The enormous publicity attracted by a sixteen year old Swedish girl has rattled the airline industry and is prompting government talk of aviation taxes to reduce flying. This is among a number of hurdles the industry will face in 2020.
At the start of this year CAPA chairman emeritus, Peter Harbison wrote: “the year begins with much uncertainty. Not only in China, where the economy has slowed considerably, but more globally, a sense of uncertainty is descending on global markets and in international political circles.”
“The economic and political upheaval that is being created by an unpredictable US administration and by the vacillations of the UK government over how to rearrange its ties with the rest of Europe are merely the most visible of signs in what is very much a changing world. Until now, aviation has to a large extent been immune from any direct impact, surging forward at unprecedented rates. There has been no obvious move at government level to impose more restrictive rules on international airline market access, nor has there to date been any sign of a downturn in traffic.”
“On the other hand, there have been no signs of moves towards greater freedom. Perhaps we have passed the zenith in that arena. As free trade comes under attack, the infection could easily overflow. In the operational sphere, it is fuel that will be a large determinant of the airlines’ financial performance in 2019. In the middle of the past year a dark cloud passed over the industry as Brent Crude prices exceeded USD80 and the experts predicted even higher levels. But going into 2019, the downward price trend, towards USD60, offered positive news making profits seem achievable once again. However, demand is another issue.”
Were these predictions correct, what has the industry learnt and what would it do differently as we start to look ahead into 2020? The CAPA World Aviation Outlook Summit took place last week, hosted at The Westin Dragonara Resort, in the exclusive enclave of St Julian’s on Malta. It showcased that the implications of market changes are profound, touching the entire travel value chain from airports to accommodation, ground transportation, distribution/payment and technology – and even corporate travel.
Here’s some insights from the event:
Paid loyalty programme is the ‘the most powerful’ kind of loyalty programme
Spirit Airlines president and CEO Ted Christie said the carrier’s paid loyalty programme is “the most powerful” kind of loyalty programme because it is “paid loyalty”, where the customer “pays upfront and shops later”. He said the LCC will look to “enhanced this programme more”. He said there is a “vast untapped opportunity” for low cost travel in the US. “Tapping into that requires access to airports and that is one of our biggest challenges”. He said what is “unique” about Spirit is that it operates at major metropolitan airports in the US.
A ULCC is an LCC ‘that does the job properly’
Swoop president and EVP Steven Greenway stated: “I don’t believe in the mantra of a ULCC… all a ULCC is, is an LCC that does the job properly… and stays true to its principles”.
‘If airlines don’t get their act together, governments will intervene’
CAPA – Centre for Aviation chairman emeritus Peter Harbison, commenting on the impact of climate change on aviation stated that “if airlines don’t get their act together, governments will, whether for the right reasons or the wrong reasons, intervene in the process”. He added taxes on aviation are “the usual thing” in such intervention.
Electric propulsion will ‘only happen if there is money to finance it’
Embraer marketing director EMEA Michal Nowak stated “we are the lucky ones” as in its 110 to 150 seat aircraft segment is there “some kind of idea how you can make electric propulsion work”. He said this won’t happen before 2050 and will “only happen if there is money to finance it”.
There is a ‘misunderstanding about how the European market works’
European Commission (EC) head of the unit for aviation agreements Carlos Bermejo Acosta argued the uniqueness of the aviation industry is what makes it “slow” to react to market changes. He also argued there is a “misunderstanding about how the European market works” and that further debates are required on topics such as subsidies to create a level playing field that avoids abuses in the market.
Swoop boss ‘frustrated’ by 737 MAX grounding
Swoop president and EVP Steven Greenway stated the airline has been “frustrated” by the grounding of the Boeing 737 MAX. “We were meant to get  NGs from WestJet” as 737 MAXs entered WestJet’s fleet, however, the grounding has delayed this and “constrained” Swoop’s supply of aircraft.
Tus Airways CEO ‘frustrated’ with Cypriot visa regime
Tus Airways CEO Andrew Pyne stated he is “frustrated by the “restrictiveness” of the visa regime currently in place in Cyprus. “We should never underestimate the importance of visa regimes… people have hundreds of opportunities in terms of which countries they choose to travel to, and a complex visa regime is a major impediment to travel to that country”.
Climate change will be ‘the most important force affecting the aviation industry’
CAPA – Centre for Aviation chairman emeritus Peter Harbison stated the 2020s will be a “transformational decade for the aviation industry”, adding climate change will be “the most important force affecting the aviation industry”.
SAS: ‘Our customers demand’ less impact on climate
SAS EVP and chief commercial officer Karl Sandlund said aviation creates a lot of value “but we need to do it more sustainably in the future”. He added: “Our customers demand that… they want to continue to fly but continue to do it with less impact on climate”.
Getting the basics right is more important than machine learning or data science
Volantio CEO Azim Barodawala argued “getting the basics right is a lot more important than machine learning or data science” or “divining” exact passenger preferences that can be targeted by ancillaries.
It will be ‘very difficult’ to promote liberalisation in the US
FedEx Corporate staff VP regulatory affairs Ralph Carter said it will be “very difficult” to talk about promoting liberalisation in the US “until US passenger carriers start to have offensive interests… where they want to buy overseas airlines, in which case they would be willing to open up the US market on a reciprocal basis”. He questioned: “Why would you push for liberalisation” when foreign carriers can enter the market via alliances and codeshares “and get all the international flights they want”, while still keeping the domestic market protected?”
