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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.


    Cebu Pacific Air: upgauging drives 40% growth at congested Manila

    Following a commitment for 31 additional Airbus aircraft, Cebu Pacific is poised to grow capacity in Manila by more than 40% over the next five years as it accelerates an upgauging strategy. The Philippines’ largest airline group is not expecting to be able to add any flights at Manila due to slot constraints, but the average seat capacity per departure should grow from 195 seats currently towards an average of nearly 280 seats.

    Increasing densification is a sensible strategy for Cebu Pacific as the resulting reductions in unit costs enable it to maintain very low fares in a price sensitive market while maximising precious slots at its main hub. Over the next few years Cebu Pacific will stop operating turboprops at Manila, double the size of its widebody fleet and transition most of its Manila-based narrowbody flights from A320s to A321s.

    Cebu Pacific is the launch customer of a new 460 seat high density configuration for the A330-900 and will receive 16 of the new type from 2021 to 2024. It is also the launch customer of A320neos in a new 194 seat configuration and plans to start receiving in 2020 A321neos in the 240 seat maximum configuration.

    The airline group’s overall seat capacity has grown marginally in the last three and half years as it has waited for the delivery of new generation aircraft, which have been delayed due to Pratt & Whitney engine issues. Cebu Pacific is resuming double digit capacity growth in 2H2019 and expects annual seat capacity growth of 10% to 11% from 2020 to 2024.

    To read on, visit Cebu Pacific Air: upgauging drives 40% growth at congested Manila


    Air Malta turnaround attempt: fleet renewal and network consolidation

    Air Malta is accelerating fleet renewal as it takes delivery of two A320neos in Aug-2019. The government-owned flag carrier took its first A320neo in 2018 and plans to transition to an all-A320neo fleet within the next few years as eight A320ceo family aircraft are phased out.

    The A320neo is driving a 17% reduction in costs and enabling Air Malta to improve its inflight product, as all the aircraft will be outfitted with WiFi. The airline also recently introduced an improved business class service, although it is sticking with a convertible business cabin and blocked middle seats.

    Air Malta turned its first profit in the fiscal year ending Mar-2018 after nearly 20 years of losses, earning it the CAPA 2018 Airline Turnaround of the Year Award. It was back in the red in the year ending Mar-2019 and is hoping that fleet renewal will help drive sustainable profitability.

    A new network consolidation phase, which will focus expansion on existing rather than new destinations, should also help improve profitability. Air Malta launched a staggering 28 routes in 2018, impacting its profitability as LCC competition intensified.

    To read on, visit Air Malta turnaround attempt: fleet renewal and network consolidation


    What’s going on in the world economy? And where is aviation heading?

    As the bond rate inversion curve appeared on 14-Aug-2019 in the US and the UK, Wall Street headed rapidly south. A number of other countries have already this experienced inversion for a while. And in Germany, the world’s fourth largest economy, GDP growth rate went into reverse in 2Q2019.

    Does this mean recession is coming, or even imminent?

    Air freight numbers have been steadily falling for nearly a year. They used to be good forward indicators of where the world economy is headed, but not so much in recent years. Passenger traffic growth too has slowed markedly in the past year.

    Global trade conflict is creating uncertainty and aviation is inevitably caught up in that.

    So are we heading for trouble, and if so, when?

    To read on, visit What’s going on in the world economy? And where is aviation heading?


    Airline strikes: correlation with profitability? CAPA study

    Over the past decade CAPA has tracked the number of news articles on its website that mention the word “strike”. CAPA annually produces approximately 120,000 global news stories and 7.2 million words, translated from over 30 languages in its daily reporting, so the statistics are fairly representative.

    This “strike” metric has broadly followed the airline profit cycle in the past – not surprising, since labour is typically more demanding when the profit cycle is at its peak.

    There have recently been some notable recent mentions of the ‘s’ word in connection with European airlines. SAS suffered a pilot strike in Apr-2019 and May-2019 and British Airways, Eurowings, easyJet and Ryanair are among airlines that have been linked with the threat of strikes this summer. There have also been strikes at European airports and ATC organisations this year.

    However, since peaking in 2016, the annual number of strike-related articles has been on a downward path. So too has the annual operating profit margin of the world airline industry. In 1H2019 the number fell by just over one third. If this rate of decline continued for the whole year, 2019 would have the lowest number of such articles since 2009.

    A reduction in industrial action is welcome, but less so if it signals a further decline in the airline profit cycle.

    To read on, visit Airline strikes: correlation with profitability? CAPA study


    European airline labour relations: multiple unions are a challenge

    One of the challenges for European airline executives, certainly by comparison with North America, for example, is the multiplicity of unions.

    This, together with the fragmented nature of labour law, can make labour negotiations very complex for airlines with operations in more than one country. It can also provide opportunities for airline management to tap into pools of labour where costs are lowest and working practices are most flexible.

    However, unions representing pilots and other civil aviation workers across Europe have tended to come together in opposition to such moves, branding them as a “race to the bottom”.

    Tightening global pilot supply has increased pilots’ negotiating power in Europe, as evidenced by Ryanair’s recognition of unions for collective bargaining. That said, pilot power has historically always been high at Air France, reflecting French industrial relations culture.

    The nature of relationships between management and unions will always vary in European airlines. Nevertheless, particularly in areas such as safety, their long term interests should align.

    To read on, visit European airline labour relations: multiple unions are a challenge


    Japan’s Kitakyushu Airport: privatisation, improvements coming

    Japan’s Kitakyushu Airport has been identified by a government-commissioned survey as being appropriate for privatisation. The airport is the closest in Japan to Korea (just 200km distant) and the intention is that more low cost international travel should be developed through new gateways like Kitakyushu.

    Kitakyushu is at the smaller end of the range of airports that are being, or have been, privatised in Japan, but it isn’t the smallest. It is one of five ‘floating’ (offshore) airports in Japan and is one of a handful of Japanese airports to have 24/7/365 operations.

    The government of the prefecture is proposing to secure funds to extend Kitakyushu Airport’s runway from 2500m to 3000m, aimed at equipping Kitakyushu to accommodate larger aircraft required for long haul international services, including freight aircraft.

    Passenger traffic at Kitakyushu has been on a firm upward trend since 2016 and in 2019 is outperforming the national passenger growth trend by 5.3 percentage points. Of the seat capacity at the airport, 17.5% is low cost. The airport has targeted LCCS since it was built, and in the country overall the seat capacity ratio has shifted in favour of LCCs.

    To read on, visit Japan’s Kitakyushu Airport: privatisation, improvements coming