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

23 August, 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.

Cathay Pacific faces steep challenge to reach near-term goal

It is no secret that Cathay Pacific is one of the airlines worst affected by the COVID-19 pandemic, thanks to its reliance on international connecting traffic. While it has struggled to gain much momentum, the airline is targeting a major boost in capacity by the end of the year.

Cathay wants to reach 30% of its pre-pandemic capacity in the fourth quarter, but this is becoming more challenging as COVID-19 waves continue in some of its core markets. The airline will need governments in Hong Kong and in other administrations to ease border restrictions in order to reach its immediate goal.

However, concerns about the dangers of the Delta variant, and a vaccination rate still far short of desired levels, will increase the government's caution.

The irony is that Hong Kong itself is one of the most successful administrations in the region in terms of controlling the pandemic. But this only makes it harder for the government to relax border controls.

TO READ ON, VISIT: Cathay Pacific faces steep challenge to reach near-term goal

European aviation: pax recovery closing in on capacity, but UK lags

Europe's total seat numbers are 33.7% below 2019 levels in the week commencing 16-Aug-2021. This is the closest that Europe's capacity has been to 2019 levels since before the pandemic.

However, the rate of improvement is slowing: after an improvement of 29.7ppts between mid May-2021 and mid Jul-2021, the gain has been only 3.3ppts over the past month.

Europe remains in third place in the regional capacity recovery ranking. The Middle East, where seat capacity is down by 44.6% versus 2019, remains at the bottom. Asia Pacific is down by 38.4%, Africa by 36.9%, Latin America by 26.4%, and North America by 21.2% this week.

European airport passenger traffic recovery moved closer to the capacity curve in early Aug-2021, according to data from ACI Europe. Yet, the recovery is inconsistent across Europe.

Non-EU Europe is enjoying the strongest traffic recovery (thanks to large Russian and Turkish domestic markets) and southern Europe is doing better than northern Europe. However, the UK's traffic recovery continues to lag the rest of the continent.

TO READ ON, VISIT: European aviation: pax recovery closing in on capacity, but UK lags

India: proposed LCC could have major ramifications for India market

The proposed entry of a new LCC to the Indian market will add another intriguing dimension to what is shaping up to be an extremely competitive airline sector in the post-pandemic recovery phase.

The airline - to be called Akasa - has started on the path to regulatory approval, and has enough prominent backing that its ambitious plans cannot be taken lightly.

Depending on the pace of various regulatory processes, Akasa could launch in the first half of 2022, and plans to ramp up quickly. There is obviously still a lot of investment drawn to the massive potential of the Indian market, but there is also potential for growth to occur too rapidly for the financial health of the industry.

One interesting detail is that Akasa is believed to be talking to Boeing about a major order for Boeing 737 MAX aircraft - with media reports indicating an order in the range of 70-100 aircraft. If this transpires, it would be an important inroad for Boeing in a market where Airbus dominates narrowbody fleets and order backlogs.

TO READ ON, VISIT: India: proposed LCC could have major ramifications for India market

Latin America airlines' new aircraft orders grow competition

Despite operating under a patchwork of restrictions, Latin American airlines continue to look towards the future, which is resulting in many of the region's operators opting to place orders for new and more efficient aircraft.

Striking the right fleet balance for the future is key for airlines in Latin America as they prepare for a rebound, and eventually for some of those operators to reach their pre-pandemic operating levels.

Those airlines that are restructuring in Chapter 11 also recognise that a modernised fleet is a necessary tool to compete in a post-pandemic world - whatever shape that may take.

TO READ ON, VISIT: Latin America airlines' new aircraft orders grow competition

EBRD takes equity position in Sofia Airport - sustainability the goal?

Typically, regional investment banks in Europe, Asia, Africa and elsewhere are content to make loans to airport authorities, and increasingly to private sector operators and investors, to help them build necessary infrastructure, and especially so where this helps improve economic performance and GDP.

The European Bank for Reconstruction and Development follows (EBRD) such a pattern, working essentially in the old political Eastern Bloc of Europe, and it has a track record of loan assistance to airports.

But now the EBRD has invested into an equity stake at Sofia Airport, which was concessioned earlier this year to a fund-led consortium following an acrimonious transaction and numerous appeals by the losing parties. It does so with a mandate to develop infrastructure "in a sustainable manner". Other such deals could follow; if so, that would change the ball game for private sector investors.

This report questions the implications for airport transactions in the future, and if 'sustainability' will dominate them.

TO READ ON, VISIT: EBRD takes equity position in Sofia Airport - sustainability the goal?

Indian airport investment and privatisation on the move again

India has been hit hard by the coronavirus pandemic in the past few months, but what was the world's third largest aviation market in the world before the pandemic must continue to look to the future and cater for an eventual return to 'normal', and particularly so as independent traffic forecasts predict that it will grow more quickly than most other countries.

Airports Authority of India is doing that by continuing with its greenfield airport programme. Six of 21 airports have opened, under a variety of ownership modes, and a further USD3.4 billion will be invested. Most of those six airports grew very quickly, justifying the investment.

Moreover, the long-awaited new Delhi and Mumbai airports appear now to be moving in the right direction, with concessionaires in place, and a further concession round on secondary level airports should follow shortly.

Foreign companies may not play such a big role in these concessions, since India's own Adani Airports has made its mark as an operator of eight of them already, with more to follow.

Nor should GMR, which has had its problems, be overlooked following its equity and 'industrial partnership' agreements with France's Groupe ADP.

TO READ ON, VISIT: Indian airport investment and privatisation on the move again

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: Boeing and Alaska Airlines trialling Inmarsat Iris air traffic modernisation solution; Etihad Airways launches carbon offset partnership with CarbonClick; Teesside International Airport chosen as pilot area for hydrogen vehicles trial; JSSI partners with Avfuel to launch online resources promoting purchase of sustainable aviation fuel; CAPA: SOF Connect's sustainability focus attracts EBRD investment in Sofia Airport.

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