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.
Singapore Changi: more healthy growth for SE Asia’s largest airport, prompting capacity investments
Singapore Changi Airport passenger traffic increased by 6% in 2017, and for the first time surpassed 60 million. On 18-Dec-2017 Changi became the first airport in Southeast Asia to reach 60 million passengers, beating out its rivals Bangkok Suvarnabhumi, Kuala Lumpur International and Jakarta Soekarno-Hatta. Suvarnabhumi reached the 60 million passenger milestone later in Dec-2017, while Soekarno-Hatta and Kuala Lumpur International will likely hit 60 million in 2018.
Singapore Changi’s traffic has increased by 150% since 2003, driven primarily by rapid LCC expansion. LCCs, which launched in Singapore in 2004 and 2005, now account for 30% of capacity at Changi.
Growth in Singapore has slowed in recent years and is unlikely to return to the double digits, which was last achieved in 2012. However, Singapore passenger traffic could double over the next 15 years, and Changi will be prepared to handle such growth after the opening of a fifth terminal and third runway.
Key Boeing customers Southwest and American satisfied in the early days of 737 Max 8 operations
After making its US debut with Southwest Airlines and American during 2017, the Boeing 737 Max will continue to populate the fleet of those large operators in 2018. Combined, Southwest and American hold firm orders for 253 of the 737 Max 8 variant.
Although those airlines have hundreds of Max narrowbodies on order, the actual operating fleet of Max jets in the US remains small. CAPA’s fleet database shows Southwest and American operate fewer than 20 of the 737 Max 8 model; however, the 737 Max fleet will continue to grow steadily in the US throughout 2018.
So far, the Max 8’s service entry has been reasonably smooth, and Southwest has publicly declared that the aircraft is meeting its expectations in fuel burn performance. The airline also recently stated that it had not experienced any major issues with the new narrowbodies.
The US’ largest domestic airline is also hinting that benefits from new tax regulations in the country could spur additional aircraft orders for Boeing from one of its most influential customers.
Southeast Asia A321neo fleet: upgauging trend accelerates; limited long haul opportunities
VietJet took delivery of its first A321neo at the end of 2017, becoming the tenth airline to operate the new type. This marked the first A321neo delivery to Southeast Asia.
Southeast Asian airlines have orders for more than 300 A321neos. Southeast Asian airlines will use the new aircraft type almost entirely to upgauge regional routes, and particularly to slot-constrained airports.
The deployment patterns are very different for European and North American airlines, which are planning to use A321neos to operate long haul services. In Southeast Asia, long haul narrowbody is a much more challenging proposition.
Cathay Pacific won’t leave oneworld to join Star Alliance, and China Southern can’t join oneworld
The Cathay dilemma is only one part of a complex reaassessment of strategic airline partnership options in North Asia. In 2018 aviation will continue to experience changes, but some adjustments to the much-discussed global alliance shake-ups in greater China may unfold in unexpected ways. For example, conventional wisdom holds that Cathay Pacific will exit oneworld for Star Alliance, while American Airlines’ minority stake in China Southern will result in China’s – and Asia’s – largest airline leaving SkyTeam for oneworld.
It has been argued that Cathay is a better fit for Star. In fact, Cathay is far better suited to oneworld, which facilitates strong commercial relations in Cathay’s three largest markets. Star Alliance does not come close to providing the same coverage.
Further, Star – already too big – is unlikely to accept Cathay as a member. And so long as Cathay remains in oneworld, Cathay is likely to prevent China Southern from joining.
But changes are afoot. Global alliances are undergoing challenges, and will be complemented widely by bilateral relationships morphing into complex, multi-jurisdiction partnerships. It is on this platform where China Southern and American Airlines can become closer, and later add Japan Airlines – then perhaps a fourth airline.
Northeast Asia aviation 2018 outlook: Chinese airlines begin to take on the role of disrupters
The world’s airlines are increasingly putting aside their concerns about Gulf superconnectors to acknowledge instead the growing competitive concern about airlines in mainland China, which, in just one indication of their might, have opened over 100 new long haul destinations in the past decade.
Chinese fleet growth is still characterised by orders placed for near term delivery. They operate young 777-300ER fleets, so 777X sales are not an immediate concern. A350 sales are increasing, while the A330neo and the assumed 797 will one day be good fits for the region’s airlines.
There is much to be addressed in the way that the airlines interface with each other through partnerships and alliances. There were significant changes in 2017 that will be put to bed in 2018 – or perhaps overturned.
Turboprops & regional jets: lowering aircraft orders could suggest a fading regional airline model
The future looks hazy for turboprops and regional jets. Recent headlines highlight the challenges faced by the regional aircraft manufacturers Bombardier and Embraer.
A Dec-2017 CAPA report on Europe’s aircraft fleet noted a disproportionately low number of orders for these types. Further analysis of data from the CAPA Fleet Database confirms that this is not confined to Europe.
For turboprops, the ratio of aircraft orders to aircraft in service is low in all regions, particularly in Europe, North America, Africa and Latin America. For regional jets, this ratio is reasonably high in Asia Pacific and Middle East, but low in Africa, Latin America and Europe. Even in North America, comfortably the leading region for regional jets in service, orders are low by comparison.
Order cycles are driven by a complex range of factors, including technological change, aircraft pricing and airline profitability, oil prices, aircraft ages and developments in airline business models. The ratio of aircraft orders to aircraft in service may not be a definitive guide to the future.