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

11 May, 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.

COVID 19: The fate of Delta Air Lines' focus cities is uncertain

During the past few years Delta Air Lines has adopted different domestic and international strategies from those of its larger global network rivals in the US.

Internationally, it has opted to take equity stakes in its international partners and form JVs with those operators. Domestically, it has created focus cities where it had determined that there was an opportunity to leverage a larger presence. The airline has also built up certain coastal hubs, in Boston, Seattle, New York and Los Angeles.

The focus city and coastal hub strategy worked well for the airline before the abrupt onset of COVID-19, which has grounded airline fleets and brought the US and worldwide airline industry to a halt.

And with the growing consensus that demand may not regain the levels of 2019 for three to five years, Delta is no doubt examining whether its focus city strategy will be viable in the future.

TO READ ON, VISIT: COVID 19: the fate of Delta Air Lines' focus cities is uncertain

European airline capacity: a wider 'U'. Global COVID-19 standards key

Total airline seat numbers in Europe have dropped by 87.1% year-on-year in the week commencing 4-May-2020, according to schedules from OAG combined with CAPA Fleet Database seat configurations.

This is very fractionally worse than the past week's 86.8% decline, when it had actually eased a little for the first time in the coronavirus crisis. Essentially, the data indicate that European airline capacity is bumping along the bottom.

Europe's cuts are no longer the deepest among world regions. Seat count in Latin America this week has dropped by 87.3%, which is very slightly worse than Europe. Seat count has been reduced by 79.3% in Middle East, 79.4% in North America, 77.4% in Africa and 'only' 56.7% in Asia Pacific.

The capacity recovery anticipated by schedules data continues to slip further into the future, with a wider U shape. This process is likely to continue.

Meanwhile, standards on social distancing and other measures necessary to ensure the safety of air travel from contagion are still a long way off. Without global coordination in this area, any easing of lockdowns and travel restrictions will have little or no positive impact on the demand for flights.

TO READ ON, VISIT: European airline capacity: a wider 'U'. Global COVID-19 standards key

COVID 19: Argentina's flight ban extension puts LCCs in peril

Argentina's decision on flight access - essentially to halt all air travel to, from and within the country until the start of Sep-2020 - is both baffling and worrying.

Few, if any, other countries have extended travel bans that far out in the future, and the move could create a precedent for countries deciding to adopt their own set of standards for the aviation sector in the aftermath of COVID-19, rather than using the normal channels for a more coordinated and organised effort.

The decision has also created an extra layer of uncertainty over the future of Argentina's start-up low cost airlines, which have not been warmly welcomed by the new government that took control of the nation in late 2019.

This latest development could wipe out Argentina's young, but promising, low cost sector. State-owned Aerolineas Argentinas could be the last airline standing, as it appears Argentina's historical tilt towards protectionism has returned.

TO READ ON, VISIT: COVID 19: Argentina's flight ban extension puts LCCs in peril

Gatwick Airport to proceed with second runway conversion

Many airports are recognising that the sort of traffic levels that existed in late 2019 and the first month of 2020 will not be seen again for quite some time, and the measurement is in years rather than months.

Even so, and as reported frequently by CAPA, the intent is there to get new infrastructure through the planning stage and under construction as quickly as possible, using the current limbo period as an opportunity to progress those ends, and to welcome on board new investors.

One example is at London's Gatwick Airport, the world's busiest single runway airport.

Gatwick already has its new investor, in the shape of the French conglomerate VINCI, and now it is fast-forwarding a conversion from taxiway/emergency runway to functioning runway, in order to give it two. Or at least, one and a half.

TO READ ON, VISIT: Gatwick Airport to proceed with second runway conversion

COVID 19: US airlines try to strike cash burn-liquidity balance

The COVID-19 pandemic continues to change businesses worldwide, and airlines have been forced to set aside their historical financial metrics in lieu of providing specifics regarding their efforts to preserve cash and stave off cash burn.

In the US, American, Delta and United are working feverishly to reduce their cash burn, and to sustain or bolster their liquidity. All three airlines are seeking approval for government loans with certain conditions, but American seems the most eager to access loans through the Coronavirus Aid, Relief, and Economic Security (CARES) Act, despite stipulations attached to the debt that could be deemed as unattractive.

The major focus of those airlines and operators worldwide is weathering the crisis intact.

But the severity of the COVID-19 pandemic will raise questions over the longer term about the right levels of liquidity that airlines should aspire to achieve.

TO READ ON, VISIT: COVID 19: US airlines try to strike cash burn-liquidity balance

CAPA TV: Volaris CEO - airline forced to reduce capacity in May

While Mexico is yet to face its most critical period in the spread of COVID-19, Volaris is preparing to meet the challenge head on.

At the end of March Volaris underwent a huge decline in passenger demand to key markets such as the US, Mexico and Central America, however it is believed that the biggest impact of the virus is yet to come.

The total number of cases in Mexico is much lower than in other countries around the world; however to minimise the spread Volaris has reduced its capacity by approximately 80% for Apr-2020.

Volaris CEO Enrique Beltranena believes the peak of COVID-19 for Mexico will come about in May-2020, and as a result, the airline plans to slash its capacity to as little as 12-15% of its total for that month.

TO READ ON, VISIT: CAPA TV: Volaris CEO - airline forced to reduce capacity in May