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    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 airlines: capacity to rationalise as headwinds strengthen

    Domestic and International ASK growth in the US is forecast to rise for 1H2019. This may spur some concern in the investment community as uncertainty on long term trade policy, stock market swings and the potential for a prolonged government shutdown coalesce to create pressure on the US’ economic performance.

    The country’s largest airlines have varying forecasts for capacity growth in 2019, with Southwest and United planning increases solidly above projected GDP growth, whereas American has declared its capacity expansion this year would be close to the lowest in the US industry.

    Signs are indicating some slight softening of demand in the US domestic market, which could result in revisions in current capacity forecasts; however, for now most of those operators feel satisfied with their 2019 capacity projections.

    It is difficult to predict the ultimate trajectory of capacity in the US during 2019, but even as OPEC has opted to cut production and oil prices are rising, a certain level of volatility in pricing remains, which should result in the country’s airlines taking a rational approach to capacity management.

    To read on, visit US airlines: capacity to rationalise as headwinds strengthen

    Chicago O’Hare airport: major construction after key airline approval

    Chicago O’Hare International airport is ending a significant year, one in which it finalised an agreement to embark on a USD8.5 billion expansion plan that will help the airport remain competitive and satisfy the needs of its two largest airlines – United and American.

    United’s recent rebanking of O’Hare has produced favourable results for the airline, as it works to recapture some lost domestic market share. The airport is a key mid-continent hub for United, and is the airline’s largest base measured by departing frequencies.

    Even as costs are set to rise at O’Hare, growth from airlines operating at the airport continues unabated. United and American, in particular, are making a push to shore up their connectivity at the airport, which remains at the top in the US for domestic connectivity, according to CAPA partner OAG.

    Given the strategic role O’Hare plays in the networks of its largest operators, they seem willing to accept the trade-off of higher costs in order to maximise efficiency at the airport.

    To read on, visit Chicago O’Hare airport: major construction after key airline approval

    North Korea aviation: Korea’s airlines may benefit from liberalisation

    South Korean airlines have started preparing for the potential opening up of the North Korean market. Airspace restrictions may be lifted in the near term, resulting in significant fuel savings, followed by services from Seoul to Pyongyang.

    North Korea is an underserved market as it currently has less than 200,000 annual operated seats, despite a population of more than 25 million. Outbound demand should increase significantly if travel restrictions are eased. North Korea tourism also has huge potential, driving inbound demand along with ethnic traffic from South Korea as families are reunited.

    South Korean carriers will likely be the main beneficiaries if the North Korean aviation market opens up. South Korea’s largest airline, Korean Air, is well positioned and eagerly awaiting opportunities in North Korea but South Korean LCCs may be best positioned, given that North Korea’s future market could consist mainly of price sensitive leisure passengers.

    To read on, visit North Korea aviation: Korea’s airlines may benefit from liberalisation

    Air France reabsorbs subsidiary Joon: an also-ran, failed experiment

    From the start, Air France’s subsidiary airline Joon was ill-conceived and half-hearted. The concept was originally intended as a long haul response to competition from Gulf airlines and announced by Air France-KLM’s previous CEO in 2016 as part of his ‘Trust Together’ strategic project. Joon launched in Dec-2017, aimed at millennials and with the strapline ‘also an airline’.

    It always had compromise written right through it, particularly in its cost base, network focus, size and branding. From the outset, Air France did not attempt to make Joon a low cost airline, merely lower cost. Using the term (and concept of) low cost was offensive to Air France’s unions, so much time and money that could have been used fighting external competition was wasted pandering to internal idiosyncrasies.

    The long haul focus was diluted early on, so that Joon launched initially only on short/medium haul and that remains the majority of its network. It has only 16 aircraft (12 narrowbodies, four widebodies) and although its name, crew and onboard environment are new, its pilots, marketing and support functions are all provided by Air France.

    To read on, visit Air France reabsorbs subsidiary Joon: an also-ran, failed experiment

    Airport investment: Korea’s IIAC and KAC seek global opportunities

    Korea is not often thought of as a hotbed of international investment in airports, nor in their operation. But the two main operators –International Airport Corporation (IIAC) and Korea Airports Corporation (KAC) – have quietly built, and are expanding, a significant portfolio of airports outside the country by way mainly of concession, management and consulting activities.

    Whereas IIAC’s focus is a flexible one, currently encompassing both Asia and the Middle East, KAC’s preference is for Latin America.

    IIAC has secured its largest ever external project with the management of Kuwait Airport’s Terminal 4. KAC has secured several airport contracts in Latin America and expects them, and others, to contribute extensively to its bottom line in 2019.

    To read on, visit Airport investment: Korea’s IIAC and KAC seek global opportunities

    Chiang Rai Airport: new AirAsia hub offers international service

    Thai AirAsia is launching four new routes from Chiang Rai in northern Thailand at the end of Jan-2019 and the beginning of Feb-2019. Chiang Rai will become Thai AirAsia’s seventh hub after Bangkok, Chiang Mai, Phuket, Krabi, U-Tapao/Pattaya and Hat Yai.

    Thai AirAsia is adding three international routes – to Kuala Lumpur, Macau and Singapore – as well as a new domestic service linking Chiang Rai with Phuket. Chiang Rai Airport has a small but fast growing international operation that until now has been limited to mainland China and Hong Kong.

    The international market accounted for less than 10% of the nearly 3 million passengers handled by Chiang Rai in 2018. Chiang Rai’s traffic has more than quadrupled since 2010, driven mainly by domestic expansion. AirAsia is already the market leader and will widen the gap compared to competitors as it launches the four new routes.

    To read on, visit Chiang Rai Airport: new AirAsia hub offers international service