Analysis Reports

London’s Heathrow Airport was once steeped in glamour, as businesspeople, captains of industry and ‘celebrities’ waltzed in and out, transferring from limousines to classic aircraft like the Boeing 707, 747, Vickers VC10 and Concorde. If you weren’t one of them you would regularly rub shoulders with them.

But just as the airline industry lost its glamour completely to the new wave of mass travel on ‘low cost’ airlines, Heathrow has become, despite some reasonable investment, run of the mill. More Walmart than Harrods.

And that has taken place during decades when public ownership was transferred to the private sector – one that might be expected to ensure its assets were draped in ‘luxury’ (as many publicly owned Middle East airports are today).

The nature of that ownership at Heathrow has changed dramatically from public, to public floatation, and then to full private sector ownership, with 90% of it in foreign hands.

The recent transfer of Ferrovial’s 25% stake (yet to be ratified) to a French private equity firm and the Saudi sovereign wealth fund has emphasised that foreign ownership in Heathrow, and in other London airports, and throughout many other sectors in the UK,  and it has prompted a strong reaction in the UK media.

This is part one of a two-part report.

Although Alaska Air Group’s decision to acquire, and merge with, Hawaiian Airlines took many by surprise, the reality is that Alaska’s management has always taken a quietly adept approach to managing its business and looking for strategic opportunities. 

Alaska’s relatively smooth integration with Virgin America during the past decade, after the close of their merger, serves as a reliable framework for Alaska’s acquisition of Hawaiian, pending regulatory approval, which is a major wildcard. 

In a US market where scale is increasingly important outside certain niche airline models, Alaska is moving to ensure its relevance for the future, and Hawaiian attains a certain level of sustainability that was arguably not otherwise achievable. 

All Nippon Airways (ANA) expects Japanese outbound traffic will continue to recover slowly through 2024, although the airline’s plans for next year (2024) have been complicated by fleet availability issues.

Japan’s outbound travel was an important traffic flow for many airlines before the COVID-19 pandemic, so it has been closely watched during the post-pandemic period. It has not rebounded as quickly as in other markets, and a full return to 2019 levels is not expected to occur until well into 2024.

The Japanese government was slower than others to remove travel restrictions, and there was also some early reluctance in Japan to travel abroad. However, both these constraints have eased, and the main influence on demand now is the higher cost of travel.

Some overseas markets, such as Hawaii, are performing more strongly, and this is a positive sign for the overall international outlook.

ANA faces the extra problem of grounded aircraft due to the Pratt & Whitney engine issues that are affecting many airlines around the world. This impacts domestic more than international services for ANA, although it is occurring just when the airline is looking to ramp up its overall capacity and improve its earnings.

CAPA ANALYST PERSPECTIVE - a new series where CAPA - Centre for Aviation's analyst team provide personal views on a hot topic facing aviation around the world. 

Air travel has now returned to pre-pandemic levels and forecasts are that growth in passengers will continue into 2024, albeit moderating somewhat from recent rapid growth.

The outlook for the air transport sector is now largely positive, with airlines and airports reporting record revenue and the sector largely moving back towards profitability, after a series of difficult years.

However, if you look at the state of the global aircraft manufacturing industry, a very different picture emerges. You might even be forgiven for thinking that the crisis induced by the COVID pandemic has yet to end.

Simon Elsegood, Head of Research at CAPA - Centre for Aviation shares his viewpoint.

The saga of the redistribution of equity in Athens International Airport seems to have lasted as long as the Greek Debt Crisis, which began in 2009.

The complex ownership structure, involving the Greek government, state development funds, a private German company (from the country that bailed out Greece, but at a cost), and a Greek family was increasingly less fit for purpose, with decision-making decentralised.

Now that German company, AviAlliance, has been given the green light by the European Commission to take sole control, with marginally more than 50% of the equity.

That provides the airport with a clear strategic development focus. AviAlliance operates similar airports in Germany, Hungary and the Caribbean.

Now the country awaits the outcome of an IPO on the airport, in 2024, which will shed more light on whether or not Greece has finally extricated itself from the shackles of that debt crisis.

There are several small airports in Europe that have chosen to prioritise cargo operations over passenger.

One of them is Liège Airport in Belgium, and arguably it is the most successful, handling aircraft from across the world and benefitting from its location close to major industrial conurbations.

Now the airport’s owners intend to invest EUR500 million in additional facilities to benefit both long haul services and maintenance operations.

Air cargo, which prospered during the COVID-19 pandemic, has faltered during the post-pandemic economic turndown, but recent statistics from IATA for the period 3Q2023 suggest that international cargo demand registered its first growth since the end of 2021.

A struggle is emerging in East/Central Africa to establish the leading international air hub there.

The contenders are Addis Ababa in Ethiopia, where a new airport is planned, Kigali in Rwanda, where one is being built, and Nairobi, where airlines and passengers use a facility that opened in 1978.

Nairobi has been promised a new state of the art terminal before, but hopes came crashing down seven years ago when construction funding could not be found.

Now the Kenya Airports Authority is having another go, on this occasion hoping to secure a PPP agreement involving the private sector; deals that are increasingly common across the globe, but still rare in Africa.

But the very fact that at the same time the government has ordered an enquiry into the status of Kenya’s airports, triggered by concerns over wholly inadequate infrastructure, will trigger alarm bells at potential investors.

Many Asia-Pacific airlines are reporting that the rebound in traffic on their mainland China routes has been slower than anticipated, causing them to adjust their plans in this market.

Part one of this analysis showed that China’s overall international capacity growth has levelled off, aside from some peaks in holiday periods. Comments from executives at Malaysia Airlines, Batik Air and AirAsia X underlined this trend.

Part two provides another similar example, with the AirAsia short haul group pulling back slightly in the China market as growth cools.

However, some airlines are having more success on their China routes. The LCC Scoot is performing better than its full service cousin, Singapore Airlines. And Cathay Pacific is seeing strong demand for connecting traffic to and from mainland China.

Australia’s fifth largest city is not one considered to be an air gateway to and from the country from much of the world. With only half a dozen international routes at the main airport, it isn’t likely to be, even if the city has attractions worth making the journey for.

Now Adelaide Airport’s leaseholders want to help change its perception by way of an AUD1 billion capital investment over the next five years.

And that will go hand-in-hand with a push to attract up to 40 new international services – but over a lengthy time span that stretches to 2050.

North Asia, Southeast Asia and the US figure highly, with route gains targeted for no later than 2030; but China is not mentioned, despite 15.2% of tourists coming from that country in 2019 (2022: 2.7%).

The airport benefits from the financial sturdiness of profits achieved throughout the COVID pandemic period and the solidity of the 99-year lease with committed partners.

CAPA ANALYST PERSPECTIVE - a new series where CAPA - Centre for Aviation's analyst team provide their personal views on a hot topic facing aviation around the world.

Aviation is now close to pre-pandemic traffic levels. Pent-up demand from the COVID-19 pandemic years has been unleashed and passengers are enjoying air travel again.

They have an innate understanding that it connects friends, families and businesses, with significant benefits in cultural and social exchanges, in facilitating international understanding, and for the global economy. However, a return to reliable long term growth cannot be taken for granted.

Aviation is like a 'guilty secret'. Everyone likes to fly, but nobody likes to admit it, and there are many challenges to growth.

Jonathan Wober, Chief Financial Analyst at CAPA - Centre for Aviation shares his viewpoint.