Analysis Reports

British Airways, Swoop and Spirit Airlines have been recognised among the top airlines at CAPA’s annual Global Aviation Awards for Excellence in Malta this evening (5-Dec-2019). The nine award categories covering airlines, airports and aviation leadership were presented at a dazzling ceremony at the Westin Dragonara Resort in St Julian’s, attended by over 150 aviation luminaries from across the globe as part of the 2019 CAPA World Aviation Outlook Summit.    

Regarded as the pre-eminent awards for strategic excellence in aviation, CAPA first established the awards in 2003 to recognise successful airlines and airports based in the Asia Pacific region. The awards later expanded to the global stage in 2012 to acknowledge aviation excellence worldwide.

CAPA – Centre for Aviation (CAPA), Chairman Emeritus, Peter Harbison said: “In the dynamic and ever-evolving environment of the aviation industry, CAPA’s Global Aviation Awards for Excellence serve as an opportunity to stop and recognise key achievements across our industry over the last 12 months and celebrate with industry peers.”

Both 2018 and 2019 saw the opening of a major new global-level airport, at Istanbul (Oct-2018) and Beijing Daxing (Oct-2019) respectively.

While the world waits with bated breath to see if Berlin Brandenburg Airport will actually open in 2020 this report shows that both the number of projects and the amount of capital expenditure on existing and new airports are not increasing substantially when it "needs to" according to industry organisations.

All indications, from lack of political will to environmental challenges to airline growth, are that new construction will continue to slow.

At Air France-KLM's investor day in Nov-2019 the group reported that a new agreement between Air France and its pilots had lifted the previous 40 aircraft cap on the fleet of Transavia France.

According to the CAPA Fleet Database, Transavia France has a fleet of 38 narrowbodies at 25-Nov-2019 and Transavia Netherlands has 36, giving the Air France-KLM LCC brand a total of 74. 

Air France-KLM's narrowbody LCC fleet is 32 short of Lufthansa Group's and less than half of IAG's. The narrowbody LCC fleets of all three are much smaller than Ryanair's and easyJet's, but closer in size to those of Wizz Air, Norwegian and Jet2.com.

Transavia is now free to grow, but its growth plans lack ambition, given its size disadvantage. Air France-KLM is placing a priority on improving Air France's cost efficiency and aircraft utilisation so that Air France can close the margin gap with KLM, and Air France-KLM can close the gap with Lufthansa Group and IAG. Air France-KLM will continue to lag IAG and Lufthansa Group in the scale of its LCC narrowbody operations.

In many ways, the Canada-Asia aviation market is a study in contrasts. Asia, particularly China, remains one of the fastest growing aviation markets worldwide, both domestically and internationally. Yet the yield on routes between Canada and Asia remains depressed, and overcapacity remains an overhang.

There are other market distortions that make it difficult to make profits on trans Pacific routes, including caps in the Canada-China bilateral. 

Those market dynamics are resulting in Canada’s second largest airline, WestJet, adopting a cautious approach to determining the right time to launch trans Pacific flights. For now, WestJet does not have any immediate plans to enter the long haul trans Pacific market. 

Most of the focus on the Canada-China market remains on origins in Western Canada, including Vancouver and Calgary. But Toronto and Montreal are also points of strength for airlines operating between Canada and Asia as ethnic populations continue to grow in those markets. 

Aviation Week Network and CAPA - Centre for Aviation will jointly hold the inaugural Airline Operations Leaders’ Summit in Seville over 2/3-Dec-2019. The Summit is dedicated to cutting through the noise around airline operations, MRO, fleet strategy, network planning and business technology optimisation. The ground-breaking event has attracted a line up of thought-leaders in the industry, including key airline COOs and other airline executives.

The Summit will see Aviation Week Network and CAPA combine their market leading aviation analysis and data to produce an agenda covering relevant industry topics. Key areas of discussion include industry operational efficiency, the keys to fleet and network planning, combatting delays, big data and its real-world applications, recruitment and training for the aviation workforce, consolidation in the aftermarket sector and the impact of digitalisation.

