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Research Publications

CAPA Research Publications are long-form in-depth analysis of a feature of the aviation industry, presented in PDF format.

Airports - Potential M&A Activity in 2H2021 and beyond

Researched and produced by leading CAPA Analysts and backed by industry data, the report lists airports and airport groups which could be attractive to investors and identifies other airports that may be a target for mergers or acquisitions. The report features a case study on the move from Hungarian government to enact a sort of partial reverse privatisation by acquiring the equity of the majority shareholder, AviAlliance, in Budapest Ferenc Liszt International Airport. Finally, the report concludes with pinpointing the operators and investors to watch, based partly on their participation in the sector already and partly on their level of activity before the pandemic.

Report Length: 71 Pages

Report Summary:

For evident reasons the last 18 months have been the quietest known for airport M&A transactions since the early 1990s. While some that were already in train did continue, for example in Brazil (with hardly any delays to the concession programme there), and in Japan (with some, but not for long), and some long-standing others like the Sofia concession were completed, new opportunities for investors have been very hard to find.

Investors with a penchant for airports couldn’t be blamed for walking away from a business where the ultimate customer base – the passenger – collapsed by up to 99% along with most of the auxiliary revenue streams, where uncertainty abounds, and where its future prospects are at the whim of ultra cautious governments, many of which may use the ‘opportunity’ presented by the pandemic to ‘reset’ aviation within the context of a rapidly carbon-free future. Aviation will not

be carbon-free ‘rapidly’ or even for a long time, which classifies it as a dinosaur to many of those in power. Then, out of the blue, a tentative but unsolicited bid emerged by a consortium of investors to buy Sydney’s Kingsford Smith International Airport, which is listed on the stock exchange.

That consortium’s bid essentially hangs on: continuing ‘local’ ownership and retained management; investment experience; the promise of improved operational and financial performance; and a commitment to ‘green’ ideals and targets.

Section 1 – Review of listed airports/groups which could be attractive to investors

Those credentials are likely to become the norm as deals begin to reappear – and especially the last one.

This bid, a rare one for a publicly listed company and similar to the one for BAA plc in 2006, also raises the question of whether other wholly or partially floated airport companies, most of them dating from the 1990s, might also become hostile investor targets.

The majority of them have since established themselves as multi-ownership companies in which the public float has reduced and sometimes considerably so. Additionally, there are still occasionally investment level caps preventing single entity equity investment beyond, say, 5% or 10%. So opportunities will be rare.

But it can be done, as the case of Vienna Airport proves, where an Australian fund, the lead member of the Sydney consortium as it happens, ate into the free float in two tranches, leaving itself in a close-to-controlling position.

There is a wide range of airports that are publicly or privately owned, or with no stock market float component, or where there has been, and even where there actually is but the government remains firmly at the helm of strategic development, that could also become targets for investors in the coming months and years.

Section 2 – Other airports that might be M&A targets

Section 2 of the report reviews some of the more likely candidates, including Berlin, where the new airport began life long ago as a private-sector enterprise before a crippling public-sector construction debacle set in, and where the private sector might yet be required to fly to the rescue of an entity that had the misfortune to open nine years late – in the middle of the pandemic.

It examines the prospects for greater competition between airports in the US – and even within cities there, where public private-partnership development is becoming commonplace, despite the failure of a 25-year privatisation scheme designed to lease airports out wholly – and in Canada, which retains its unique ‘not for profit, stakeholder’ ownership system.

Section 3 – Budapest Ferenc Liszt International Airport

Section 3 of the report looks inter alia at a move by the Hungarian government to enact a sort of partial reverse privatisation by acquiring the equity of the majority shareholder, AviAlliance, in Budapest Ferenc Liszt International Airport.

While such state grabs are rare, they do happen. One of them, in Bolivia, helped end the participation of the Spanish company Abertis in the sector as well as causing international friction, and there have been several other examples of national government interference in airport ownership in Europe.

The government’s decision in Hungary is driven by politics and raises questions about future ownership of airports and state protectionism across Eastern Europe as not only Hungary, but also several other countries in the region, could well leave the European Union in the following years.

Section 4 – Who are the buyers and concessionaires?

Finally, the report looks at which might be the operators and investors to watch in the future, based partly on their participation in the sector already, and partly on their level of activity before the pandemic.

Inevitably much of that renewed activity will likely arise from a small group (20 of them are examined here) which have a track record in the sector, and it is interesting to note how so many of them were chasing the same deals up to Jan-2020.

There are many other investors and potential new ones, and throughout the text reference is frequently made to various CAPA databases (Global Airport Investors; Airport Construction and Cap Ex; and a shortly forthcoming one on the major airports and airports groups in FY2020 as measured by revenues and other metrics), which will enable professionals in the industry better to understand this complex segment of it.

CAPA – Centre for Aviation Managing Director, Derek Sadubin said:

“Airport transactions for the most part have ground to a halt as the pandemic bites. But as we begin to see some light at the end of the tunnel, opportunities across the sector are beginning to re-emerge. This new CAPA report supports investors, financers, government and infrastructure planning departments to look beyond just the next few weeks or months ahead and take the first step towards identifying real opportunities for the future.”

