Industry Intelligence - catch up on CAPA’s exclusive market analysis insights

2 March, 2020

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. Here's some of the reports published over the past week.


American Airlines, Qatar Airways find commercial common ground

American Airlines has emerged from a fog in the early weeks of 2020, outlining strategic partnerships with GOL, Alaska Air Group, and now, Qatar Airways.

After severing ties in 2018, American and Qatar appear to have buried the hatchet, determining that the benefits of a new pact far outweigh any lingering animosity regarding accusations over unfair subsidies and other issues that the Big 3 of American, Delta and United had raised against the largest Gulf Airlines during the past few years.

The Qatar deal is the last piece of a trifecta for American to lay the groundwork for building a competitive network over the long term. The new pact helps American make important inroads into the Middle East, India and Africa that complement its own efforts to expand in those regions.

American is hinting that at some point it will introduce service to Qatar's Doha hub on its own metal, which indicates that, indeed, if there had been any hard feelings between the two airlines, they are taking a back seat to more logical commercial interests.

TO READ ON, VISIT: American Airlines, Qatar Airways find commercial common ground


SIA fine-tunes group strategy to tackle big new challenges

Although Singapore Airlines (SIA) has forged a reputation as one of the most successful carriers in the industry, it isn't resting on its laurels. SIA is continuing to evolve and adapt its multipronged business model, as it seeks new partnerships and introduces advanced aircraft types to broaden its network capabilities.

SIA's moves are partly driven by a set of well-known strategic challenges. Competition on long-haul connecting markets is coming from the giant Middle Eastern carriers and increasingly from the Chinese mainland airlines.

Closer to home, LCCs in Asia are continuing to ramp up their fleets with vast order backlogs. And other Asian hubs are attempting to emulate the success of Singapore's Changi Airport as a global connection point.

TO READ ON, VISIT: SIA fine-tunes group strategy to tackle big new challenges


American and Alaska Airlines breathe fresh air into US competition

Although the US remains a mature market, with FSCs, LCCs and ULCCs firmly entrenched in their respective strategies, occasionally interesting developments occur.

During the past few months one of the more fascinating events was Delta's surprise tie-up with LATAM, which is dissolving a long term partnership with American and exiting the oneworld alliance.

It appeared as if American Airlines would accept LATAM's defection without much protest or examination of its own international strategy. But now American and Alaska Air Group have opted to cancel a planned dissolution of their relationship, and instead are bolstering their partnership to enable American to introduce new long haul service from Seattle, which is a coastal hub for Delta. It is an interesting move by American, which is in the midst of making a major push from its hubs in Dallas/Fort Worth and Charlotte.

Alaska has also pledged to become a fully fledged member of the oneworld alliance in 2021, at a time when scrutiny of the intensity of alliances is growing. Alaska has flirted with oneworld in the past, and now it seems as if the airline is ready to commit in order to bolster its position among corporate elites in Seattle.

TO READ ON, VISIT: American and Alaska Airlines breathe fresh air into US competition


Sweden and Norway airports: still growing, just

Financial statements for the main airport operators in Sweden and Norway, respectively Swedavia and Avinor, indicate that the anticipated impact of high taxes on aviation and of environmental activism, which is powerful in both countries and especially Sweden, has not yet brought about the depth of negative result that was envisaged, and which has been recorded by local airlines.

State-owned Swedavia operates 10 of the major airports in Sweden, including those in the three leading cities of Stockholm, Gothenburg and Malmö.

Also a state-owned operator, Avinor controls most of the airports in Norway, 44 in all (there are very few privately owned airports). Unlike Swedavia, Avinor is also responsible for air navigation, but that role is diminishing.

Both organisations report revenue increases in the final quarter of 2019 and for the full year, although that has not always been reflected in the bottom line - in the final quarter especially.

TO READ ON, VISIT: Sweden and Norway airports: still growing, just


Air Canada and JetBlue: high hopes for the Airbus A220

North American Airbus A220 customers continue to lavish praise on the aircraft, with the term 'game changer' uttered often when JetBlue Airways and Air Canada discuss the possibilities that the A220 opens up.

Air Canada has recently started taking delivery of the A220 and JetBlue is preparing to accept delivery of is first aircraft later in 2020.

Air Canada cites the potential of the aircraft to open up profitable new city pairs, and JetBlue is convinced the aircraft will improve its cost structure.

