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.

    Brazil aviation outlook: positive trends and Azul still opportunistic

    Brazil’s two largest domestic airlines – GOL and LATAM Airlines Brazil – have reasonably solid outlooks for their performance in the country during 2019 as the country marches toward an economic recovery.

    Uncertainty remains over the fate of Brazil’s fourth largest airline, Avianca Brazil. The airline sought bankruptcy protection in late 2018, and recently Brazil’s third largest airline Azul stated that it had entered a non-binding agreement to acquire some of Avianca Brazil’s assets – aircraft and slots at some of Brazil’s key airports.

    If those plans materialise, capacity rationalisation should be maintained in Brazil’s domestic market; however GOL and LATAM could find a formidable competitor in some key airports in Brazil. Azul has a track record of making opportunistic acquisitions to accelerate its position in Brazil’s domestic market – the largest in Latin America.

    To read on, visit Brazil aviation outlook: positive trends and Azul still opportunistic

    Domestic aviation: Spain-to-Spain is W Europe’s largest market

    Spain is Western Europe’s biggest domestic airline market by seats, with more than a quarter more capacity than number two Italy. Spain’s domestic market has also experienced fairly healthy growth over the past year and over the past five years, when compared with other leading European countries.

    Unlike the international market, where Ryanair is the leading airline and airlines from outside Spain have a majority share of seats, Spain’s domestic market is dominated by local operators. Spanish airlines have 84% of domestic seats, led by Vueling, Iberia and Air Europa. The two IAG airlines have a 58% seat share between them.

    Iberia’s capacity is unchanged this year whereas Vueling is growing, with a number of route launches and increased frequencies. The regional airline CanaryFly’s capacity is also stable, while Norwegian is shrinking. Other leading airlines in domestic Spain are expanding this year, with the LCC Volotea being growing fastest.

    To read on, visit Domestic aviation: Spain-to-Spain is W Europe’s largest market

    Brussels Airport: Macquarie selling and pension funds contending

    Some of the large global organisations that have taken an interest in the airport sector for investment purposes are starting to follow in the footsteps of the smaller, more regional ones, which used to be involved in it but stood down or reduced their attachment.

    But for every action there is an equal and opposite reaction, and the wave of interest from pension funds in particular appears to be as hooked as ever on airports, now supplemented by insurance companies and other financial institutions that are seeking a piece of the action – especially in Europe.

    This report deals with one such case: the projected sale of equity in a European airport by an Australian-based fund manager, potentially to one or other Canadian pension funds supported by European finance houses with no experience of the sector.

    To read on, visit Brussels Airport: Macquarie selling and pension funds contending

    Lufthansa Group SWOT: Opportunities in an industry downturn

    Lufthansa Group’s operating profit margin slipped slightly in 2018, although 2018 was still the second best year this century (after 2017).

    The group’s most dynamic unit, the point-to-point brand Eurowings, absorbed significant capacity from airberlin, while also more closely integrating Brussels Airlines. Eurowings made a loss in 2018 but has proved its strategic value to the group, in spite of its higher unit costs than pure LCCs.

    Lufthansa’s network airlines have made progress with cost reduction and embraced direct distribution and a digital strategy. Nevertheless, they still have high cost bases versus other European legacy airlines. True, they also have strong brand value, but further cost cuts are important.

    As Europe’s biggest airline group, Lufthansa Group is well placed to remain a leader in the (still slow) process of industry consolidation. The group’s 2019 guidance highlights the likelihood of a further margin decline this year, adding to the sense that the industry’s cyclical peak is in the past. However, Lufthansa should not fear a downturn if it comes, since this would provide opportunities.

    This report considers Lufthansa Group’s strengths, weaknesses, opportunities and threats.

    To read on, visit Lufthansa Group SWOT: Opportunities in an industry downturn