Catch up on CAPA’s exclusive Market Analysis pieces

    Each week, CAPA – Centre for Aviation, produces informative, thought provoking and detailed market analysis of the aviation industry. With supporting data included in every analysis, CAPA provides unrivalled and unparalleled intelligence.

    US transborder: markets still await response on Delta-WestJet JV

    Nearly a year after announcing their plans to establish a joint venture,  Delta Air Lines and WestJet have formally applied to gain antitrust approval for their proposed tie-up from US authorities. It would be surprising if the Department of Transportation (DoT) issued an outright rejection of the JV given Air Canada’s heft if the US-Canada transbroder market.

    Delta and WestJet do have ambitions to grow 20% in the transborder market, and add six new markets. Unsurprisingly, the two airlines are not disclosing those markets; but WestJet has already announced new service from its Calgary hub to Delta’s largest hub Atlanta in 2019, and more new service to Delta’s US hubs seems logical, following a service pattern adopted by Aeromexico after it established a JV with Delta.

    The remaining unanswered question is how Delta and WestJet’s competitors will respond. Air Canada and United do no seem to be rushing to create their own JV even as they have held antitrust immunity since 1997. But the long standing Star Alliance partners are no doubt examining their options as transborder competitive dynamics change. An interesting development in Canadian aviation during the last year is changes in how JVs in the country are approved, which could make it easier for Air Canada and United if they choose to revive plans to establish a JV.

    To read on, visit US transborder: markets still await response on Delta-WestJet JV

    Airline outlook: unbundling, fare families, ancillaries

    Low fuel prices and new competition forced airlines to pass on savings to consumers, which drove traffic growth as price sensitive travellers took advantage of low fares. Nevertheless, unit revenue fell at a slower rate, partly thanks to ancillaries.

    Rising oil prices now put the focus on revenue growth, although fare increases could temper demand from leisure markets. As airlines adjust to the new operating conditions, they are seeking alternative revenue optimisation strategies.

    Finding the right mix of unbundled fares and fare families and also developing genuine ancillary (i.e. new) revenues will be crucial.

    The CAPA World Aviation Outlook Summit 2018 on 27-28 November in Berlin will include a panel discussion on the commercial outlook for airlines and their revenue optimisation strategies. This report provides some background for that discussion.

    To read on, visit Airline outlook: unbundling, fare families, ancillaries

    2018: airport sales, concession opportunities, main investors

    Investor interest is currently concentrated on Brazil, Japan, France and Eastern Europe as the ‘pipeline’ of airport deals, mainly concessions and public-private partnerships to build and manage infrastructure, has dried up a little this year.

    The nature of the business is that there is always a shock waiting side-stage, and right now it could be an announcement about London Gatwick Airport.

    As for the investors themselves, there has been a hard core of them for the last two decades and many are still very active around the world. Some are only defined as investors in that they do not become involved in the day-to-day running of the airport, while others are fundamentally operators and bring their expertise in those activities, with the financing element a lesser part of their involvement.

    This report summarises the leading operator/investors in 2018 and the location of existing and anticipated deals.

    (CAPA’s Global Airport Investors Database, part of the CAPA Airport Database Suite, currently lists 886 current, lapsed, anticipated and ‘major’ investing entities in this sector, together with a real-time ‘news’ section (updated daily) on developments that concern them.)

    To read on, visit 2018: airport sales, concession opportunities, main investors

    New Mexico City Airport cancellation raises issues for the whole region

    Mexico’s incoming President-elect Andres Obrador, who takes power on 01-Dec-2018, said the government would “obey the will of its citizens” as manifested in a referendum in which 70% of those who voted said that the USD13.3 billion New Mexico City Airport project, currently under construction, should be abandoned.

    The announcement came on almost the same day as the official opening ceremony for the new Istanbul Airport, where works began at broadly the same time.

    The decision has implications for the capital city’s existing airport, Benito Juárez, for a military airbase which it is proposed should handle commercial traffic and, most intriguingly, for Toluca Airport, whose proposal for expansion to handle more commercial traffic was ignored in favour of a new facility that now looks as if it will not be completed.

    There is also the possibility that the use of existing infrastructure over new will become the norm throughout Latin America as it has throughout North America now that the bar has been set in Mexico.

    To read on, visit New Mexico City Airport cancellation raises issues for the whole region

    Icelandair-WOW Air merger: impacts Keflavik Airport and others

    Iceland’s mammoth tourist boom could not last forever. Despite a huge increase in demand over the last eight years, and aviation capacity increases to match, a variety of factors has slowed the growth. This comes at a time when Keflavik Airport has plans for a significant expansion.

    The two major airlines, the quasi-FSC Icelandair and the upstart LCC WOW Air, have both been suffering this year and their merger would have come as no great surprise to Iceland-watchers; only its timing, which suggests that their future prospects might have been worse than envisaged.

    Much has been written already about the merger. This report addresses the impact on Keflavik Airport and, by implication, on the downtown domestic airport and others in Iceland’s far-flung regions.

    To read on, visit Icelandair-WOW Air merger: impacts Keflavik Airport and others

    Segmented airfare products: Alaska Air and JetBlue catch up

    It was only a matter of time before the US LCC hybrid airlines Alaska Air Group and JetBlue opted to match their larger US network peers by developing a basic economy-like fare. The revenue opportunity offered by product segmentation was too good to pass up as American, Delta and United are all touting the millions they aim to generate from their branded fares.

    Perennial passenger favourites Alaska and JetBlue have to tread carefully with the development of their respective equivalents of basic economy. And both airlines are taking great care to stress that their lowest fare tiers will be different from what is currently available in the market place.

    But it remains to be seen whether Alaska and JetBlue can truly develop a basic economy fare that does not feel restrictive to passengers, and they are likely looking at the upsales from basic economy that their larger competitors enjoy as major drivers in their decisions to offer a similar type of fare.

    To read on, visit Segmented airfare products: Alaska Air and JetBlue catch up