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.

    Bombardier aircraft: free cash flow a priority; sell-offs no surprise

    In many ways, Bombardier’s decision to sell its Q400 turboprop programme and its business jet training segment was not surprising, given that it now only retains a minority stake in the CSeries (now the A220). The sell-off is part of a broader scheme by the company to improve its fortunes and bolster free cash flow in the near future.

    Perhaps now the question is how much those changes, and Bombardier’s evaluation of options for the CRJ programme, will affect the commercial aerospace landscape. And the answer is that there will be no shift in the pecking order.

    Bombardier’s decision to cede a 50% stake of the CSeries to Airbus and Boeing’s pursuit of a commercial JV will only strengthen the dominance Airbus and Boeing have enjoyed in the commercial aircraft industry for decades.

    To read on, visit Bombardier aircraft: free cash flow a priority; sell-offs no surprise

    Narrowbody long haul: Airbus & Boeing’s airline growth market

    On 13-Nov-2018 Arkia Israeli Airlines took delivery of the world’s first A321neoLR. Arkia replaced the bankrupt Primera Air as launch customer for the aircraft, which carries Airbus’ hopes of challenging Boeing’s leadership on narrowbody long haul routes.

    Narrowbodies on routes of more than 4,000km are a small market, with capacity led by US domestic routes and growing onto new intercontinental city pairs, but such an operation has strong potential thanks to new aircraft technology.

    Boeing has the bigger share of long haul narrowbody seats flown in the week of 12-Nov-2018, with 71.5% (much greater than in the more balanced widebody long haul market, where Boeing’s seat share is 58.8%). This is built on both the 757 and the 737 and helped by Boeing’s MAX range beating the A320neo family into service.

    Boeing’s 737 MAX 8 has gained a head start in the longest narrowbody sectors, but the A321neoLR is superior in range and capacity. Boeing is planning further additions to the MAX family and is also mulling a new mid market aircraft, while Airbus is considering further extending the neoLR’s range.

    The battle for supremacy in narrowbody long haul is just one part of the fierce competition between Airbus and Boeing. Both manufacturers will be represented at the CAPA World Aviation Outlook Summit in Berlin on 27-28 November 2018.

    To read on, visit Narrowbody long haul: Airbus & Boeing’s airline growth market

    New Zealand LCC market: AirAsia pulls out again, leaving only Jetstar

    AirAsia X will suspend services to Auckland in early 2019, ending a second attempt at serving the New Zealand market. After the last AirAsia X flight departs Auckland on 10-Feb-2019, Jetstar will once again become the only LCC in the expanding New Zealand market.

    AirAsia X has served Auckland with a daily flight from its Kuala Lumpur base with fifth freedom rights using a stop at Australia’s Gold Coast since Mar-2016. AirAsia X previously served New Zealand with four weekly nonstop flights from Kuala Lumpur to Christchurch but this route was suspended in 2012 after slightly over one year.

    AirAsia X’s suspension of Auckland is a setback for New Zealand, which has been keen to attract more foreign LCCs as part of its ongoing drive to boost tourism. AirAsia X promises to relook at the New Zealand market in future, with a nonstop service from Kuala Lumpur to Auckland being its most likely third attempt. In the meantime New Zealand tourism and airport authorities will need to focus on trying to attract other Asian LCCs.

    To read on, visit New Zealand LCC market: AirAsia pulls out again, leaving only Jetstar

    Mexico-US aviation: currency, fuel, other pressures soften the market

    Airlines operating to, from and within Latin America are experiencing headwinds driven by high fuel prices and currency pressure –particularly in Argentina and Brazil.

    But airlines have also faced challenges in the Mexico-US transborder market due to overcapacity, currency depreciation and travel warnings over certain leisure markets. Aeromexico, the largest Mexican airline operating between Mexico and the US, is dropping five US routes in 2019.

    Some US airlines are seeing slight signs of improvement in the Mexican market as 2018 draws to a close. But Southwest Airlines does not foresee a dramatic improvement in operating conditions.

    To read on, visit Mexico-US aviation: currency, fuel, other pressures soften the market

    Manchester Airports Group: investing offshore as UK rivals step up

    Manchester Airports Group (MAG) is increasingly seeking investment opportunities in Eastern Europe and has confirmed its participation in the Bulgarian Government’s tender process for the concession to operate Sofia Airport under a EUR4 billion 35-year concession. MAG had previously expressed interest in the proposed concession on Lithuanian Airports, a stalled procedure, and in the Belgrade Airport concession.

    MAG’s bid will be supported by the Chinese company Beijing Construction and Engineering Group (BCEG), which is a key member of the consortium building the Airport City at Manchester Airport, and which is itself expected to attract Chinese companies.

    MAG is the only UK airport operator known to be showing any interest in investing in foreign airports at this time.

    But slowing traffic at Manchester, noticeably more so than at other, peer airports, raises questions as to whether the MAG management should be paying more attention to local matters – or whether this is in fact a sound group strategy, designed to ensure group sustainability, as Brexit issues threaten growth.

    To read on, visit Manchester Airports Group: investing offshore as UK rivals step up

    Garuda-Sriwijaya tie up: an Indonesian domestic aviation duopoly?

    Garuda Indonesia’s LCC subsidiary Citilink has taken over management of Indonesia’s third largest airline group, Sriwijaya, resulting in further consolidation in the country’s domestic market. The Garuda and Sriwijaya groups consist of four airlines which together account for approximately 45% of Indonesia’s domestic market; Lion Group occupies most of the rest.

    Managing four brands could prove to be difficult, particularly given that the Garuda-Sriwijaya deal does not include equity (yet). However, combining the four airlines gives Garuda a powerful portfolio of slots in Indonesia’s tightly constrained airport system, enabling it to compete more efficiently against the rival Lion Group.

    Sriwijaya survived earlier periods of consolidation, making it the only remaining significant domestic competitor after Lion and Garuda, but has struggled in recent years as domestic market competition has intensified.

    To read on, visit Garuda-Sriwijaya tie up: an Indonesian domestic aviation duopoly?