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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.

    Malaysia aviation: growth slows, profits under pressure

    Malaysia has become a challenging market for airlines, set back by intense competition and volatile demand. Six of Malaysia’s seven carriers were unprofitable in 2018 and the seventh, AirAsia, generated its smallest operating profit in four years. An uncertain future for Malaysia Airlines is a destabilising feature

    Passenger growth at Malaysia’s flagship airport, Kuala Lumpur International, slowed from 11.2% in 2017 to 2.4% in 2018. The growth in the overall Malaysian market slowed from 10% in 2017 to 3% in 2018.

    Growth is likely to remain in the low to middle digits in 2019. Profits continue to be under pressure and overcapacity is once again a concern.

    To read on, visit Malaysia aviation: growth slows, profits under pressure

    Ryanair to Armenia. CIS-to-W Europe underserved by LCCs

    Reports that Ryanair is considering services to Armenia have focused attention on that country’s existing aviation market and the potential for more low cost routes between Western Europe and the nations of the Commonwealth of Independent States.

    Armenia, with a population of three million, is one of Eastern Europe’s smaller markets. Annual seat capacity has been volatile in recent years, growing strongly in 2017 and 2018, but is set to fall this summer, according to OAG data. Russia and Russian airlines dominate Armenia’s schedule. LCC share is small, but growing, and includes no routes to/from Western Europe.

    The CIS nations in general are underserved by LCCs to/from Western Europe, but Moldova, with a similar population to Armenia’s, has 12 such routes. Armenia would be only Ryanair’s second CIS market after Ukraine. Wizz Air operates to Ukraine, Georgia and Moldova from Western Europe, and Vueling operates to Belarus and Russia (also served by Pobeda from Western Europe).

    Outside the CIS, Eastern Europe includes some similarly sized countries with a much higher penetration of LCC links with Western Europe, including Croatia, Latvia, Lithuania and FYR Macedonia.

    To read on, visit Ryanair to Armenia. CIS-to-W Europe underserved by LCCs

    Brazil airports: fifth concession tranche completed at a premium

    When it started with the concession on the greenfield airport Natal, São Gonçalo do Amarante, in 2011 – which was won by Brazilian and Argentinean companies – could anyone have imagined just how big the Brazilian airport privatisation procedure had become, subsequently attracting big international hitters such as Changi Airports, Flughafen Zurich, Fraport and Vinci Airports?

    The latest tranche, or round, of these concessions has just been completed; smaller airports that, although ‘anchored’ on a bigger one, have in the main far less attraction than the São Paulo, Rio de Janeiro, Brasilia and Belo Horizonte airports that went before.

    Nevertheless, they attracted bids hugely in excess of the minimum required, even more than in previous tranches in some cases, justifying the new Brazilian President’s cross-sector privatisation strategy, though what the future will actually hold for the concessionaires in a country still suffering from recession and stagflation, remains to be seen.

    But the government is so confident that it is already pressing ahead with the next round.

    To read on, visit Brazil airports: fifth concession tranche completed at a premium

    Lufthansa, IAG, Air France-KLM fleets: Lufthansa Group largest

    Lufthansa Group has comfortably the largest fleet among Europe’s big three legacy airline groups. According to the CAPA Fleet Database, its total of 734 aircraft is 157 more than that of IAG, whose fleet of 577 is 43 more than Air France-KLM’s 534 aircraft.

    (Note that only those aircraft in service with airlines that are majority owned and controlled by each group are included in the above numbers.)

    Lufthansa Group’s superior overall fleet numbers are based mainly on its short and medium haul strength, reflected in larger numbers of narrowbody and regional aircraft. Lufthansa itself is also the biggest individual airline brand by fleet among the big three legacy groups (but its fleet is smaller than Ryanair’s fleet).

    Lufthansa Group’s Eurowings and IAG’s Vueling (in that order) are the biggest LCC subsidiary airline brands – considerably larger than Air France-KLM’s Transavia.

