Analysis Reports

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.

Throughout 3Q2020 a patchwork of travel restrictions and quarantines was in place across Europe, aimed at limiting COVID-19 transmission.

However, a Nov-2020 analysis by ACI Europe shows no correlation between infection rates and air passenger traffic, based on data from this period. This suggests that travel restrictions are not effective where community transmission is already present.

Nevertheless, quarantines and restrictions continue to erode European aviation. Airline seat capacity in the continent remains in an increasingly distant last place behind the other regions. Europe's year-on-year cut in seat capacity widened to -73.8% in the week of 23-Nov-2020 – its biggest cut since Jun-2020, and 13.2ppts below the Middle East on -60.6%.

Africa is on -58.5%, Latin America at -50.0%, North America at -42.0%, and Asia Pacific is on -37.9%.

In spite of attempts at the EU level to promote a common approach to testing, European nations are divided on this issue, just as they are on travel restrictions. Pending fully available and widely administered vaccines, European aviation will continue to wither unless a commonly agreed system of testing air travellers is introduced.

Virgin Atlantic is maintaining a focus on cash positive flying and finding new routes where the service is important. The airline has reduced its cost base so that destinations that in the past were out of reach – just because of the equation between the revenues and the costs – are now within reach.

The airline was 70/30 focused on the North Atlantic but it is more 60/40 now, with new routes added to India, and Pakistan.

The airline urges the UK government to view aviation as a national infrastructure and agree to testing as it is clear that a testing regime ensures that the infection does not travel.  

Virgin Atlantic’s commitment to net zero by 2050 and having the youngest fleet in the sky is unwavering.

Talking at the CAPA Live on 11-Nov-2020, Virgin Atlantic’s CEO Shai Weiss spoke with CAPA’s chief financial analyst Jonathan Wober. Key highlights from the transcript can be found below.

Just a few weeks ago US airlines were buoyed by an uptick in bookings for the upcoming Thanksgiving holiday season. But shortly after that, daily COVID-19 cases in the country crossed the 100,000 threshold, and now that number is inching closer to 200,000 new cases every day. 

As a result the sentiment has obviously changed, with two of the country’s largest airlines citing a slowdown in bookings as public health agencies urge US citizens not to travel for the Thanksgiving holiday period. 

All of this is occurring as the industry welcomes positive news in the development of vaccines for COVID-19, but the reality is that demand will continue to ebb and flow for many months until a vaccine is widely available and a reliable distribution chain is created. That’s why the industry cannot afford to takes its focus off a push for affordable and fast testing if the needle on demand is to be moved. 

Australia's aviation market has been deeply affected by the coronavirus pandemic, but there is some strong hope that there will be a resumption of air movements around the Australian domestic market before Christmas.

As CAPA – Centre for Aviation managing director Derek Sadubin highlighted during the 11-Nov-2020 edition of CAPA Live, a second wave In Melbourne has been brought under control after a 15-week lockdown and has “paved the way for a resumption of aviation activity, at least domestically". 

The Nov-2020 edition of CAPA Live – a new monthly virtual summit, offering insights, information, data and live interviews with airline CEOs and industry executives across a next-gen virtual event platform – provided some optimism on the local market as selected interstate services have resumed.

Aviation Week senior air transport editor Adrian Schofield highlighted “another big development” will occur when New South Wales opens its border to Victoria today, 23-Nov-2020.  

This, Mr Schofield stated, “will spur the recovery of the Sydney-Melbourne route, which is one of the top domestic flows in the world".

The opening "is a particularly major step for Qantas" said the analyst, as it "plans to operate more than a hundred weekly return flights between these states from 23-Nov-2020, versus just 10 at the moment". 

Ryanair DAC CEO Eddie Wilson believes that some of European government state aid is blatant discrimination and could cause problems for those airlines that are well managed and well capitalised, but in the longer term it will play out.

Mt Wilson said he believes the 737 MAX aircraft is a game changer that will provide a lot of options and flexibility and will play a key part of its strategy going forward.

Falling over the precipice of a hard Brexit isn’t in anyone’s interest. Common sense will probably prevail, but Ryanair is well prepared.

Talking at the CAPA Live on 11-Nov-2020, Ryanair DAC CEO Eddie Wilson spoke with CAPA’s chairman emeritus Peter Harbison. Highlights from the transcript can be found below.