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.
The Singapore Airshow – subdued sales, but in the heart of the world’s most vibrant market
As the 2018 Singapore Airshow kicks off on 6-Feb-2018, it may seem at first sight to have a relatively minor role, at least as measured by attention grabbing order numbers. They are few.
Competition from other airshows, most notably Dubai, has been compounded by the fierce competition between Airbus and Boeing to get runs on the board in 2017. So, for example, instead of waiting till a major airshow to make announcements, the big two went to great lengths to hustle in a rush of orders in Dec-2017.
However, the Singapore Airshow is still the biggest airshow in Asia Pacific and provides an opportunity for suppliers from around the world to promote opportunities in this exciting and high growth market.
CSeries aircraft could get second looks from Airbus customers through the new Bombardier partnership
The Airbus-Bombardier tie-up has been one of the most significant developments in the aerospace sector during the past few years.
The partners recently scored a huge victory after the US International Trade Commission struck down a recommendation by the country’s commerce department to slap tariffs of nearly 300% on Bombardier CSeries aircraft delivered to the US. The decision paves the way for Delta to become one of the largest operators of the aircraft.
Another result of the new partnership is that one large Airbus customer – JetBlue – is indicating that it would need to factor in changes to the aerospace landscape as it evaluates its future fleet needs, particularly its subfleet of 100-seat Embraer 190s.
Other Airbus customers are also likely factoring in Airbus’ participation in the CSeries programme as they map out their future fleets. Previously, the US ULCC Spirit has stated that it could study options from other airframers.
China’s secondary city long haul flights: policy changes and higher fuel prices could slow growth
Growth of China’s secondary city long haul flights has been so underpinned by subsidies that it has become conference coffee break talk to exchange stories of what exuberant incentives are on offer, often for fanciful flights.
Secondary city long haul flights will average 31 each day in 2018, up from 12 in 2015. Foreign airlines initially led secondary city long haul development, but now it is firmly Chinese airlines developing this segment – and in particular the HNA Group, which operates 31% of Chinese-flown secondary city routes.
Subsidies for outbound Chinese passengers holidaying in Australia, Europe and the Americas brought little benefit to Chinese economies but were encouraged by local governments.
Now, China’s major state-owned airlines are appealing to the central government to curtail subsidies, according to Aviation Week. The state-owned airlines may be ganging up on HNA, but subsidies and the rush for traffic rights has brought disorder to China’s carefully laid hub developments.
Even without a policy change, rising fuel prices will drive a shake-out of services, most of which were launched during fuel’s rock-bottom prices. There is some potential benefit to other airlines, but most passengers on subsidised flights are unlikely to pay more.
Peru aviation: Government now has a significant opportunity to seize growing demand for air travel
Peru has been one of the more dynamic aviation markets in Latin America during the past few years, particularly during the region’s recent bout of economic weakness. During that time, the country charted solid economic growth and sustained stable air passenger numbers.
Amid a low cost boom across Latin America in 2017, Viva Air Peru made its debut in the country and built up a 2% market share from May-2017 to Nov-2017. The airline believes much opportunity for passenger stimulation remains in Peru, and airlines operating in the country’s domestic market increased nearly 8% in the 11M ending Nov-2017. Peru is also charting solid domestic growth as Lima’s prominence as a regional hub continues to grow.
But Peru’s aviation industry has major challenges in reaching its full potential, including the fact that Lima Jorge Chavez International Airport is operating well beyond its designed capacity. Calls for capacity expansion at the airport are growing, so that Lima and Peru realise their full potential and compete effectively with other hubs in the region.
Phnom Penh Airport: rapid passenger and tourism growth dictates new airport for Cambodia’s capital
Cambodia has approved a proposal to develop a new airport 30km outside the capital, Phnom Penh. The new airport could eventually replace the existing Phnom Penh International Airport, which is constrained due to its location on a relatively small site of approximately 400ha near the city centre.
A gigantic 2400ha site has been set aside for the new airport, providing ample space for multiple runways and terminals. The existing airport has a single runway and a terminal which has the capacity to handle 5 million passengers per annum. Terminal capacity can potentially be doubled but there is not sufficient space at the existing site to support a large scale airport or second runway.
Passenger traffic at Phnom Penh surged by 25% in 2017 to 4.2 million passengers, and has doubled in just five years. Growth of at least 20% is likely in 2018, which would put the airport throughput above 5 million passengers.
US airline corporate travel outlook: business fare pricing traction rebounds; United grows capacity
The US major global network airlines American and Delta were offering bullish outlooks for the corporate sector before United Airlines outlined plans to growth its annual capacity as much as 6% during the next three years, spurring fears that a fare war would ensue in the US market.
American, in particular, has worked feverishly to close the gaps it had in corporate market share against its larger rivals, and has added more than 20,000 new small to medium sized corporate accounts in 2017. Delta is working with the position that many corporations plan to sustain or increase their travel spend during 2018.
Delta’s optimism has also been fuelled by business yields rebounding from previous pricing pressure. For now, it is tough to predict whether United’s capacity growth, designed to improve connectivity through is mid-continent hubs, will affect the momentum in business fare pricing traction.
Vienna Airport’s airline revolution. LCCs & Lufthansa Group win from NIKI/airberlin demise
Vienna has been experiencing a revolution in its traffic, both in terms of growth and composition. In 2017, the airport pushed past 24 million passengers for the first time, after several years of stagnating around 22-23 million. This happened in the year that NIKI and airberlin, its second and third largest airlines of 2016, ceased operations.
Not only did Vienna’s biggest airline, Austrian, return to strong growth after its own long period of stagnation, but its low cost airlines grew even more rapidly. Led by Eurowings, LCCs have almost doubled their share of passengers over the past two years. Vienna was Eurowings’ first base outside Germany, is the base for easyJet’s new Brexit-hedging European subsidiary and will be a new base for Wizz Air from summer 2018.
The Lufthansa Group now has almost two thirds of passengers at Vienna. Although Austrian is growing once more, the lower cost Eurowings gives the group a significant alternative growth vehicle.