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

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.


Delta Air Lines: return to domestic core hubs after coastal build-up

Over the past few years Delta Air Lines’ domestic strategy has concentrated on building up focus cities and what it deems as coastal hubs, including Seattle, New York and (more recently) Boston. The airline has also built up focus cities in Austin, Nashville and San Jose.

But Delta’s domestic push in 2020 will shift back to some of its more established hubs in Atlanta, Detroit, Minneapolis and Salt Lake City, after the airline has achieved a level of scale elsewhere in its domestic network.

The approach is different from those of its large global US network peers, which are focusing on their core hubs. But Delta believes the structure of its domestic network will produce a revenue premium, and its refocus on core hubs occurs as American and United have been expanding at their own US domestic hubs.

TO READ ON, VISIT: Delta Air Lines: return to domestic core hubs after coastal build-up


Incheon Airport slot shortages limit Korean Air’s growth potential

Seoul Incheon Airport is one of the world’s leaders in both the passenger and cargo sphere. But a Korean Air network planning manager says it is very difficult to get slots for passenger services now, pointing to Incheon as one of the worst offenders.

Comparing Incheon with a selection of other global hub airports it can be seen that the average number of aircraft movements and passengers per runway there is in most cases fewer. Moreover, Incheon is in the fourth stage of an infrastructure programme that goes back more than a decade.

So why has this problem arisen? Has too much prominence been given to Incheon over Gimpo airport? And to the freight operations?

TO READ ON, VISIT: Incheon Airport slot shortages limit Korean Air’s growth potential


Norwegian Air’s exodus not a body blow to Oakland Airport

Norwegian Air intends to consolidate all of its routes in the San Francisco Bay Area from Oakland International Airport to San Francisco International Airport.

Norwegian SVP commercial Matthew Wood has reported that the consolidation “will better position us for our return to profitability”. Norwegian’s twice weekly San Francisco-Oslo service will launch on 30-Mar-2020 and three times weekly San Francisco-Rome service will begin on 01-Apr-2020 for its summer schedule. The carrier relocated all London, Barcelona and Paris services from Oakland to San Francisco earlier in 2019.

What does all this mean for Oakland Airport, for other U.S. airports specialising in ‘low cost’, for Norwegian itself and the very concept of long haul low cost travel?

TO READ ON, VISIT: Norwegian Air’s exodus not a body blow to Oakland Airport


Why European soccer is good for airlines

At one time if a soccer fan wanted to travel to a game taking place abroad he (or sometimes she) would take an affinity group charter flight if there was one. More usually these days as airfares have fallen in real terms owing to the influence of LCCs, supporters can follow their team even if it is a foreign one, taking several trips every year on scheduled airlines to watch league matches.

One of the best examples is Scandinavia, where the level of support for British clubs has reached such a level that scheduled flights are being put on for entire seasons just to cater to this demand.

Can such trends spread to long-haul travel? In some cases it already has.

TO READ ON, VISIT: Why European soccer is good for airlines


The depths of the 737 MAX crisis wears on Southwest Airlines

The unprecedented grounding of the Boeing 737 MAX will reach its one year anniversary in Mar-2020 and with no clear certainty for the aircraft’s re-entry date, the MAX’s largest operator, Southwest Airlines, has removed the jets from its schedule through mid Apr-2020. Boeing’s 17-Dec-2019 announcement it will cease production of the MAX in the new year has done nothing to reduce the uncertainty.

Publicly, Southwest has displayed a level of patience with Boeing, but the challenges it has faced with the aircraft’s grounding are formidable, including a reduction in its operating income through 3Q2019 of more than USD400 million.

The deficit of MAX aircraft at Southwest is now at 68 aircraft, including the 34 aircraft that have been grounded since Mar-2019. And while the airline has recently reached a deal with Boeing on partial compensation for financial damages stemming from the MAX’s grounding, the overhang from the forced removal of the aircraft from service will remain firmly in place well into 2020, including cost headwinds and network and scheduling headaches prolonged by the aircraft continuing to remain idle.

TO READ ON, VISIT: The depths of the 737 MAX crisis wears on Southwest Airlines


US airlines: 2020 prospects bright, but unknowns persist

US Airlines are heading into 2020 with two big uncertainties – the timing of the Boeing 737 MAX’s return to service, and the country’s upcoming Presidential election, which at this point no one dares to predict.

Airlines operating the MAX in the US have had to pull back the aircraft’s re-entry date many times as the US FAA takes great care in the process of recertifying the aircraft’s flight control software MCAS (Manoeuvring Characteristics Augmentation System).

The ever growing uncertainty makes predicting overall US capacity growth in 2020 challenging, and that unpredictability is an overhang for investors somewhat nervous that capacity could outstrip demand.

The Presidential election creates another level of uncertainty as the unpredictable outcome can create some weakening of consumer sentiment. For now, US consumer perception remains strong, which bodes well for US airlines heading into the new year.

TO READ ON, VISIT: US airlines: 2020 prospects bright, but unknowns persist


LATAM and IAG: Latin America dynamics shifting at a dizzying pace

Significant shifts in alliances and airline operating groups continue as LATAM Airlines Group and IAG have abandoned plans to create a JV after IAG decided to buy Air Europa, which positions the European airline group favourably on routes from Europe to Latin America.

But over the long term IAG presumably needs feed within Latin America, particularly South America, that only an operator the size of LATAM can offer.

For now, LATAM has stated that current pacts with the IAG Group – codesharing and interlining – will remain in place.

The chess game that is currently being played in the Latin American aviation market will be closely watched and for now, no one should venture to predict the winners and losers until all the pieces are in place on the chessboard.

TO READ ON, VISIT: LATAM and IAG: Latin America dynamics shifting at a dizzying pace