Every 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.
Amedeo: with no airlines to take its 20 Airbus A380s on order, the lessor will operate them itself
Lessor and asset management firm Amedeo’s order for 20 Airbus A380s is the second biggest outstanding order for the type, and by far the biggest without airline operators identified.
After struggling to secure airline lessees since making the order in 2014, Amedeo has said that it wants to use the aircraft to offer capacity to existing airlines or new disruptive operators, under ACMI/wet lease agreements from 2022. It plans to apply for an air operator’s licence in 2018.
Amedeo was originally established in Jun-2013 as Doric Lease Corp by the German leasing company Doric GmbH. It changed its name in Feb-2014 to mark its separation from Doric (where Amedeo’s founding managers used to work). Based in Dublin, Amedeo specialises in widebody acquisitions and sale and leaseback transactions. Its particular focus is on Airbus A380 aircraft, but its activities also include A350 and Boeing 777 variants.
Airbus has struggled with new orders for the A380, although another order from Emirates may still be in the near term pipeline. Moreover, for several years Airbus has not widened the customer base beyond a fairly small number of operators. Amedeo has little choice but to try a new approach, but there will be challenges.
President Trump praises jobs created by SIA’s Boeing order, but new legislation to cause job losses
New draft US legislation would plumb the depths of discriminatory aviation practices. The Big 3 US airlines (American, Delta, and United) have – so far – fruitlessly campaigned that the Gulf superconnector airlines are artificially big, and that “fair competition” restrictions should be invoked so that those airlines must reduce their flights.
A senator from Delta’s home state of Georgia is now proposing tax provisions that would subject the three Gulf superconnector airlines, as well as a handful of other airlines, to US taxes. The provision is based on US airlines not flying to foreign countries whose home airlines do fly to the US. This is overtly discriminatory and cuts across the long-running US aviation policy of liberalisation that has allowed US airlines to spread their wings internationally. And not only would it attack the Gulf carriers, but at least another 20 international airlines would be affected.
American Airlines ended its codeshares with Etihad Airways and Qatar Airways to escalate its stance. Internally at American the decision was controversial on a commercial basis, and has now taken an aeropolitical turn: Etihad will suspend its Dallas flight from Mar-2018, on the basis that the loss of American’s codeshare will make the flight unviable.
US airlines will never replace Gulf airline flights on a one-for-one basis. One week after US President Trump praised Singapore Airlines for placing a Boeing order that will generate jobs in the US, Etihad has declared that American Airlines is, effectively, single-handedly responsible for a decrease in economic and job contribution in the US.
Whatever the facts, this is a new political environment often guided by emotion and appearance rather than substance and the public interest.
Depressed pricing still hangs over Mexico’s domestic market, but demand holds steady
Mexico’s domestic market continues to grow at a steady pace, with passenger levels increasing 9% year-on-year for the first nine months of 2017. But pricing in the country’s domestic market was depressed during 3Q2017, creating challenges for the larger airlines operating in Mexico.
The country’s second largest airline, Volaris, continues to be under pricing pressure in 4Q2017, while Aeromexico believes its capacity rationalisation in the domestic market is helping its yield performance. For Aeromexico, the more challenging geographical region is the US transborder market.
Aeromexico does expect some capacity rationalisation in the US transborder market, but the region remains competitive, and is strategically important for both Aeromexico and Volaris. Their respective performances on US routes could remain challenged until leisure demand firms up.
Stockton to become a “San Francisco airport”? Rebranding should help visibility, but it’s a journey
Recent reports suggest that San Joaquin County leaders are considering a proposal to change the name of Stockton Metropolitan Airport to include San Francisco in the new name. The county-owned airport would be renamed ‘San Francisco Stockton Regional Airport’.
An advisory committee is suggesting that the change will help attract business, increase awareness of the airport’s location and make a connection with the Bay Area for marketing purposes.
Similar attempts to rebrand airports in Europe have met with varying degrees of success.
Blockchain: potentially transformative technology that could help rebalance the aviation value chain
According to IATA SVP Financial and Distribution Services Aleks Popovic, IATA’s financial settlement system hands USD7.7 billion annually to financial institutions in fees (22% of the world airline industry’s estimated 2016 net profit). Financial institutions are just one of many intermediaries in the aviation value chain, each taking a cut.
IATA, airlines and other aviation organisations are understandably researching blockchain technology’s potential. It could help to reduce airlines’ dependence on intermediaries, to lower costs and to streamline processes.
The best known application of blockchain is bitcoin, the mercurial cryptocurrency, whose benefits for payment include speed of processing, lower costs versus credit cards, lower risk of fraud, and its cross-border nature. It also widens the potential customer base, since bitcoin payment does not require a credit card, or even a bank account.
But blockchain has huge transformative potential beyond cryptocurrency. An open, distributed ledger that records transactions in a manner that is permanent and verifiable, blockchain allows parties to exchange money, data and contracts without involving a third party. It enables ‘smart contracts’, which automatically trigger an action on the fulfilment of agreed conditions.
Blockchain’s potential uses in aviation include areas such as passenger and operational data, loyalty, baggage tracking, MRO, security and distribution.
Condor Flugdienst: Thomas Cook Group’s German airline raises profile with airberlin’s demise
Thomas Cook Group’s biggest airline by passenger numbers, the leisure operator Condor Flugdienst, is the only one with its own brand and separate reporting of financial results. It also has the highest proportion of seat-only sales. More than four years after Thomas Cook merged its airlines into a single segment, Condor still has more autonomy than the others (it even looked at buying parts of airberlin).
Condor’s principal base is Frankfurt Airport, where its 4.8% share of seats in summer 2017 placed it second to Lufthansa, which had 63.4% (Ryanair just edges it into third place this winter). Condor’s next two most important bases are Munich and Dusseldorf, which has overtaken Hamburg as its number three hub. It also serves Leipzig/Halle, Hannover, Berlin Schoenefeld, and Cologne/Bonn, with a routes to destinations in all the major world regions.
After losses, capacity cuts and restructuring, Condor has returned to growth in 2017 and also returned to profit. Condor’s renewed confidence has gained a further boost with airberlin’s demise and subsequent cessation of long haul activities.
Condor has taken the opportunity to expand its network in the Caribbean, where it now offers more destinations than any other airline from Europe, including route launches from airberlin’s former second hub of Dusseldorf.