Catch up on CAPA’s exclusive Market Analysis pieces – Lufthansa, Cathay Pacific, JAL and more

    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.


    Germany-Italy: a major aviation market where Lufthansa dominates

    Germany is Italy’s biggest aviation market and Germany-Italy is Europe’s number four country pair by seat numbers. Lufthansa Group companies, led by Lufthansa and supported by the fast growing LCC subsidiary Eurowings and Italian regional subsidiary Air Dolomiti, dominate Germany-Italy. The group has a 62% seat share in the year to Sep-2018, compared with 20% for Ryanair and 9% for easyJet.

    The gap left by airberlin’s collapse and exit can be likened to that left by a hand withdrawn from a bucket of water. Other operators have immediately closed in around the space and airberlin’s 10% seat share of last year has not been missed. Easyjet and Lufthansa, through Eurowings, are the main beneficiaries, while Condor is also growing rapidly on Germany-Italy routes.

    Relative to the rapid growth of these operators, Ryanair is taking something of a pause for breath in this market this year, perhaps waiting to see what happens to Alitalia. Italy’s national airline has only 4% of seats on Germany-Italy, suggesting that Lufthansa’s interest in bidding for it is of only minimal importance to the German group.

    To read on, visit Germany-Italy: a major aviation market where Lufthansa dominates


    Asia-Seattle airline market: Cathay Pacific’s opportunity to match JAL

    At Seattle Tacoma airport there are already almost as many international seats to Asia as to Europe but the airport could soon gain more, with Japan Airlines considering the Pacific Northwest city.

    Media reports indicate that JAL has decided to serve the airport, but JAL has not yet announced its decision. A JAL service will be accompanied by further growth of its codeshare partnership with Alaska Airlines, which is the largest airline in Seattle by far. JAL is able to partner with Alaska Airlines in a number of cities, despite JAL having a JV with American Airlines.

    A JAL service to Tokyo should be followed by a Cathay Pacific Hong Kong-Seattle flight. Seattle has long been a consideration, but Cathay already has an extensive footprint in Vancouver, is hesitant to send the wrong message to its (non-JV) partner American Airlines by partnering with Alaska Airlines, and needs to decide on aircraft selection.

    The debate is less about commercial practices and more about optics.

    To read on, visit Asia-Seattle airline market: Cathay Pacific’s opportunity to match JAL


    Airline mergers: why Europe needs blue sky thinking

    IAG’s interest in acquiring Norwegian Air Shuttle once again focuses attention on the process of consolidation in the European aviation sector. Although often headline-grabbing, this is a process that has not led to any significant change in market structure in recent years.

    The wave of mega-mergers in Europe started with Air France and KLM in 2004, included Lufthansa’s acquisitions of SWISS and Austrian, and ended with the 2011 combination of British Airways and Iberia to form IAG. Since then, consolidation has ambled along at a slow pace, led by mergers of smaller scale and market exits.

    By comparison with North America, Europe’s aviation market remains very fragmented. Europe’s top seven airline groups control 55% of seats to/from/within Europe in summer 2018, compared with an 82% share for North America’s top seven.

    An acquisition of Norwegian would add 3% to IAG’s 9% share and take it just ahead of Lufthansa Group as Europe’s number one. However, it would leave it well short of American Airlines’ market-leading 19% share in North America and still leave Europe in a fragmented state.

    Only mergers between Europe’s biggest groups could match the seat share of North America’s leading players.

    To read on, visit Airline mergers: why Europe needs blue sky thinking


    US widebody aircraft market: Boeing’s upper hand in aircraft orders

    A decision by American Airlines to cancel its order for Airbus A350s and opt for 47 Boeing 787 widebodies surprised no-one. The airline had been hinting for quite some time that the order was somewhat of an outlier as it worked to simplify its widebody fleet for the future.

    American’s cancellation of its Airbus A350s followed a decision by Hawaiian Airlines to cancel an order for six Airbus A330-800s and instead order 10 Boeing 787-10s. American’s and Hawaiian’s selection of the 787 has resulted in a diminished widebody order backlog for Airbus in the US.

    For now, US airlines appear to have their large widebody order books firmed up for the foreseeable future. But they are eager for mid-market aircraft as the replacements of aging Boeing 757s and 767s, a development that is now the next phase of intense competition for Boeing and Airbus.

    To read on, visit US widebody aircraft market: Boeing’s upper hand in aircraft orders


    US smaller airport using incentives to attract new LCC services

    Small to mid-size airports in the US have used a range of tactics to attract and sustain service during the past decade as market forces have changed, due to consolidation.

    Waiving certain fees or using minimum revenue guarantees seem to be the most dominant forms of attracting new air service, and those methods offer mixed results, depending on an airport’s geographical location and a city’s economic climate.

    As the three large US global network airlines (United, Delta and American) work to maximise high yielding connections at their hubs, small to medium sized airports may need to continue courting low cost airlines to secure direct service to destinations at the top of their respective wish lists.

    To read on, visit US smaller airport using incentives to attract new LCC services


    The airline cost equation: strategies for competing with LCCs

    In spite of all the talk of business model convergence, there are still meaningful unit cost differences between low cost airlines and full service/legacy airlines. Anyone can unbundle and offer seat-only low fares, but this is not the same as having the low costs necessary to be profitable with such fares. Business model choice has implications for cost structure as well as for revenues.

    Legacy airline responses to competition from low cost airlines have included cutting costs, adopting low cost features, setting up or buying a low cost subsidiary, and forging partnerships with LCCs. However, LCC market share continues to increase.

    A panel discussion at the CAPA Airline Leader Summit on 17 & 18-May-2018 will discuss the theme ‘The Cost Equation: cutting costs and strategies for competing with low cost carriers’. The panel will include IAG CEO Willie Walsh, Kenya Airways CEO Sebastian Mikosz, Amedeo CEO Mark Lapidus, AACO Secretary General Abdul Wahab Teffaha and AAPA Director General Andrew Herdman.

    To read on, visit The airline cost equation: strategies for competing with LCCs


    Budapest Airport: Central Europe’s #1 LCC airport and growing fast

    Budapest Ferenc Liszt International Airport is only Europe’s 46th largest airport by seat numbers (based on in its seasonal peak week of 30-Jul-2018). However, it is significant as the largest low cost airport in Central Europe (based on the number of LCC seats). LCCs have 60% of all seats at the airport.

    Budapest is growing rapidly, with double digit passenger growth in each of 2015-2017 and 17.0% growth in 1Q2018. The airport’s leading airline, Wizz Air, is growing capacity at 18.0%, and number two Ryanair is growing by 33.6% this summer (week of 30-Jul-2018).

    Strongly dominated by short/medium haul, Budapest’s long haul network receives a boost this summer when LOT Polish Airlines establishes its first trans-Atlantic routes from outside Poland, with services to New York and Chicago. Moreover, American Airlines returns to Budapest after more than six years, with a Philadelphia service. Norwegian has mooted narrowbody trans-Atlantic routes from Budapest.

    When Malev Hungarian Airlines collapsed in early 2012 the airport lost its leading airline, and there were concerns that Budapest would lose connectivity. However, the gap was quickly filled and this catalysed renewed growth. There are 55% more routes and one third more airlines in summer 2018 versus summer 2011.

    To read on, visit Budapest Airport: Central Europe’s #1 LCC airport and growing fast