Catch up on CAPA’s exclusive Market Analysis pieces – US-UK bilaterals, Air France, Airport construction review 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.


    US-UK bilateral aviation talks could provoke post-Brexit rethink

    Before the UK leaves the European Union, it will have to negotiate a new bilateral air service agreement with the rest of the bloc in order to ensure traffic rights for its airlines. It must also negotiate new bilaterals with 17 non-EU countries where rights are currently granted under EU agreements.

    The most important of these extra-EU agreements will be a new UK-US deal, necessary once the UK falls out of the EU-US open skies agreement. After the EU (and other members of the ECAA), the US is the UK’s second most important aviation market by seats and ASKs. Apart from the internal European aviation market, the current EU-US open skies agreement, to which the UK is a party, is one of the world’s most liberal international air services agreements.

    This provides a helpful backdrop to US-UK negotiations, but there are also powerful US aviation interests that have resisted liberalisation (for example, the opposition to the Gulf airlines and to Norwegian’s Irish and UK subsidiaries). Nobody wants a return to the old Bermuda II UK-US agreement, but complexities such as nationality clauses may challenge the negotiators. The time is ripe for a rethink of the whole bilateral system.

    To read on, visit US-UK bilateral aviation talks could provoke post-Brexit rethink


    Air France slips as LCCs intensify – now long haul challenges

    Air France remains the biggest airline in Paris by some distance, but low cost airlines have grown their share of seats in recent years. Air France’s in-house LCC, Transavia France, has only slowed the tide, while competitors such as easyJet and Vueling have taken market share. Norwegian has also been part of this low cost onslaught, initially on medium haul and now on long haul routes to the US.

    To make things more difficult for Air France, other low cost operators are also entering long haul markets from Paris, particularly on the Atlantic, including Level, WestJet, French Bee and WOW air, with Primera Air also planning to enter.

    Air France has not fully been able to defend its Paris share against LCC competition by the use of Transavia, a genuine low cost operator focused on medium haul and based in Orly. As long haul low cost competition grows, it will hardly be any easier for Air France to defend its position with its new CDG-based subsidiary Joon, which operates both medium haul and long haul and does not even set out to be a low cost airline.

    To read on, visit Air France slips as LCCs intensify – now long haul challenges


    Global airport construction review 2Q2018: USD803 billion costs

    Airport capacity, or the lack of it, is a consistent theme. Runway capacity in particular is not keeping pace with airline expansion and passenger and cargo growth, especially so in Europe, North America and Latin America, with the potential to constrain growth.

    Whether or not that growth will continue at the impressive rates achieved during the past two years remains to be seen. For now it is clear that while some regions and individual countries are not doing enough to satisfy demand, the number of airport construction projects and the capex generated are often higher than might be imagined.

    This report looks at: where the projects are; the level of expenditure by region; and lists the biggest individual projects or groups of projects individually, again by region.

    To read on, visit Global airport construction review 2Q2018: USD803 billion costs


    Philippines domestic market: airport constraints restrict growth

    The Philippines has had one of the fastest growing economies in Asia over the past few years. Demand for air travel has naturally increased, but domestic traffic has increased at a rate slightly slower than GDP.

    Slot restrictions at Manila make it difficult to keep up with rising demand: domestic traffic at Manila increased by only 2% in 2017, whereas the total domestic market increased by 6%.

    Two of the three main domestic competitors in the Philippines, AirAsia and Philippine Airlines, have been focusing expansion at secondary airports such as Cebu and Clark. Market leader Cebu Pacific has paused its domestic expansion in the past two years, resulting in market share declines, but is re-accelerating growth in 2018 as it takes seven high density A321s.

    To read on, visit Philippines domestic market: airport constraints restrict growth


    Delta Air Lines SWOT: challenges after years-long industry leadership

    There’s no question that Delta Air Lines betters its large US global network rivals American and United in numerous metrics ranging from its operational performance to customer sentiment. Delta’s outperformance is driven by the transformation the company has undertaken since its merger with Northwest Airlines a decade ago.

    The distance between Delta’s merger integration and that of its rivals (five years for American and eight for United) has allowed Delta to recognise the growing maturity of the US domestic market and the importance of building a global network to ensure blanket coverage in the future.

    Obviously work remains for Delta in building a competitive network, and its US rivals have pledged to move aggressively to close competitive gaps with the airline. Delta also faces numerous challenges and threats, including cost creep, uncertainty over Brexit, and a lack of immunity from investor anxiety driven by decisions taken by its competitors. This report examines Delta’s strengths, weaknesses, opportunities and threats.

    To read on, visit Delta Air Lines SWOT: challenges after years-long industry leadership


    Thailand low cost airlines: rapid growth as fleet triples in 5 years

    Thailand has six low cost airlines operating a combined fleet of 136 aircraft, according the CAPA Fleet Database. LCCs account for 45% of Thailand’s total commercial aircraft fleet and over 60% of the narrowbody fleet.

    Thailand’s LCC sector has grown rapidly since the first two LCCs, Nok Air and Thai AirAsia, launched in 2004. Growth has particularly accelerated over the past five years, driven partially by the late 2013 launch and rapid expansion of Thai Lion Air.

    Five years ago, in May-2013, there were only 42 LCC aircraft based in Thailand, including 28 at Thai AirAsia and 14 at Nok Air. Over the past five years the LCC fleet has more than tripled in size, and the total commercial fleet has increased by 50%.

    To read on, visit Thailand low cost airlines: rapid growth as fleet triples in 5 years


    Reno-Tahoe airport: tech company growth prompts upside

    Reno International has had its share of ups and downs throughout the years but the airport logged 10% passenger growth in 2017, inching closer to pre-recession levels. During the past couple of years the airport has secured service to Denver and New York, JFK, and more recently, flights to Austin by ULCC Frontier.

    Some of the growth is driven by shifts in Reno’s economy as the region has attracted outposts from Apple, Tesla, Google and Amazon, which has helped to reduce the city’s unemployment rate drastically during the past eight years.

    All the elements are in place for solid growth at Reno’s airport; but some challenges are looming, including a potential housing shortage in the Reno area and ensuring that the airport retains ample US Customs and Border Protection staffing in order to attract additional international service.

    To read on, visit Reno-Tahoe airport: tech company growth prompts upside