The impacts of the global pandemic have meant the last 18 months have been the quietest for airport merger and acquisition transactions since the early 1990s. While some that were already in the works did continue, for example in Brazil and Japan, new opportunities for investors have been very hard to find.

Investors with a penchant for airports couldn’t be blamed for walking away from a business where the ultimate customer base – the passenger – collapsed by up to 99% along with most of the auxiliary revenue streams. Nevertheless, after a lengthy period with little activity in the airports sector, prospects in the future look bright and a few key bids may just pave the way for more to come.

The new CAPA Airport Mergers & Acquisition Opportunities for 2H2021 and Beyond is available now for USD795.

Are you a CAPA Member? Contact your account manager now to receive a 50% discount code. 

Airline Start-Ups: A global overview of new airlines over the past 18 months

Despite initial fears towards the beginning of the COVID-19 pandemic, fewer airlines went out of business than first predicted. During 2020 only around 30 collapsed, out of a total of thousands of airlines.

During the most difficult time for the aviation industry on record, where international capacity fell to around one tenth of its previous level and many domestic operations fared only slightly better, it was surprising that so few airlines went out of business. What surprised, even with the most optimistic of predictions, was that several new airlines entered the market and began operating.

Few countries escaped the pandemic without having seen dramatic reductions in capacity, however some achieved a return to normality, and even exceeded previous capacity by late 2020.

Many of these countries were in the Asia Pacific. Owing to successful initial responses to the pandemic, in China, South Korea, Japan, and Taiwan there was, in all of them, robust domestic capacity, and all four countries saw new entrants into the market during 2020.

Since the end of 2020, the remarkable trend of new start-ups continues. As the world, and in particular the aviation industry, emerges from the capacity lows that are the result of months of harsh lockdowns and border closures, the number of new airline start-ups continues to climb, with many future entrants poised to launch.

It is considered that new airline start-ups offer significant opportunity for growth over the coming months and years, as the industry recovers. With airlines poised to seize back the market share they occupied before the global collapse in aviation capacity, it has become a perfect storm for new entrants. However, with the aviation landscape looking more competitive than ever, it is expected that not all new entrants will survive the gruelling task ahead.

Report Length: 13 Pages

Aviation recovery -Three very different versions: China, the USA and Europe

From the beginning of the COVID-19 pandemic the world’s three largest aviation markets, China, the USA, and Europe have taken contrasting approaches and begun recoveries at different rates, each with different levels of success. The rest of the world has fallen somewhere in between. The levels of risk tolerance and consequent paths to recovery in all three markets have varied widely, but although the industry desperately wants to add capacity, sustainable growth on a secure foundation will be needed.

Despite the turmoil that the pandemic has created, there are now some green shoots appearing, some even as early as 2Q2020. During 2020 and into 2021 some countries and regions leveraged different strategies to begin slow recoveries back to the capacity levels that were seen in 2019; however, others were far less sustained, and led to setbacks and continued suppression of capacity. 

Internationally, while a standardisation of approach is now badly needed to allow market reopening, that will not occur until the pandemic is much better controlled and vaccinations are vastly more widely distributed.

Click on the bottom to download the full report 

Preparing for a Gathering Storm: A 12-Point Survival Plan Specifically for LCCs

Like any business, airline management is expected to manage the airline prudently through a downturn to minimise the impact on profitability and shareholder returns. 

Given the inevitability of a downturn in the industry – whether it’s this year or next – that expectation becomes more telling. 

Generally speaking, LCCs should be better placed in times of heightened price sensitivity, as their lower cost base should give them an edge. But that alone is not enough. 

CAPA offers here some key tactics that LCC management can deploy when things get tough. Many of them are common sense, but in tough times the sense may not be so common. 

Airlines making money: preparing for a Gathering Storm

As the world economy starts to stutter, and Brent crude oil prices creep up towards USD70 again, the financial climate threatens to make life difficult for airlines which aren't prepared for it.

CAPA's 2,000 word "15-point Airline Survival Toolkit for 2019" contains key money saving, loyalty and revenue generating actions that airlines can take, as the long period of global economic improvement starts to wind down.

Airport Finance & Privatisation Review 2018

This 186-page document is the eighth in a series of reports on airport privatisation and investment published by CAPA and the first since Sep-2016. The report picks up on events since the beginning of 2017, in some ways a turning point for airport privatisation activities, and looks to the future.Commentary and data may be found, inter alia, on who the main players and rising stars are; the number and type of transactions and their values; public-private partnership transactions (P3s or PPPs); the continuing increase in international funds investing in the sector; the prospect for IPOs; the disproportionate impact of exogenous events on the sector; and the likelihood of individual transactions taking place.The second part of the report looks at ongoing, completed, anticipated, and abandoned transactions on a country-by-country basis within a continental framework and within the context of economic and political activity where appropriate. There are Special Reports on airport privatisation in the United States, Brazil, Japan, Serbia, Spain, Japan, India, Russia and Saudi Arabia.
Throughout the report the text is supported by CAPA’s renowned graphical representations.