Combined, Air Canada and JetBlue have 113 A220s on order, and once JetBlue receives all 70 of its A220s, it will be one of the largest operators of the aircraft in North America.

TO READ ON, VISIT: Air Canada and JetBlue: high hopes for the Airbus A220


Groupe ADP takes large stake in GMR Airports and blindsides Tata Group

France's Groupe ADP has signed a share purchase agreement for the acquisition of a 49% stake in GMR Airports, representing investment of INR107.8 billion (USD1.5 billion). The deal came out of the blue, as one had already been agreed with a consortium led by India's Tata Group.

Groupe ADP, which operates the two main Paris airports, as well as associated infrastructure in the French capital and airports and terminals around the world, reported a very positive FY2019, with revenue increasing by 17.3% and EBITDA by 5.5%.

Phase one of the acquisition will be completed "within the coming days" (the announcement was made on 19-Feb-2020), for a 24.99% stake, and the second phase, for a further 24.01%, is to be concluded in the coming months and is subject to certain regulatory conditions: notably, obtaining the customary regulatory approvals - in particular, from the Reserve Bank of India.

In terms of passenger numbers, the combined entity is claimed to be the biggest airport operator in the world, with 336 million passengers in 2019. But is it really 'global', as it claims to be? And what potential dangers yet lurk for either party?

TO READ ON, VISIT: Groupe ADP takes large stake in GMR Airports and blindsides Tata Group


UK's high-speed rail (HS2) lining up a Chinese company

Infrastructure is top priority policy in the UK at the moment. Since the General Election in Dec-2019, apparently all that occupies Prime Minister Johnson's thoughts is ditching "austerity" (which has been around since 2008) and embracing instead a policy of rampant investment into infrastructure. That appears to be one of the reasons that a more cautious Chancellor of the Exchequer, Sajid Javid, resigned.

A much-needed part of that infrastructure is the delayed high-speed rail (HS2) project to connect London with the Midlands and the North of England. The first part of the project has been quickly approved, although questions remain about the sections that follow. It seems that a Chinese company has approached the government, promising to build the HS2 faster and cheaper, and with faster trains.

If such a scenario were to emerge, does that mean that Chinese interests might pitch to build the even more delayed third runway at Heathrow Airport? They already have interests at two UK airports, including Heathrow.

TO READ ON, VISIT: UK's high-speed rail (HS2) lining up a Chinese company


Sustainability in aviation: Delta's goals add to dialogue

It is not surprising that Delta Air Lines has declared fairly ambitious plans to become carbon neutral over the next decade and is spending USD1 billion to meet that goal. Throughout 2019 Delta's executives fielded questions about sustainability, and the airline's management pledged that in 2020 the company would exert more of an active voice in conversations about aviation's role in combating climate change.

Delta's plans to achieve carbon neutrality have been widely deconstructed since the airline unveiled its environmental goals, and in some ways there are more questions than answers regarding how the company will attain its targets. But Delta seems aware of the challenges associated with its goals, particularly with growing scepticism about carbon offsetting.

With limited room for manoeuvre in the short term, all airlines are searching for ways of mitigating environmental damage, most tellingly by the use of newer, more efficient aircraft.

TO READ ON, VISIT: Sustainability in aviation: Delta's goals add to dialogue


Airport groups: large revenue increases for Groupe ADP in 2019

Groupe ADP, which operates the two main Paris airports, as well as associated infrastructure in the French capital and airports and terminals around the world, reported a very positive FY2019, with revenue increasing by 17.3% (mainly as a result of acquisitions) and EBITDA by 5.5%.

Revenues increased across the board - from all sources apart from airport safety and security and, intriguingly, from car parking. Given the impact of the 'flight shame' movement in Europe, Groupe ADP will expect there to be an increase in public transport usage.

International divisions made a major contribution to the result, but revenues for the consulting arm ADP Ingénierie decreased slightly, by -1.2%; it has a backlog of work and its role within the group is expected to increase rather than diminish.

Groupe ADP is to be privatised, with organisations such as VINCI Airports looking to increase a current minority shareholding. Together, the two groups, with TAV, would become potentially the largest in the world.

The outcome still remains dependent on a 'shared referendum' on blocking it, which was launched in Jun-2019. (The referendum has reached approximately 22% of votes required to do that, with around one month remaining until the deadline.)

TO READ ON, VISIT: Airport groups: large revenue increases for Groupe ADP in 2019