CAPA - Centre for Aviation executive chairman Peter Harbison, outlined (07-Nov-2017) the following six big trends in aviation:
- Fuel: While there is some correlation between lower fuel prices and ASK growth, this is not the case for all airlines, particularly major full service carriers. Ticket prices followed fuel prices downwards since 2011 and especially since 2014, while increased profitability mirrors the drop in fuel prices. Load factor increased slightly while passenger growth was much greater. There is some correlation between the price of fuel and market growth and low fuel prices are beneficial for airlines, passengers, tourism and economies. There may be a slowing of market growth in 2018 as the industry reaches capacity in a number of areas, including personnel (especially pilots) and airport slots;
- Southeast Asia as the "competitive battlefront": There are many opportunities for growth in the region. Growth and competition will be driven by carriers with large fleet orders, such as the Lion Air and AirAsia groups;
- North Asia and China: The region continues to lag behind others and remains constrained by lack of liberalisation. The growth profile for aviation in China is "astonishing" with great potential for LCC expansion. The number of domestic airlines in China increased from 26 in 2007 to 44 in 2017 and routes increased from 1178 to 2739. The number of international airlines increased from 95 to 159 and the number of international routes increased from 416 to 1285 over the same period. China has a "massive impact globally" but is less influential within the intra-North Asia market;
- Long haul low cost carriers (LHLCC) and new narrowbody aircraft: LHLCCs now account for 5% of the market and are "very much where we're heading in the future". There are now 43 LHLCCs from 28 countries, including 16 from 10 countries in Asia Pacific. The US accounts for 20 of the 23 domestic LHLCC routes. International LCC market share increased from 3.5% in 2007 to 11.3% in 2017, with Asia Pacific market share increasing from 1.6% to 7.7%, behind the market average largely due to North Asia. LCCs hold the bulk of long haul narrowbody aircraft orders, including A320neos and Boeing 737 MAXs;
- Super connectors losing steam: After recording a compound growth rate of about 13% over the last 10 years, there is a lot of change among the airlines which have been driving long haul growth. Emirates is now starting to adjust its route structure, Etihad Airways is undergoing a major upheaval, Qatar Airways is facing a blockade and Turkish Airlines is reducing its expansion plans;
- Distribution: There will be massive disruption over the next five to 10 years. Tens of thousands of apps are being developed in the travel space and innovation and creativity are destabilising forces. Progress is likely to be very untidy and while some changes will be good, others will be confusing and not helpful. Mr Harbison said: "In five years time we won't recognise this industry".
Qatar Airways Group CEO Akbar Al Baker, stated:
- US airlines opposed to the growth of Gulf carriers "are never going to give up" and claimed the US carriers are "fighting a proxy war" for their European partners. He also claimed the US airlines "are doing this to divert the attention of their employees" following a series of Chapter 11 bankruptcy proceedings and described Chapter 11 as "a kind of subsidy". Mr Al Baker said the major US airlines "are lying to their people", while Qatar Airways is creating jobs in the US. He said "These three American carriers are misleading the whole country" and described the campaign against Gulf carriers as a waste of time and energy;
- The airspace blockade of Qatar by other countries in the region as "painful", noting some services are now up to 2.5 hours longer, while others had to be converted from narrowbody to widebody aircraft. The carrier is expected to announce a loss for FY2017/18, ending Mar-2018. Mr Al Baker said Qatar Airways lost nearly 11% of its network and nearly 20% of its revenue stream, but has plans to replace the 20 lost destinations with new destinations within 12 months. He commented: "This kind of bullying tactic to my country will not succeed". Regarding an end to the blockade, he said: "I don't think that this is going to happen any time soon";
- Meridianawill be renamed Air Italy with the aim to become "the flag carrier of Italy". Mr Al Baker said Meridiana has "very big potential" and noted Italy is a very important market in the EU. Meridiana will grow in a "very robust manner" and Mr Al Baker intends to make the airline "very successful";
- He hopes Qatar Airways, IAG, LATAM and Cathay Pacific can eventually exchange shareholdings in each other to become a "mega carrier". He commented: "Where there is determination and will I think that anything is possible";
- On the airline's acquisition of a 9.6% stake in Cathay Pacific: "I wish I could buy more". Regarding the carrier's strategic investments in other airlines, Mr Al Baker said it is difficult to make money in the airline business and stakes in other carriers allow Qatar Airways to spread the risk. He said Qatar Airways achieves "a lot of synergies" and economies of scale through its partnerships, including in negotiating fuel, ground handling and aircraft.
Changi Airport Group GM airline development Damon Wong, stated:
- Singapore Changi Airport is on track to report a record 60 million passengers in 2017. Mr Wong reported broad growth at the airport across both full service and low cost airlines. The airport recorded its one billionth passenger overall in Apr-2017;
- The company is excited about route developments at Singapore Changi Airport in 2018. Mr Wong noted Lufthansa plans to commence Munich-Singapore service with A350 aircraft, Qantas will resume Sydney-Singapore-London service with A380 aircraft and Singapore Airlines will commence services to new US destinations with A350s, while introducing its new premium product. The airport expects six new destinations in the northern winter 2017/18 season, including three in China, two in Japan and Honolulu.
Association of Asia Pacific Airlines (AAPA) director general Andrew Herdman, stated:
- There is a trend towards the use of larger aircraft to increase capacity and maximise utilisation. He said the "pressure to move upwards" is in response to congestion at airports and the scarcity of pilots;
- Long haul low cost carriers "wouldn't be viable as stand alone" businesses as they work better as part of an LCC group with short haul connectivity;
- The acquisition of a 9.6% stake in Cathay Pacific by Qatar Airways forms part of a pattern of acquisitions by Qatar Airways, including IAG and LATAM Airlines. Mr Herdman noted all the airlines are oneworld members and the acquisitions serve to cement alliance relationships, paving the way for more cooperation. He said the alliance adds a degree of stability to the relationship between the carriers but added it remains to be seen how much influence Qatar Airways can exert as a minority shareholder;
- Asia Pacific airlines will not see similar consolidation to carriers in Europe and the US due to foreign ownership regulations. Mr Herdman commented that even in cases where airlines cannot consolidate, "the pressures towards cooperation are very strong in this business".