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

15 March, 2021

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.

Europe leads world aviation towards net zero carbon emissions

On 26-Feb-2021 a coalition of European aviation trade associations published 'Destination 2050', a plan to achieve net zero carbon dioxide emissions by 2050. The target covers all flights within and departing from Europe (specifically the EU, European Free Trade Association and the UK).

It plots a path to reach this target through a combination of new technologies, improved operations, sustainable aviation fuels and economic measures.

The target of net zero emissions by 2050 puts the European aviation industry ahead of the global aviation target to halve carbon emissions (relative to 2005 levels) by 2050.

TO READ ON, VISIT: Europe leads world aviation towards net zero carbon emissions

Domestic strength sets Air New Zealand on recovery path

Air New Zealand has been rocked by the COVID-19 crisis as much as any other airline.

But while there are plenty of things the airline cannot control right now, there are also many things it can. Air New Zealand is a good example of how airlines are pulling all the levers available to survive the brutal revenue slump.

There will certainly be some financial pain until the recovery kicks in, though. The airline reported a rare net loss of NZ$72 million (US$51 million) for the six months through 31-Dec-2020, and it will likely also post a loss for the full fiscal year ending 30-Jun-2021.

However, the New Zealand airline has a better outlook than most due to a strong domestic network, financial support from its government, and many years of prudent financial management and healthy balance sheets.

TO READ ON, VISIT: Domestic strength sets Air New Zealand on recovery path

European aviation. Seats and fleets point to 2Q2021 recovery

According to the CAPA Feet Database, Europe's passenger jet fleet in service increased by 1.8% month-on-month in Feb-2021, to 3,400.

This is almost three times the Apr-2020 trough level, but 16% below the Aug-2020 peak recovery level. Moreover, it has changed little since Nov-2020 and represents only 56% of the total passenger jet fleet, compared with the world average of 65%.

Seat capacity in Europe also continues to lag the rest of the world, falling by 74.5% relative to 2019 in the week of 1-Mar-2021, according to OAG schedules and CAPA seat configurations. Middle East is down by 55.8%, Africa is down by 53.6%, North America by 45.1%, Latin America by 43.4%, and Asia Pacific by 33.9%.

Nevertheless, a combination of seat capacity and fleet in service data supports the conclusion that 1Q2021 will be the low point in this phase of the pandemic. European aviation can expect the recovery to start in 2Q2021.

TO READ ON, VISIT: European aviation. Seats and fleets point to 2Q2021 recovery

Mexico's airlines consolidate: ULCCs set to win big

It appears as if COVID-19 has ushered in some consolidation in Mexico's market, but not in the traditional forms of mergers and acquisitions. Even before the COVID-19 crisis, there were calls for consolidation of airlines in Mexico.

The market shifts have occurred due to the shrinking of two of country's larger airlines in the wake of the pandemic. A form of unconventional consolidation has occurred, and Mexico's ultra-low cost carriers are the biggest beneficiaries.

As a result of the changes, and as the aviation industry looks toward recovery, Mexico's market composition could ultimately feature two ultra-low cost operators and one full service airline.

TO READ ON, VISIT: Mexico's airlines consolidate: ULCCs set to win big

UK aviation lacks clear, consistent, integrated government leadership

The UK's roadmap out of lockdown has targeted 17-May-2021 for the return of international travel. However, World Travel and Tourism Council (WTTC) warns that delaying it until then will cost the UK economy nearly GBP27 billion. Even that date is subject to a government task force on travel.

Meanwhile, the UK's 3-Mar-2021 Budget statement by the Chancellor of the Exchequer (the UK finance minister) did nothing for aviation.

Earlier this year, limited sector-specific support to airports and ground handlers in England was made available, offering up to GBP8 million each, but six northern airports have called for more. Cardiff Airport is to receive more substantial support from the Welsh Government, its sole shareholder, but this is the exception that proves the rule.

The UK's continued waiver of airport slot rules into summer 2021 remains the only sector-specific support to UK airlines. Compounding the challenges facing airlines in generating revenue, UK charter operators are protesting post-Brexit rules that make it harder for them to compete for charter revenues. A mooted domestic APD reduction in 2022, if it happens, will be too late for some.

UK aviation needs clarity, consistency, and an integrated approach if it is to resume its place as Europe's biggest aviation market.

TO READ ON, VISIT: UK aviation lacks clear, consistent, integrated government leadership

Airport financials, year end 2020 - grim but not disastrous

A trickle of annual reports and financial statements for airport operators is turning to a flood as the end of Feb-2021 is reached.

They make for grim reading, as expected. But it is not disastrous.

None are saying that they are on the verge of going bust. One big operator, which last year was talking in terms of having sufficient liquidity until the summer of this year, now cites 2023 instead. There has been recapitalisation and cost-cutting as operators adapt to the 'new normal'. Multiple vaccine availability gives cause for hope.

