Analysis Reports

An annual report from OAG on the world's busiest airport to airport routes as measured by seat capacity reveals no great changes compared to 2023, with the Asia Pacific region continuing to dominate the statistics.

However, the Middle East does figure to a greater degree than it did previously, both domestically and internationally, and especially in respect of Saudi Arabia, which continues to show signs that it could become a regional air transport powerhouse.

Only one route involving both Europe and the Americas figures in the international table, and those very busy domestic and international intra-European routes of a decade ago have clearly been impacted by rail travel.

It was domestic travel that kept the US airline business running during the COVID-19 pandemic, but while that travel segment is back up to full speed now (and, unlike in Asia and Europe, faces no tangible threat from rail), it is still the case that no US domestic route figures in the global Top 10.

Not only that, the second biggest US route by capacity in 2024 (and number 1 in 2023) was between two Hawaiian islands!

As an international aviation hub, HKIA connects to about 200 destinations around the world and has been named the world's busiest cargo airport for 13 times since 2010.

The Three-runway System (3RS) at Hong Kong International Airport (HKIA) was commissioned on 28-Nov-2024.

With all three runways in operation, HKIA will be able to expand its air network and meet the target of serving 120 million passengers and handling 10 million tonnes of cargo.

Leveraging Hong Kong's unique edges and enhancing the airport's capacity, Airport Authority Hong Kong (AAHK) is developing the Airport City to a regional landmark and boosting the sea and land connectivity between HKIA and the Guangdong-Hong Kong-Macao Greater Bay Area (GBA), reinforcing its status as the international hub for both passengers and cargo in the GBA.

This regular CAPA - Centre for Aviation report provides a summary of major developments in the aircraft interiors sector, supported by data from the CAPA - Centre for Aviation Aircraft Interiors Database and CAPA - Centre for Aviation News.

This edition provides highlights in the interiors space throughout 2024.

Russia's war in Ukraine, now almost three years old, has had a detrimental impact on its economy: with skyrocketing inflation, labour shortages (so many are on the front line), the rouble in freefall, and construction projects diminishing rapidly.

Meanwhile, with some of its gas exports curtailed, the price of its main commodity (oil) could well fall dramatically in the wake of the president-elect taking office in the US in a few weeks' time.

Perhaps President Putin expects that a peace formula could arise out of that change of government - but now seems a peculiar time, when you are still fighting a very costly war - to be committing almost USD2.5 billion to investment in a third of the nation's airports on the spurious assumption that passenger traffic is going to grow by 50% in the next five years.

While a small aviation tax is to be levied, that tax isn't going to pay for this extravagance, and Russia's extensive private sector might well be asked to make a significant contribution to this scheme.

One thing is for sure - foreign investors won't be asked to contribute any time soon, and if they were, they should make their excuses and look elsewhere.

If an algorithm was created to track the number of times premium was used in North American airline discourse over a couple of years, the results would be significantly higher than profits at some of the region's airlines.

Premium products, ranging from seats to lounge access, are cornerstones of nearly every major North American airline's strategy - regardless of business model.

As a case in point - the decision by the ULCC Frontier Airlines to introduce a first class offering.

The push into premium products is arguably more than a decade old; but various factors have accelerated the adoption of them by unlikely airlines.

Now the question for 2025 and beyond is: if there's a risk for oversupply in the premium space.

Europe's airlines can look back on 2024 as the year when they finally completed the capacity recovery from the COVID-19 pandemic. Seat capacity is scheduled to be 100.0% of 2019 levels for 2024 as a whole, according to data from OAG and CAPA - Centre for Aviation.

LCCs are leading the way, and this seems likely to continue in 2025.

In 1Q2025 Europe's capacity is scheduled to be at 101.5%, confirming the recovery but with little further increase.

Aviation supply chain constraints and the ongoing (but slow) process of European airline consolidation are likely to contain capacity growth, and this may help to support yields in 2025.

The year 2025 will bring challenges in aircraft supply, recruitment, airspace capacity and the green transition - nevertheless, Europe's airlines are now beyond the COVID-19 recovery phase.

The Asia Pacific airline industry is set to continue its international capacity growth in 2025 and finally move past the pre-pandemic benchmark, although the growth rate will be hindered by aircraft availability issues.

Airlines in this region are collectively already close to 2019 capacity levels in the international market; so it is likely that they will exceed that mark early in the new year.

Aside from a few key international markets, the factors inhibiting capacity growth are no longer demand-related. Airlines want to grow faster, but are frustrated by engine issues, delivery delays and supply chain bottlenecks.

Aircraft orders by Asia Pacific airlines have soared over the past few years as airlines look to rebuild their fleets. This trend will continue in 2025, with some key deals looming, although possibly to a lesser extent than in 2023 and 2024.

Constrained capacity will help to keep yields and revenue relatively high, although they may moderate somewhat in 2025.

Collective profits in the region are expected to rise slightly, although financial fortunes will be mixed.

Factors such as elevated costs and geopolitical tensions will continue to put financial pressure on Asia Pacific airlines.

Two of Latin America's largest airlines - LATAM Airlines Group and Avianca - are bullish heading into 2025, driven in part by their competitive cost structures and product offerings that target a range of customer classes.

Those favourable cost structures place each airline in a competitive positions vis-a-vis their long haul rivals, and the recognition that product segmentation is key to bolstering revenues should bode well for LATAM and Avianca in the future.

Of course, challenges remain for airlines operating in Latin America, including oversupply within Colombia, which should ease somewhat next year.

And changes could occur in Brazil's aviation sector if discussions regarding potential consolidation materialise into something more market-changing.

Recent moves by the US ultra-low cost carriers - Spirit Airlines entering Chapter 11 and Frontier Airlines' recent decision to introduce a first class product - beg one simple question: has the era of the pure-play ULCC model in the country come to an end?

The answer would appear to be: yes.

Questions are arising regarding Spirit's future as a going concern, and it is yet to be revealed whether Frontier's bet on first class will pay off.

Whatever the outcome of each scenario, the original ULCC model is no longer applicable in the US, as the rush to offer upscale products to bolster revenue could push Frontier, and possibly Spirit, into the 'value' airline' category, alongside JetBlue Airways and Alaska Airlines.

Japan's major airlines are considering more aircraft orders to address their next fleet modernisation priorities, adding to already substantial order books that are helping make near term improvements.

Japan Airlines (JAL) is moving closer to ordering regional jets for its domestic operation, and All Nippon Airways (ANA) is still completing an assessment that could lead to widebody and narrowbody orders.

Deliveries from previous deals are arriving steadily, with JAL receiving its long haul flagship Airbus A350-1000s, and ANA taking delivery of Airbus narrowbodies and Boeing 787s.

Aircraft from recent orders - including some new types - are due to begin arriving over the next few years, but in some cases the timeline is uncertain due to manufacturer delays.

Also on the fleet front, ANA is affected by engine-related aircraft groundings in its widebody and narrowbody fleets.

Executives from JAL and ANA discussed their fleet situations at the Association of Asia Pacific Airlines annual meeting in Brunei on 12-13-Nov-2024.

They also talked about their expectations for international demand recovery, as detailed in this analysis.