Among the speakers are senior operations and maintenance executives from a range of airlines including Air France-KLM, Icelandair, LOT Polish Airlines, Ryanair, TAP Air Portugal, Vueling, United Airlines and Alitalia. Also presenting keynotes and panels will be speakers from OEMs and lessors, including Embraer, MTU Aero Engines, Collins Aerospace, Thales and Aircastle. 

Latin American airline group Avianca Holdings has had a tumultuous 2019 that includes shareholder upheaval, urgent debt renegotiations and significant changes to its senior management.

The company has cut more than 20 unprofitable routes and part of Avianca’s strategy in 2020 is full leverage of the company’s hub in Bogotá, with a planned 20% increase in international city pairs. The airline has already announced plans to launch service from Bogotá to Asunción and Montevideo, and recently forged new codeshare agreements with GOL and Azul. 

Avianca is working to shrink its fleet and aims to phase out its Embraer 190s by the end of year 2019. The company is also working to shed its remaining A318s and two additional A320s by the end of 2019.

Although Avianca’s new senior management has laid out a back to basics plan that includes cutting unprofitable routes, a refocus on its Bogotá hub and the shedding of smaller gauge aircraft, its debt levels remain significant, and balance sheet repair will be an ongoing concern for the future. 

The UK is about to hold a general election (12-Dec-2019) which will determine the political direction of the country for the next five years. It is probably the most important election since the one in Jul-1945 immediately after the end of World War 2.

The referendum vote to leave the EU in Jun-2016 and the opposition to it that has arisen in the Houses of Parliament since is at the heart of the election. Other issues will have an impact, too.

Britain’s transport future will be determined by this election and the government that arises out of it.

But air transport in particular, along with tourism, has been universally overlooked this time by nearly all the parties, at least in their manifestos. 

ACI Europe has followed its North American counterpart in highlighting the “lack of investment” in airports in Europe, especially from the private sector, and on how that impacts on the ‘decarbonisation’ of airports.

This appears to be a response to the growing tide of our-environment anti-flight movements, which have the capacity to impact heavily on transport choices in the future.

But is there really a lack of investment on that continent? To what extent should investors – public or private – be expected to finance environmental protection around airports, which are public spaces used by a wide variety of traffic?

Should they be expected to forego profitable enterprises such as car parking and make provision instead for alternative travel modes that legislators wish to see replace them? And in any case, can anyone be certain that the growth in travel is going to continue unabated? These all form part of the complex framework around growing awareness of the need to take action to slow the rate of aviation emissions.

Air Transat has noted the importance of Heathrow traffic in the market between the UK and Canada and is keen to attract more of this to Gatwick. Heathrow dominates UK-Canada traffic, but only the two national airlines, Air Canada and British Airways, serve Canada from the UK's biggest airport.

Air Transat's commercial director for the UK and Ireland Adrian Keating regards this as one of Air Transat's "biggest challenges", as "so much Canadian traffic is Heathrow based" (Business Traveller Asia Pacific, 9-Nov-2019).

The UK is the biggest market in Europe by annual seats to/from Canada, but annual capacity has grown only very slowly in recent years and much more slowly than the overall Europe-Canada market.

Canadian airlines, led by Air Canada, dominate the UK-Canada market and drive growth (particularly the entry of LCC WestJet in 2015). British Airways has reduced its seat count, and Virgin Atlantic left this market in 2014. However, in Nov-2019 Virgin announced a new codeshare with WestJet to 32 destinations in Canada for passengers travelling from Gatwick.

Air Transat is introducing the A321LR into the UK-Canada market in 2020. Long range narrowbody aircraft such as this could help to reinvigorate the market.

Spirit Airlines has been one of the fastest growing US airlines during the past decade, and over the past three years its ASM growth has averaged nearly 20%. The company expects capacity growth of 17% to 19% in 2020 as it expands both domestically and internationally. 

Spirit has also worked to ensure that its expansion includes international destinations to diversify its network, and expects international markets to make up approximately 15% of its total capacity. 

Cancún has been a centrepiece of Spirit’s latest international push after the airline concluded that it is a ripe market for the company’s specific product offering. The airline also believes that some of the new markets it has added during the past year should reach a certain level of maturity, which should create some unit revenue benefit for Spirit in 2020.