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.
Vietnam airports: Can Tho joins international trend with AirAsia
In 2Q2019 Can Tho will become the eighth airport in Vietnam with scheduled international services when AirAsia launches flights from Bangkok and Kuala Lumpur. Other new international services from other airlines will likely follow, including to China, boosting tourism in Can Tho and the Mekong River region of southern Vietnam.
Can Tho is the latest in a growing list of secondary Vietnamese airports to become international. Vietnam currently has seven airports with scheduled international services but six years ago, in early 2013, the country had only three: the main cities of Ho Chi Minh, Hanoi and Da Nang.
Nha Trang gained international status in 2013, followed by Phu Quoc in 2014, Hai Phong in 2015 and Da Lat in 2017. Vinh also gained international status in 2014 but does not currently have any scheduled international flights.
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Ukraine aspires to be a Europe-Asia aviation hub, attract LCCs
The Infrastructure Ministry in Ukraine wants to develop regional airports, attract more LCCs and, most ambitiously, build an international hub to connect Europe and Asia.
Ukraine’s Minister of Infrastructure, Volodymyr Omelyan, has identified the key directions for aviation reform in Ukraine as: development of regional airports, the attraction of LCCs to reduce fares, and a fair and transparent market for air services.
However, the Ukrainian state airline (UIA) has few flights to Asia and a fleet that is not set up for expanded long haul operations. Moreover, there are many airports in those regions already fulfilling the international hub requirement and the circumstances in Ukraine at the moment are not ideal for making a success of that venture.
On the other hand, there are good prospects for the further development of LCC routes and the airports that service them.
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Denver International airport: impressive growth and planning ahead
Denver International Airport had a banner year in 2018. It continued to log impressive passenger growth levels and launched a facilities revamp that includes a terminal overhaul and the addition of 39 gates in order to meet forecast passenger demand.
The airport plays an important role for full service and low cost airlines alike. United, Southwest and Frontier are its three largest operators, and United has started rebanking Denver to bolster the airport’s already strong performance in its system. At the same time, Denver has also attracted new airlines during the past couple of years, including Norwegian and Copa.
The airport also took top honours among the Wall Street Journal’s top US airport rankings based on a wide range of factors, including value and convenience, besting other large hubs and among them Los Angeles and Atlanta.
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Norwegian Air SWOT analysis: innovative but overexpanded
Norwegian’s 2018 results revealed its third set of losses in five years. Although it was burdened by higher fuel costs and by costs related to Rolls Royce engine problems on its 787s (now resolved), its track record points to more fundamental flaws in its model, particularly as its losses have coincided with a period of strong margins in the global airline industry.
Norwegian’s rapid expansion along with its new market entries has spread its management focus, weighed on its margins and burdened it with ever growing debt and worryingly low cash levels. At the same time, it has given it a network with strengths in the Nordic region and on the North Atlantic that attracted interest from IAG during 2018.
After rebuffing that interest, and in the absence currently of alternative bidders, Norwegian is to issue NOK3 billion of new shares in 1Q2019 (but this compares NOK32 billion of net debt at the end of 2018). Taken with cost reductions, aircraft sales and delivery postponements, this emergency rights issue should rescue Norwegian.
Longer term, it may need to find a buyer.
This report considers the group’s strengths, weaknesses, opportunities and threats.
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North Atlantic airline joint ventures: under the regulatory spotlight
One of the many unanticipated consequences of the uncertainties raised by Brexit is increased regulatory scrutiny of North Atlantic airline joint ventures. Members of these JVs are allowed to coordinate schedules and prices only with regulatory immunity from competition rules.
In Oct-2018 the UK’s Competition and Markets Authority (CMA) launched an investigation into the JV inside oneworld between British Airways, Iberia, Finnair and American Airlines. The JV was approved by the European Commission in 2010 after JV members gave commitments to release slots to competitors on six city pairs: London-Dallas, London-Boston, London-Miami, London-Chicago, London-New York and Madrid-Miami.
The commitments expire in 2020, after the UK’s scheduled exit from the EU, and five of the routes touch the UK, hence the CMA’s investigation ahead of their expiry. It is expected to report in Mar-2019.
CAPA analysis indicates that there has been only a limited increase in competition, if any at all, on these routes and on the two routes most important to the other JVs (Paris-New York and Frankfurt-New York). Competition investigations are complex, and it would be foolhardy to second-guess their outcome, but the CMA’s study could prompt other regulators to review the North Atlantic aviation market.
The CAPA Americas Aviation Summit in Denver on 18-19 March 2019 will include discussion of the North Atlantic.
To read on, visit North Atlantic airline joint ventures: under the regulatory spotlight