The main message coming out of these reports, though, is that no two sets of circumstances are alike, which is why a few operators are able to carry on much as normal, while others (the majority) are a shadow of what they once were.

TO READ ON, VISIT: Airport financials, year end 2020 - grim but not disastrous

Air Canada: encouraging signs for potential government support

After nearly a year of navigating stringent travel restrictions and receiving no sector-specific financial support from the government, Canadian airlines are seeing some encouraging signs emerge in those two areas. However, it still could be some time before major relief materialises.

Since Mar-2020 Canada has mandated a 14-day quarantine for anyone entering the country, and a range of interprovincial restrictions have also been in place since that time. At the beginning of 2021 the country mandated negative COVID-19 tests for all passengers entering Canada, in addition to the existing quarantine.

More recently, Canada has introduced new requirements that entail testing for passengers upon arrival.

In the meantime, Canada's airlines continue to deal with a state of limbo they've been in since the onset of the COVID-19 pandemic. They have also agreed to cut service to warm weather destinations to combat the spread of the virus, which, in some ways, is rubbing salt into their wounds.

TO READ ON, VISIT: Air Canada: encouraging signs for potential government support

CDG airport expansion: French government pulls back development

Paris is the latest city where the cancellation, or postponement, or review, of a major airport construction project has been announced.

In this case it is not of the operator's own volition - Groupe ADP has been told to do it by the French government, for environmental reasons.

As the COVID-19 pandemic enters its second year, and long-standing traffic projections go out the window, operators have to accept that governments are increasingly likely to use the pandemic as a catalyst, if not an excuse, towards ensuring that what future infrastructure there is will be as green as the grass in the Bois de Boulogne.

TO READ ON, VISIT: CDG airport expansion: French government pulls back development

Mumbai terminal reopens as India ponders the spread of COVID-19

The degree of 'recovery' from the effect of the pandemic on aviation varies from country to country. Some are still a long way off resuming any sort of cohesive air service, whereas others are close to it.

India potentially lies in the latter category, and as Mumbai's airport reopens its domestic terminal to provide more space for latent international operations at the other terminal, this report looks at the relatively low infection rate in India and at what the reasons might be.

It poses by consequence the question of whether India could benefit from a commercial advantage, at least for a short while, as air transport aspires to return to normality.

TO READ ON, VISIT: Mumbai terminal reopens as India ponders the spread of COVID-19

UK airports bid for Freeport status under new government programme

With Brexit now completed and the UK signing, or chasing, trade deals around the world, a policy of awarding 'Freeport' status around the country has been reinstated. And at the same time the government is committed to improving the lot of the regions; that is how it got elected.

Free ports, or zones, are designated by the government as areas with little to no tax in order to encourage economic activity. While located geographically within a country, they essentially exist outside its borders for tax purposes.

Although the majority of applications will come from marine organisations, airports will be represented, and two of them have already played their cards.

One question which arises, though, is whether there is so much regional support through special economic zones and the like already that the status of Freeports will be diminished before they are even awarded. Also, will they be allocated where the need is the greatest?

TO READ ON, VISIT: UK airports bid for Freeport status under new government programme

Peru's Chinchero Airport: another start date, but more lies ahead...

Just like Berlin's new airport (which has at least opened, almost a decade late), the one proposed at Chinchero Cusco in Peru has long been delayed.

The circumstances were similar. Originally the arrangement was a public-private partnership, but over the course of a couple of years the private sector consortium's position became untenable, and the deal was annulled.

For a short time a project which has attracted scorn from the local media became a wholly state one, but it was not long before the private sector was again attracted, in the form of a Korean consortium, this time just to build it.

Now, the process having taken another unwanted year's break on account of the pandemic, along comes an equally undesirable 'sustainability assessment'; one which should have been done years ago, bearing in mind that the central attraction here is a globally famous World Heritage Site.

Regrettably, there are examples of where such late intervention has proved fatal to an airport's prospects.

TO READ ON, VISIT: Peru's Chinchero Airport: another start date, but more lies ahead...

SPECIAL REPORTS: Aviation Sustainability and the Environment

This regular weekly CAPA report features a summary of recent aviation sustainability and environment news, selected from the 300+ news alerts published daily by CAPA. This week's issue includes: Air France CEO: 'Technology will be key' to achieving emissions reduction goals; American Airlines and Kuehne + Nagel sign agreement for use of SAF; United focused on carbon capture, not 'fig leaf' carbon offsets: CEO; ANA Holdings partners with Fermenstation to create sustainable consumer products; Delta Air Lines commits to carbon neutrality plan from Mar-2021.

TO READ ON, VISIT: SPECIAL REPORTS: Aviation Sustainability and the Environment