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 domestic air travel: hubs exceed limits, ex-hubs rebuild
Consolidation in the US market has resulted in large hubs reaching or exceeding their passenger thresholds while other airports caught in the crosshairs of mergers have spent the better part of the past decade attempting to rebuild in the wake of losing their hub status. Thanks to service expansion by low cost airlines, many of those airports are getting close to reaching historical passenger levels, reflecting their ability to adapt to new marketplace dynamics.
With the three large global network airlines relying on their hubs now more than ever to maximise high-yielding connecting passengers, it is imperative that the infrastructure at those airports supports growing passenger numbers throughout. That scenario is casting the spotlight on the age-old debate in infrastructure funding that pits airlines against airports.
A new infrastructure plan introduced by US President Donald Trump in early 2018 proposed some changes in the governance of airports, but it remains unclear whether those proposals will materialise into actual legislation. The result is a continuation of a status quo that in many ways fails to meet the demands of the US market. The inertia begs a question – is it time to give serious consideration to airport privatisation in the US?
To read on, visit US domestic air travel: hubs exceed limits, ex-hubs rebuild
North America-Asia: future of the trans-Pacific airline market
Japan Airlines is expected to open a Tokyo Narita-Seattle service, according to a report from the Puget Sound Business Journal. This meshes with JAL’s own management plan, which calls for a new service to the US West Coast in the short term. Such a flight represents the next stage of growth in the trans-Pacific market.
CAPA’s Americas Aviation Summit on 16 and 17 April 2018 in Houston will address topics relating to North America-Asia growth.
Asian airlines have been expanding on relatively easy routes where there is strong O&D or a partner hub. But increasingly Asian airlines will have to enter competitive markets, grow partnerships, and even enter a competitor’s hub.
China Eastern was reported to be interested in service to United’s Houston hub, but this has not eventuated. A Star or oneworld airline may be interested in services from Asia to Atlanta. US-China open skies will reshape the market. China’s growth is significant but sometimes obscures the rest of Asia, and in particular the need for airlines to link Northeast Asian hubs with developing traffic out of Southeast Asia.
To read on, visit North America-Asia: future of the trans-Pacific airline market
US airlines reject LCC subsidiaries – as Westjet Swoops
The highly anticipated launch of WestJet’s new ULCC Swoop in Jun-2018 will be closely watched worldwide. Swoop is the first domestic low cost subsidiary of a major airline in North America since the days of the – unsuccessful – Delta’s Song and United’s Ted. Air Canada has had success with its low cost subsidiary Rouge, but its route composition is largely international. However, Air Canada seems poised to use Rouge as a line of defense when Swoop and other ULCCs debut in Canada’s domestic market.
Canada and the US are vastly different market places, and the likelihood of US majors revisiting potential LCC subsidiaries is low. Those operators have chosen – or had no other option – to price match ultra low cost airlines through new fare tiers, and the proposition of launching low cost subsidiaries would be hugely unsettling to investors.
Delta is a bit more forward thinking in its domestic network evolution, pursuing select focus cities where it can attain a certain strategic advantage. For now, that seems to be its answer to avoiding the complexities of a dual brand strategy as too many hurdles exist for US airlines to consider attempting to create distinct, lower cost subsidiaries.
The prevalence of the LCC subsidiary model elsewhere in the world strongly suggests it is the most viable approach, but US airline managements are wary of pushing an unwilling union workforce to adopt this solution – for the time being at least.
To read on, visit US airlines reject LCC subsidiaries – as Westjet Swoops
Boracay Island to close: major airline and tourism impacts
The Philippine government is planning to prohibit visitors from visiting Boracay Island, its most popular tourist destination, for six months starting 26-Apr-2018. The government will use the closure period to clean up the island, which has been suffering from environmental degradation, illegal construction and insufficient waste management.
The unusual move could have a long term positive impact on tourism at Boracay and the Philippines as a whole. However, the short term impact on tourism in the Philippines and the country’s three main airlines could be significant. Boracay accounts for approximately 6% of seat capacity at the Cebu Pacific Group and the Philippine Airlines Group while smaller Philippines AirAsia has over 20% of its capacity allocated to the Boracay market.
Boracay attracts approximately 2 million annual visitors, close to half of which are foreigners. Total visitor numbers to the Philippines reached 6.6 million in 2017, following three years of double digit growth, but with the closure of Boracay the Philippines will struggle to meet its 7.4 million visitor target for 2018.
Philippines tourism authorities will need to invest heavily in marketing alternative tourist destinations, and work closely with the impacted airlines, to avoid a decline in overall visitor numbers.
To read on, visit Boracay Island to close: major airline and tourism impacts
Europe summer 2018 airline capacity growth still above 10y average
Growth in airline seats from Europe will slow to 5.2% in summer 2018, versus 6.2% in summer 2017, according to CAPA analysis of OAG data. This will be the slowest summer growth rate since 2014, but well above the 10 year average of 3.9% for the fifth year running.
Jet2.com and Wizz Air are the fastest-growing European airline groups, while Air Europa, Finnair, TAP Portugal, easyJet, Aeroflot Group and Lufthansa Group are also growing at double-digit rates. The demise of airberlin and Monarch has led to some consolidation of seat share in the hands of larger groups.
Europe to Africa will grow fastest, but growth will also be above trend to every other region from Europe (including intra-Europe), apart from Europe-Middle East.
Within Europe, LCC seat growth will be almost twice non-LCC growth, and Eastern/Central Europe will outpace Western Europe. On the North Atlantic, growth above trend is being driven by LCCs, whose seat share will be 8.0% (versus 3.0% two summers ago), while immunised JV share continues to fall. On Europe-Asia Pacific, accelerating growth is mainly driven by Asian airlines.
This report presents data on growth and airline group seat share for each major destination region from Europe this summer.
To read on, visit Europe summer 2018 airline capacity growth still above 10y average
Singapore Airlines Group: How SIA and Scoot share 787s
Singapore Airlines (SIA) took delivery of its first 787-10 in late Mar-2018. SIA is the launch customer for the 787-10 and has committed to acquiring 49 of the new type.
SIA is a new operator of the 787 family but its LCC subsidiary Scoot has been operating 787s since early 2015. Scoot currently operates 16 787s – consisting of 10 787-8s and six 787-9s – and has four more 787-9s on order. Scoot plans to take delivery of its seventh 787-9 in May-2018 and its eight aircraft in Jun-2018.
SIA is receiving its second 787-10 in early Apr-2018 and third aircraft in May-2018. In Jun-2018 SIA will become the eleventh airline group with at least 20 787s in service.
SIA will need to manage the 787 fleet carefully, from a group perspective. Some network adjustments may be required to avoid too much overlap between Singapore Airlines and Scoot.
To read on, visit Singapore Airlines Group: How SIA and Scoot share 787s