CAPA – Centre for Aviation’s unrivalled market intelligence, research and data is represented in industry leading analysis pieces released every day. More than 10 different pieces are published each week and cover a wide variety of topics and themes from airline performance, airport builds and product analysis.
Below is a snapshot of the top 5 most popular analysis pieces accessed by CAPA members in 2017:
For much of this decade, Middle East aviation has been besieged by external events throwing markets in disarray. Now there is a dispute of internal making. Four countries – Bahrain, Egypt, Saudi Arabia and the UAE – are cutting ties with Qatar for political reasons. Local flights are being cancelled while Saudi Arabia has shut its airspace to overflights from Qatar Airways.
Saudi is not a signatory to the “Transit Agreement” which followed the Chicago Convention. Bahrain and the UAE are signatories and have airspace far more relevant to Qatar. For the open skies-seeking UAE to abandon its Transit Agreement obligation is a big call, but with this incident highly charged, uncertainty pervades. The ban on flights has a greater impact on Qatar Airways, which operates more flights than all other airlines combined. Local traffic is impacted and so too is Qatar’s global network, which relies on Saudi and the UAE as large source markets supporting its superconnector network.
More significantly, public confidence in aviation has been dealt a blow and for aviation there are no long term winners from this. A speedy resolution is needed. It stems from a much broader issue than aviation alone, but hopefully, in this tight knit global industry, airline operations will not be disrupted for long.
There is a different rhythm in Doha with Qatar Airways. As Emirates trims US flights by 19% and Etihad cuts global destinations and capacity, on 24-Apr-2017 Qatar Airways announced its intent to add 12 new destinations in 2018. This is on top of eight destinations for 2017 that it announced in late 2016. These cities still need to be realised, but are characterised by thinner markets with a leisure focus. Qatar is growing its London and Bangkok catchment areas with service to Cardiff and Utapao.
Qatar Airways serves the highest number of destinations of the three Gulf airlines, and it serves 49 destinations that Emirates does not. About three quarters of these destinations are flown by narrowbody aircraft and small widebodies, which Emirates does not operate. This highlights Emirates’ own growth constraint of effectively having the 777-300ER as it is smallest aircraft type. Emirates needs agility to diversify and right size its network. Emirates has been studying an order for smaller widebodies – A350s or 787s – and more recently is evaluating narrowbody aircraft, too. Rather than establishing its own narrowbody operation, Emirates could consider merging with sister airline flydubai.
Malaysia Airlines is planning to launch a new long haul route in 2018, using its new A350 fleet. Destinations in continental Europe are under evaluation. London has been Malaysia Airlines’ only destination in Europe since early 2016, when the flag carrier suspended services to Amsterdam and Paris as part of the last phase of its network restructuring project.
Malaysia Airlines plans to use four A350s to replace A380s on its twice daily London service under a recently accelerated schedule which includes transitioning the first London flight in 1Q2018. The other two A350s were initially intended for medium haul routes within Asia Pacific, including Auckland, but are now earmarked for a new not yet decided long haul route.
Malaysia Airlines is also planning to nearly double the size of its passenger widebody fleet over the next few years – from 21 aircraft to 36 aircraft. The lease of approximately 15 additional A330s will enable Malaysia Airlines to upgauge several routes from the 737-800 as it shrinks its narrowbody fleet.
What’s new since the analysis was published:
Malaysia Airlines has since moved forward with its plans for leasing additional A330s by committing to six ex-Air Berlin A330-200s, as CAPA highlighted in an analysis report that was published on 5-Oct-2017. The six A330-200s are slated to be delivered from Feb-2018 to Sep-2018. Malaysia Airlines also has since signed an MOU for eight 787-9s which are slated to be delivered from 2H2019 to 2021. The airline still has an unmet requirement to acquire at least 20 more new generation widebody aircraft (it is considering additional 787-9s or A330-900neos) and continues to look at leasing additional A330s beyond the six that have been secured. No decision has been made on a potential new European route, using the fifth and sixth A350. Malaysia Airlines took delivery of its first A350 in early Dec-2017 and is temporarily using the aircraft on regional routes before deploying the new type on Kuala Lumpur-London from 15-Jan-2018. The airline still plans to use its first four A350s to replace the A380 on its double service to London and continues to evaluate deployment options for the last two A350s, which are slated to be delivered in mid 2018. Malaysia Airlines’ new management team could decide against launching a new European route and instead use the last two A350s to replace A330s on regional routes within Asia Pacific.
jetBlue Airways has joined many other US airlines in undertaking a comprehensive fleet review, but its reasons are different from those of its larger counterparts United and Delta, which are assessing their future widebody needs. jetBlue is focused on the opposite end of the spectrum, studying the future viability of the smallest aircraft in its fleet – the 100-seat Embraer 190.
The airline is reiterating declarations it made regarding the Embraer 190s earlier in 2017 to determine whether the unit revenue benefits it derives from their operation are worth the aircraft’s higher operating costs. jetBlue is the largest worldwide operator of the aircraft, and represents 33% of existing orders for the Embraer 190.
jetBlue has also deferred some Airbus deliveries and switched some of its 2018 orders from the NEO model to current generation jets as A320neo operators have experienced some engine problems with the jets. The fleet review is part of jetBlue’s efforts to achieve lower costs in the 2018 to 2020 period, while attempting to drive margins above the industry average.
What’s new since the analysis was published:
As of mid-Dec-2017 jetBlue had not rendered decisions on two key fleet developments – the fate of its Embraer 190 fleet and the Airbus A321LR. The long range Airbus narrowbodies have the operating profile for trans-Atlantic flights, and jetBlue’s evaluations of launching flights to Europe are being closely watched. Its Mint premium product could be a game changer for low cost service in the trans-Atlantic market.
It is difficult to determine if jetBlue will outline its fleet plans by YE2017. The airline has been working to combat effects of storms that struck its bases in Florida and Puerto Rico in late 3Q2017. However, the company remains committed to ambitious cost targets it set for 2018 to 2020 of annual unit cost growth excluding fuel of 1% or less. A decision about the future composition of its fleet is an important factor in meeting its cost performance goals.
On 2-May-2017 Alitalia’s Board of Directors filed with the Italian Ministry of Economic Development for “amministrazione straordinaria” (extraordinary administration). This followed confirmation by the airline’s shareholders, including Etihad, that they would not provide the EUR2 billion of fresh capital previously earmarked for Alitalia. The planned new investment had been conditional on employee acceptance of Alitalia’s restructuring plan. However, the workforce voted against the preliminary agreement reached with union leaders.
The Italian state has now given Alitalia guarantees for EUR600 million of bridging loans to keep it flying in the short term, and its flight schedule remains unchanged. The new debt is expected to last for around six months and the government is unlikely to follow it with any further cash.
This buys time for the administrators to explore the potential, if any, to save Alitalia, including looking for potential acquirers. The Italian airline’s long record of losses, its multiple restructurings and its administrations in the past are likely to deter other airlines from investing. Alitalia has long had a Lazarus-like ability to come back from the dead, but its workforce’s latest refusal to accept the need for change could be the final nail in its coffin this time. Presumably they expect some form of government salvation. But even the government may have run out of patience.