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.

    North American airlines need to stay ahead of sustainability curve

    As flight shaming becomes more prevalent in news headlines and a dominant force in social media, airlines that do not give their attention to a long term strategy for sustainability could, at some point, find themselves at a competitive disadvantage.

    But strides in sustainability, while both commendable and necessary, are slow in nature, and even as progress is being made it might not be at an adequate pace to satisfy the growing detractors of air travel.

    Flight shaming is not as strong in North America as in other regions of the world, but North American airlines understand that the industry as a whole needs to communicate its environmental stewardship better.

    But is there really a unified message being delivered by the airline industry?

    To read on, visit North American airlines need to stay ahead of sustainability curve

    IAG-Air Europa: #1 on Europe-Latin America, overtakes Air France-KLM

    On 4-Nov-2019 IAG announced that Iberia had agreed to buy Spanish rival Air Europa for EUR1 billion, with completion expected in 2H2020. It does not require IAG shareholder approval, but will require regulatory approval.

    Air Europa’s brand will initially be retained and it will be run as a standalone profit centre within Iberia. The use of the word ‘initially’ suggests that IAG may phase out the Air Europa brand at some point, perhaps to merge it fully with Iberia, but is also keeping its options open to merge it with another of its brands (such as LEVEL or Vueling).

    Judged by share of all seats to/from/in Europe, the acquisition will not have a big impact on market structure. Based on OAG data for summer 2019, Air Europa will take IAG’s share from 9.4% to 10.4%, but keep it in third place behind Lufthansa Group and Ryanair.

    However, it will reinforce IAG’s leadership at Madrid, take IAG ahead of Air France-KLM on Europe-Latin America seat share, and extend its lead by the number of Latin American destinations. Moreover, it will end Air France-KLM’s hopes of a JV with Air Europa and mitigate the lack of progress on completing IAG’s planned JV with LATAM Airlines.

    To read on, visit IAG-Air Europa: #1 on Europe-Latin America, overtakes Air France-KLM

    Aviation safety regulators may diverge over Boeing 737 MAX’s return

    European safety regulator EASA will reportedly choose its own moment to approve the return to service of the Boeing 737 MAX, rather than simultaneously following the FAA, the US regulator. China may also follow its own timetable.

    The FAA would prefer a coordinated global decision, since additional delays by other regions after US approval would leave lingering doubts over the aircraft and could be seen to undermine the FAA’s authority.

    Historically, decisions to ground aircraft and subsequently to approve their return to service have usually – but not invariably – been taken in a globally coordinated manner, with the lead coming from the regulator in the jurisdiction where the aircraft manufacturer is based, or which originally approved the aircraft for service.

    However, that gentlemen’s agreement was broken at the outset in the case of the MAX when the Civil Aviation Authority of China became the first to ground the aircraft on 11-Mar-2019, beating the FAA by two days.

    Boeing hopes for a 4Q2019 return to service, but several operators of the aircraft are planning on Jan-2020 or Feb-2020.

    In the meantime, the grounding is hitting Boeing’s bottom line and weighing on the wider US economy. Regulators acting out of phase with each other could further complicate the return of the MAX.

    To read on, visit Aviation safety regulators may diverge over Boeing 737 MAX’s return

    Air Canada: airline is resilient as uncertainty over the MAX lingers

    The worldwide grounding of the Boeing 737 MAX fleet has wreaked havoc on all of the aircraft’s operators, and it will take some time to attain a normal level of operations once the MAX returns to service.

    Air Canada has been acutely hit by the MAX grounding. The MAX jets it was supposed to be operating represented a substantial portion of its narrowbody fleet for the busy summer travel period in 3Q2019.

    The company has used a mix of mitigation measures as the MAX remains grounded, including wet leasing widebodies and extending the operating life of Embraer 190s and Airbus A320s that should have been taken out of its fleet by now.

    Air Canada is also working to ensure that it can time the end of some leases with the re-entry of the MAX into scheduled service – a complex process made even more difficult as the aircraft’s service entry date remains highly uncertain.

    To read on, visit Air Canada: airline is resilient as uncertainty over the MAX lingers

    US Airbus tariffs: airlines seek Mobile (AL) as short term solution

    US airlines that operate all Airbus fleets or have order books dominated by the European airframer have been able to breathe a sigh of relief during the continuing turmoil triggered by the worldwide grounding of the Boeing 737 MAX – until recently.

    As part of a years-long trade dispute over alleged subsidies provided to Airbus, the US has won authority to impose a 10% tariff on Airbus aircraft, which is creating uncertainty for US airlines that have deep order books for Airbus jets.

    The short term solution is a huge push by those operators to take delivery of aircraft assembled at Airbus’ US assembly site in Mobile, Alabama. But ultimately the US and Europe need to reach an agreement that ensures airlines, and possibly consumers, do not bear the brunt of those tariffs.

    To read on, visit US Airbus tariffs: airlines seek Mobile (AL) as short term solution