATA: Global solution required to address 'huge gap' between sustainability goals and reality

Xiamen Airlines realises 45% fuel saving from participation in SkyTeam sustainable flight challenge

Newcastle International Airport contributes to reforestation project as part of zero emissions drive

Bremen Airport Hans Koschnick commences sustainable aviation fuel supply

UK DfT announces plans for transatlantic SAF demonstrator flight, support for UK SAF industry

Europe's capacity recovery from the COVID-19 pandemic continues this week, reaching a new high at almost 85% of the seats flown in the equivalent week of 2019. At the same time, the most recent monthly data on price inflation for passenger air travel in the EU-27 and the UK show that price growth has slowed in 2022.

Europe's seat shortfall of -15.5% versus 2019 levels in week commencing 16-May-2022 is only slightly better than last week, but takes it to its best performance on this measure since before the crisis.

However, Europe remains fifth in the regional ranking, above only Asia Pacific, where capacity is down by -29.3%. Middle East capacity is down by -11.7%, while North America capacity is down by -10.7%, Latin America by -5.1%, and Africa – at the top of the ranking for the first time – capacity is down by -4.6%.

The capacity recovery is projected by current schedules to rise to 91% of 2019 levels in 3Q2022. However, uncertainties surrounding future virus developments and geopolitical events remain. The continued capacity recovery may require further price stimulation.

The Indian airport concession programme, which was directed immediately at the busiest in the country, began in the mid-2000s and was beset by many difficulties. Subsequent governments were reluctant to upset the apple cart again and the procedure was suspended for a decade until a number of smaller airports were privatised over the past few years.

Now the government’s aviation ministry has extended the concession period for the first of the big city airports, at Hyderabad, for a further 30 years. Usually such extensions are for 10 or 20 years, so this action indicates that the government is more than content with the existing consortium.

Moreover, this is the second time there has been such an extension in the past two years.

The action sends out a message to aggressive ‘new kids on the block’, queuing up for an anticipated eruption in Indian airport deals, that seniority can count, and that their proposals need to come up to the mark.

While Japan has moved more slowly than many other Asia-Pacific countries to reopen its borders, it is now taking important steps to ease border restrictions. The expected demand boost means Japan’s major airlines can see a path back to profitability for the current fiscal year.

Foreign travellers have generally been barred from entering Japan since the early days of the coronavirus pandemic. This prohibition was removed in early Apr-2022, but effectively only business travellers and students could enter, whereas foreign leisure travellers were still excluded.

Now the Japanese government has signalled that it will allow vaccinated tourists to enter without quarantine from Jun-2022. This will obviously be significant for Japan Airlines (JAL) and All Nippon Airways (ANA), as well as the country’s tourist industry. Domestic capacity has already rebounded well, and now the airlines are beginning to ramp up their international services again as they prepare for overseas demand to return.

In this first part of this feature we consider market trends and ANA's recovery.