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.

    US airline ownership: no promise of change to foreign ownership laws

    Foreign ownership laws in North America have undergone minor changes within the past year, including the Canadian government’s decision to increase foreign ownership limits to 49% (with no foreign entity holding more than 25% of voting shares).

    Legislation introduced in the US earlier in 2018 to remove ownership restrictions on the country’s airlines has – unsurprisingly – gained little traction. But at least the proposal created an opportunity for discussing changes to US airline foreign ownership stipulations.

    The needle on foreign ownership levels of US airlines is not likely to move anytime soon, and the increase in foreign ownership levels in Canada’s airlines have not resulted in drastic changes in the country’s aviation landscape. The result is the status quo will remain in place for the foreseeable future as age old protectionist policies show no signs of changing.

    To read on, visit US airline ownership: no promise of change to foreign ownership laws

    The Great Debate: aviation unions could be a force for good

    The CAPA World Aviation Summit in Berlin on 27-28 November 2018 will bring together representatives of airline management and pilot unions to debate the question: can aviation unions be a force for good?

    A CAPA analysis published in Sep-2018 examined the growing imbalance between demand and the supply of new airline pilots. Global aviation has enjoyed strong traffic growth in recent years, implying that supply has been sufficient. However, this growth is tightening the supply of labour and the airline industry faces challenges in recruiting qualified pilots in the numbers needed to cope with future expansion.

    Pilots are not the only labour group in the industry, but they are by far the most expensive and highly skilled. The looming shortage of pilots is strengthening their negotiating position. The discussion in Berlin will consider the challenge of servicing aviation’s growth with an adequate supply of human resources.

    It will also discuss whether unions have the industry’s interests at heart, whether airlines are too focused on a wage race to the bottom, and whether unions can adapt to rapid change. Cost reduction remains a key priority for management, but this may be more difficult when skilled labour is in short supply.

    To read on, visit The Great Debate: aviation unions could be a force for good

    Eastern/Central Europe airports: long haul connectivity opportunities

    By comparison with Western Europe, Eastern/Central Europe has very few airports with long haul connections. According to data from OAG Schedules Analyser for the week of 8-Oct-2019, there are 62 airports in Western Europe with direct flights to long haul destinations and only 16 in Eastern/Central Europe.

    Moreover, while Western Europe has 25 airports with 10 or more long haul routes (and six with more than 50), in Eastern/Central Europe only the two leading Moscow airports have a double digit number of long haul routes.

    Moscow Sheremetyevo has the greatest number of short haul to long haul connections in E/C Europe, mainly operated by Aeroflot. Outside Russia/CIS, Warsaw has the greatest number of short haul to long haul connections, with LOT Polish its leading operator. At Prague and Budapest, short haul to long haul connectivity is mainly provided by airlines from elsewhere.

    To read on, visit Eastern/Central Europe airports: long haul connectivity opportunities

    American Airlines SWOT: high leverage overshadows its strengths

    American Airlines is in the final stages of its merger with US Airways, after reaching major milestones that included merging more than 1,300 IT systems, moving its pilots and aircraft onto a single operating platform, and completing the rebanking of strategic hubs in Miami, Dallas and Chicago.

    The airline enjoys the benefit of operating the youngest fleet among its large US global network peers, and has risen to take the title of the largest US domestic airline, just passing Southwest in US market share.

    But despite those achievements and positioning, American’s financial leverage is significantly higher than its peers, and the company faces short term revenue pressure that could affect the lofty financial targets that it has set for itself.

    This report examines American’s strengths, weaknesses, opportunities and threats.

    To read on, visit American Airlines SWOT: high leverage overshadows its strengths

    Thailand-China LCC expansion drives enormous growth

    Thailand-China has emerged as one the largest and fastest growing air travel markets in the world. There are currently close to 1,300 weekly flights from Thailand to China, generating 250,000 one-way seats. Seven years ago there were 200 weekly flights, generating only 40,000 one-way seats.

    Thailand has become the most popular destination for Chinese travellers outside Greater China. Chinese visitor numbers to Thailand are on pace to exceed 11 million in 2018, compared to less than two million in 2011.

    Airlines of all types from both countries have benefitted from the rapid growth in Thailand-China travel. However, LCCs in particular have grown rapidly. The LCC penetration rate in the Thailand-China market has grown over the past seven years from only 7% to 44%, and is poised to increase further as all of Thailand’s LCCs are now banking heavily on China as they expand.

    To read on, visit Thailand-China LCC expansion drives enormous growth

    Urumqi Airport: fast growing Central Asian hub, but no BRI benefit yet

    Urumqi has emerged as one of China’s fastest growing airports. Passenger traffic has nearly quadrupled over the past decade, from only 5.8 million in 2018 to 21.5 million in 2017. Traffic increased by 6% in 2017 and was up another 9% in the first seven months of 2018.

    However, Urumqi is still relatively underserved from an international perspective, despite its strategic location on the Silk Road and only 300km from Kazakhstan. Urumqi is closer to Central Asia than eastern China and is within narrowbody range of several markets benefitting from China’s ‘Belt and Road Initiative’ (BRI). Urumqi also has a large Central Asian ethnic population and has become a hub for international companies seeking to increase their presence in Central Asia or the Silk Road Economic Belt.

    China Southern has operated a hub at Urumqi for several years and currently links Urumqi with 15 international destinations – all of which are along the Silk Road. However, the China Southern hub consists predominantly of domestic services and 96% of Urumqi’s total seat capacity is in the domestic market. International traffic has declined over the past three years, whereas domestic traffic has grown rapidly.

    To read on, visit Urumqi Airport: fast growing Central Asian hub, but no BRI benefit yet