Maltese Government looking ‘well further afield’ for new routes to the US, Africa and India
Malta’s Ministry for Tourism Permanent Secretary Ronald Mizzi stated the country is looking “well further afield” for new routes outside of the island’s traditional markets, including markets such as US, Africa and the Indian Subcontinent.
Air Malta launches Air Malta Holidays online packaging platform
Air Malta chairman Dr Charles Mangion formally launched the airline’s new dynamic online packaging platform, Air Malta Holidays. The new portal will look to offer combined Air Malta airfares, hotels and airport transfers.
Airbus A321XLR ‘gathering momentum’ and ‘certainly puts more pressure’ on Boeing NMA programme
GECAS EVP and region manager, commercial, Europe and Canada Declan Hartnett stated the A321XLR is “very interesting” and is “gathering momentum” that “certainly puts more pressure” on the Boeing New Mid-sized Airplane (NMA) programme.
Current transition to biofuels ‘very positive’
airBaltic executive board chairman and CEO Martin Gauss stated biofuels are “three times more expensive” than conventional fuel and it is difficult to have them supplied to airlines. He said however that “all airlines will be using biofuel in the future”, adding current efforts to transition to biofuels are “very positive”.
‘Airport infrastructure has not kept up with the pace of growth of the industry’
UK Civil Aviation Authority (CAA) head of airline licensing David Kendrick said “airport infrastructure has not kept up with the pace of growth of the industry itself”. He argued this is because there is less political will to carry out these projects rather than a belief that the projects are not required.
Airlines ‘have got to bring’ retailing experience into the industry
Travelport global head of New Distribution Ian Heywood stated airlines have to start building their own retail platforms. He continued that airlines “have got to bring that expertise [retailing] into the industry”.
SWISS reached 24% of NDC sales as of Oct-2019
Lufthansa Group SVP revenue management and distribution hub airlines Tamur Goudarzi Pour stated SWISS reached 24% of indirect New Distribution Capability (NDC) sales as of Oct-2019, the group is “sure” to reach the IATA 20% by 2020 target and will set a “much higher target in 2020”.
Aviation going to see an ‘evolution’ in aircraft safety regulatory regime
PA/Nyras partner and global head of airline transactions Iain May stated the industry is going to see an “evolution” of the regulatory regime for aircraft certification. The safety management regime has evolved into a “really sophisticated industry to make our industry safer” and will continue to do so.
Aircraft investment a core part of sustainability agenda
Etihad Group CCO Robin Kamark stated the ‘Etihad Greenliner’ partnership with Boeing will be introduced in Jan-2020 and will be used by both companies to explore and assess environmental sustainability initiatives while the aircraft operates scheduled services across the network. He said the innovation agenda and investment programmes in new aircraft is a core part of the carrier’s engagement in terms of sustainability.
FlyBosnia eyeing 500,000 passengers in the next three years
FlyBosnia CEO Tarik Bilalbegovic stated the carrier has handled 40,000 passengers since it started up in Jun-2019. He added the airline is forecasting 100% passenger traffic growth p/a to approximately 500,000 passengers in the next three years. He said, the airline’s base city Sarajevo is a “very attractive” destination, noting it saw an “off the chart” tourism arrivals increase of 25% year-on-year in Jul/Aug-2019.
Europe a ‘continent of islands’, aviation ‘keeping these islands alive and connected’
European Aviation Club (EAC) chairman Rigas Doganis stated Europe is a “continent of islands”. He added it is important to understand the relationship between airlines and these islands and their “role to play beyond tourism” and “keeping these islands alive and connected”.
Threats to tourism ‘become a matter of life and death’ for island nations
Tus Airways CEO Andrew Pyne argued threats to tourism posed by movements such as ‘flight shaming’ “become a matter of life and death” for islands such as Cyprus. He further argued people should have a holistic view for the whole of Europe regarding the impacts to island economies.
LOOK OUT… Exclusive executive interviews from Malta will be published on CAPA TV in the coming weeks, as well as full coverage of the agenda sessions.
Seasonality is ‘key’ for the success of regional airlines
European Regions Airline Association (ERA) DG Montserrat Barriga stated seasonality is “key” for the profitability of regional carriers. She explained these carriers not only have to provide connectivity year round to retain slots and make sure they have access to the labour market, but also hold the responsibility of carrying the brand of the region. She concluded that there are “built inefficiencies within their business” with which these airlines have to cope.
‘Part of the brand has to be working with communities’
Loganair CCO Kay Ryan stated “we had to brand ourselves as Scotland’s airline” when it moved away from its franchise partner Flybe two years ago. She said the importance is on “the routes into the community… part of the brand has to be working with communities and supporting them and being available to them”. She concluded the routes Loganair operates are “lifeline routes even though they are not subsidised”.
One Sky Claims Solutions formally launches at CAPA World Aviation Outlook Summit in Malta
One Sky Claims Solutions Limited (OSS) announced the launch of its operations at the CAPA World Aviation Outlook Summit in Malta. OSS provides a cloud-based platform that links airlines to legal experts in all major European markets, who can then assist airlines in quickly determining whether they need to pay compensation or defend the cases in court. OSS also provides a call centre that can contact passengers on behalf of the airline and arrange for a settlement of their claim. The innovative approach will assist airlines in dealing with their growing volumes of EU261 and Montreal Convention passenger claims.
CAPA – Centre for Aviation members were able to see live updates from the CAPA World Aviation Outlook Summit and have access to over 100 briefs from the event. Find out more about how a CAPA membership provides a front row seat to global aviation news, analysis and data as it happens, with access to a comprehensive suite of tools that can be customised to your needs.