Analysis Reports

According to the CAPA Feet Database, Europe's passenger jet fleet in service increased by 1.8% month-on-month in Feb-2021, to 3,400.

This is almost three times the Apr-2020 trough level, but 16% below the Aug-2020 peak recovery level. Moreover, it has changed little since Nov-2020 and represents only 56% of the total passenger jet fleet, compared with the world average of 65%.

Seat capacity in Europe also continues to lag the rest of the world, falling by 74.5% relative to 2019 in the week of 1-Mar-2021, according to OAG schedules and CAPA seat configurations. Middle East is down by 55.8%, Africa is down by 53.6%, North America by 45.1%, Latin America by 43.4%, and Asia Pacific by 33.9%.

Nevertheless, a combination of seat capacity and fleet in service data supports the conclusion that 1Q2021 will be the low point in this phase of the pandemic. European aviation can expect the recovery to start in 2Q2021.

Paris is the latest city where the cancellation, or postponement, or review, of a major airport construction project has been announced.

In this case it is not of the operator’s own volition – Groupe ADP has been told to do it by the French government, for environmental reasons.

As the COVID-19 pandemic enters its second year, and long-standing traffic projections go out the window, operators have to accept that governments are increasingly likely to use the pandemic as a catalyst, if not an excuse, towards ensuring that what future infrastructure there is will be as green as the grass in the Bois de Boulogne.

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It may seem like a lot longer, but it has been about a year since the initial surge in COVID-19 cases caused Asia-Pacific airline capacity to crash, in Mar-2020. 

Since then the airline industry has been through a downturn as deep as any it has ever experienced.

As the prospect of recovery looms closer, now is a good time to look ahead at some of the questions facing the region’s airlines.

Most Asia-Pacific airlines have been pursuing aircraft delivery delays in response to the COVID-19 crisis. Although several airlines acted quickly and secured deferrals relatively early in the pandemic, some important negotiations have occurred more recently. These latest arrangements highlight the differing approaches to deferrals being taken by the region’s airlines.  

Korean Air and Singapore Airlines are recent examples of airlines making substantial deferrals to push back spending commitments while also preserving their long term fleet renewal strategies.

The major Japanese airlines, however, are only making minimal postponements. The independent LCCs are generally trying to spread out their vast numbers of deliveries while some, such as IndiGo, are taking their aircraft as scheduled.

Few Asia-Pacific airlines will come through the pandemic without some degree of aircraft order deferments. In many cases these negotiations are key aspects of broader airline restructuring efforts.

Deferrals represent one of the main tools airlines have available for pausing growth and reducing fleet costs, along with early retirements, lease returns and order cancellations. Postponing rather than terminating orders is obviously preferable to manufacturers, particularly since Asia-Pacific airlines account for more of their order backlogs than any other region. Allowing delays also helps ensure customer survival.

It has long been the case that Istanbul’s airports have regarded themselves as in competition with those in the Gulf – especially for Europe-Asia transit traffic – rather than with those in Europe. And Istanbul’s new airport does have some geographical and operational advantages in that respect, as did its predecessor.

Now, as the country plots its way out of lockdown and with the main tourist season looming, that battle looks to recommence.

Istanbul Airport’s CEO is bullish about future prospects, no doubt taking his cue from the Prime Minister, but both the airport and the state airline will have to overcome the challenge from a rejuvenated Qatar Airways and Doha Airport, which have almost flourished during the pandemic.

Manila has long been regarded as an underachiever in aviation terms, the creaking Ninoy Aquino airport transporting far fewer passengers than peers at Singapore, Bangkok, Kuala Lumpur and Hong Kong, despite a high population to call on.

Expansion at Ninoy Aquino and at Clark International, formerly a US military airbase, was going some way to redressing the issue. But then along came not one, but two, proposals for new airports, each to handle 100 million or more passengers each year.

One of them, at Sangley Point, has been put on the back burner, although there will be a fresh tender.

But the hidden reason for the original process being cancelled suggests that Chinese firms, especially state-owned ones, may be about to find it more difficult to secure foreign airport development contracts.

Eurostat data for passenger air transport show significant price weakness in Europe in 2H2020, particularly for international flights. During the COVID-19 pandemic pricing has, on the whole, held up best when airline capacity has been at its tightest, and fallen more rapidly when airlines have sought to return capacity to the market.

This price elasticity is to be expected. At a time of damaged consumer confidence in air travel, caused by months of uncertainty over government restrictions and concerns over the transmission of the virus, demand requires strong price stimulation when capacity is growing back again. A lack of business travel adds to downward price pressure.

Total seat capacity in Europe is down by 75.4% in the week of 22-Feb-2021 – bumping along the bottom ahead of a hoped-for summer recovery and still lagging other regions.

Middle East is down by 57.1%, Africa is down by 54.0%, North America by 46.9%, Latin America by 45.9% and Asia Pacific by 40.9%.

Europe's passenger numbers have fallen worse than seat capacity throughout the crisis. Restoring consumer confidence will be a big challenge in realising the recovery.

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The pace of COVID-19 vaccinations is likely to be a key determinant of progress in the return of international travel in Europe. However, countries where vaccination is advanced may remain cautious to protect this advantage, especially against the threat of new variants of the virus.

For example, the UK has the most advanced vaccination programme among countries with more than 10 million people, but its 22-Feb-2021 roadmap out of lockdown envisages international travel returning no earlier than 17-May-2021. Even then, the lifting of travel restrictions is likely to favour other countries which also have high vaccination rates.

The US has also made good vaccination progress, but the European Union and Asia are lagging. This raises questions over the pace of recovery of short haul European travel this summer.

The two key long haul markets, Europe-Asia and the North Atlantic, have collapsed during the pandemic. Europe-Asia and European Union-US may remain weak until vaccination programmes at both ends equalise.

However, good vaccination progress in both the UK and the US raises the possibility that UK-US air travel might lead Europe's long haul recovery - although it is still uncertain just what the impact of vaccinations will have on international travel.