Airlines, airports, tourist organisations and the music business: the case for greater co-operation

Live music events attract high numbers of people prepared to travel to watch the performers they support. Further, in the case of festivals, to experience others that are new to them – both in their own countries and, increasingly, abroad.
 
This groundswell of travel adds to that undertaken by the artists themselves to perform, record, collaborate or sign contracts, as well as that of their supporting musicians, sound and lighting experts, A&R experts (talent spotters), managers and entrepreneurs.  In all, it is big business, and getting both bigger and more global.
 
Indeed, both the aviation and music industries are populated by global brands. And yet, strangely, it is only a handful of airlines and even fewer airports that have grasped its significance and made any significant attempt to work with the music industry to the benefit of both parties.
 
This report, using five case studies, examines the credentials of a number of airlines and airports that are actively involved in the promotion of musical events, including performances on their own property (e.g. on board or in-terminal).
 
It looks at how music business entrepreneurs regard the air transport and tourism industries when they start to examine the prospects for international expansion of their events. And it considers an example of a country which does not as yet stage large scale western-style events, but is in a position to do so on account of its air connectivity and advanced surface infrastructure at selected locations.
 
The purpose is to attempt to set out some guidelines that will be useful to any aviation or tourism entity seeking to enter the potentially lucrative music world in a collaborative manner. At the same time, it offers the music industry some insight into how the aviation and tourism businesses work.

The report is USD95 for non CAPA members and free for CAPA members with code from your account manager.

Format: PDF on receipt of payment

Extent: 81 pages

Publication Date: Aug-2017

Air-Rail Report: Air-Rail Developments

Conflict usually invokes the tendency to respond with either ‘fight or flight.’ The competition between air and rail as travel modes, at least over short distances and often driven by the demands of environmental considerations, shows no signs of abating and frequently verges on confrontation. What this report asks, fundamentally, is this. Is there a better alternative for those disparate modes, let us call it ‘fight or co-operate?’

It seems there is. There are already known to be over 600 designated air-rail links with another 200 planned.

This report does not attempt to catalogue every functioning and proposed air-rail link, though many of the main ones will be found here. Rather, it is more concerned with how the air-rail industry has developed, how it continues to do so and with ‘what’s new’ in the business.

Possibly the most comprehensive single report on this subject it ranges over critical subject areas such as intermodality and sectoral collaboration; interaction with airport city development; ‘low cost rail’; historically unsuccessful links; and the skills required to build air rail links. And most importantly – who pays?

Covering developments on each continent, the report includes four highly relevant case studies: Lyon Saint Exupéry Airport, London Luton Airport, Los Angeles airports (general) and the Western Sydney Badgerys Creek airport.

The report is USD795 for non CAPA members, with a discount price for CAPA members of USD495.

Format: PDF on receipt of payment

Extent: 112 pages

Publication Date: June-2017

Singapore Airlines Group Report 2017

The SIA Group consists of five wholly owned airline subsidiaries – SIA the parent airline, SilkAir, Scoot, Tigerair and SIA Cargo. In this comprehensive report, CAPA looks at the long term outlook and strategic position of all five airlines.

Singapore Airlines has evolved considerably over the past six years, embracing a multi brand model and investing in new airlines overseas. However, Southeast Asia’s largest and historically most pro table airline group is confronting an extremely challenging market place, making it near impossible to improve profitability – despite a raft of initiatives.

The Singapore Airlines (SIA) Group is at a critical juncture in its evolution. The group has evolved significantly since Goh Choon Phong took over as CEO at the beginning of 2011. While the final verdict is not yet clear, SIA would almost certainly be worse off today if it had not started to go down the path of change in 2011. However, the changes at SIA may not be deep enough, or may not have been implemented fast enough. However, in the past six years SIA has changed more than virtually any other airline group in Asia. Considering that it is a company known for its conservatism – the depth and pace of change have been relatively radical.

Format: PDF on receipt of payment

Price: The report is USD795 for non CAPA members, with a discount price for CAPA members of USD495.

Extent: 48 pages

Publication Date: May-2017

Vietnam Aviation Report 2017

In this detailed Report, CAPA examines Vietnam’s rapid growth and its future outlook, including challenges and opportunities. An analysis of all three of Vietnam’s main airlines – Vietnam Airlines, the affiliate Jetstar Pacific and the independent VietJet – is included, along with 30 graphs and charts highlighting market growth and the positioning of each airline.

The Vietnamese aviation market has experienced unprecedented growth since 2012. The market has doubled in size in just four years and now consists of over 50 million passengers. Vietnam has been a hot market and will continue to be a market worthwhile watching closely in the coming years. Suppliers from around the world have a lot at stake and are betting that Vietnam’s growth story will continue. 

The report is USD795 for non CAPA members, with a discount price for CAPA members of USD495.

Format: PDF on receipt of payment

Extent: 61 pages

Publication Date: Apr-2017