    Air France-KLM plans to grow its capital expenditure at the fastest rate of the three this year but has a much smaller order book for new aircraft than the other two. For all three groups, capital expenditure is at, or close to, all-time high levels in 2019. Moreover, trends in capex and profit margins are starting to diverge.

    To read on, visit Lufthansa, IAG, Air France-KLM fleets: Lufthansa Group largest

    European air space control: crisis management is no solution

    IAG CEO Willie Walsh told the Airlines for Europe summit in Mar-2019 that European ATC is “inefficient and starved of proper resources and staffing”. Wizz Air CEO Jozsef Varadi has characterised European air traffic control as “bleeding from every wound” and he does not expect much improvement this summer after a spike in delays last year.

    Also speaking at the A4E event, EUROCONTROL head Eamonn Brennan said that air traffic capacity in Europe has a long history of being saved by crises, which relieved pressure by lowering demand each time capacity appeared no longer able to cope. He highlighted the current pressures on air traffic management capacity by saying “unless something big happens, this time we’re heading for the wall”.

    Europe’s air space management challenges include both strategic considerations of the capacity needed to meet ever growing demand and the constraints on growth resulting from operational issues such as air traffic control strikes.

    The consequences of the mismatch between demand and air space capacity are significant. Not only does this lead to growing en route delays to flights (a much bigger source of delay than airport delays), but it also makes a significant contribution to unnecessary emissions of carbon dioxide.

    To read on, visit European air space control: crisis management is no solution

    US domestic aviation market: mature, but new opportunities arising

    Despite a certain level of maturity, route development in the US continues to evolve.

    The three largest US global network airlines are largely focused on leveraging the strength of their hubs, but Delta Air Lines has also built up a smaller group of focus cities during the past couple of years: in Raleigh/Durham, Cincinnati (a former hub) and Boston, which is a stronghold for JetBlue.

    Delta’s continued build-up in the market could prove to be a challenge for JetBlue in Boston, which is the airline’s largest focus city by departing frequencies (as of late Feb-2019).

    In 2019 the US ULCCs Spirit and Frontier are making a push from Delta’s Raleigh focus city, after Frontier’s market share at the airport reached nearly 6% in 2018. Spirit is also the first US ULCC to enter Charlotte, where American is the dominant airline by a wide margin. American has already responded to Spirit’s mild market entry by adding capacity to the markets where Spirit plans to launch services.

    None of those developments are earth shattering; but they do reflect a level of posturing that remains in the the US, despite four airlines dominating the market.

    To read on, visit US domestic aviation market: mature, but new opportunities arising

    UK to South America aviation: Virgin Atlantic enters with 787s

    Virgin Atlantic will launch a daily service from London Heathrow to São Paulo Guarulhos in 2020, to be operated by Boeing 787 aircraft. The new service will be Virgin Atlantic’s first route to South America (although it already operates to one other subregion of Latin America, namely Caribbean).

    The markets between the UK and the four subregions of Latin America all have different characteristics. UK-Caribbean, the largest, is built on strong cultural and business ties, a large VFR market and strong tourist demand, but capacity is falling slightly.

    UK-Central America, the second largest, is mainly driven by tourist demand, but seat numbers are stagnating. Growth in capacity from the UK to both Upper and Lower South America is accelerating, stimulated in both cases by LCC Norwegian’s entry and growth. Lower South America, the smallest market, is growing the fastest.

    Virgin’s planned entry into UK-South America reflects the growing dynamism of this part of the UK-Latin America market. This has been boosted by the entry of Norwegian on London Gatwick to Buenos Aires and Rio de Janeiro, and BA’s entry and growth on London-Heathrow to Santiago (Chile). On a rolling 52-week basis, the combined seat capacity from UK to the two South American subregions will exceed that of UK-Central America for the first time since the start of Apr-2019.

    To read on, visit UK to South America aviation: Virgin Atlantic enters with 787s