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

7 March, 2022

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-Asia aviation: recovery stalled even before Ukraine crisis

Throughout the COVID-19 pandemic the recovery in passenger traffic and capacity on Europe-Asia has lagged behind other route regions from Europe.

Of course, the recovery is most advanced in short haul markets, but Europe's other major long haul region - the North Atlantic - has enjoyed an upturn in recent months, whereas Europe-Asia has been left behind.

Europe-Asia has been held back by the slower removal of travel restrictions in much of Asia Pacific. The route region now faces a significant additional challenge as a result of the Russia-Ukraine conflict.

Airspace over Russia is important to many routes between Europe and Asia, but is now closed to airlines from much of Europe. Finnair, which has a higher percentage of ASKs on Europe-Asia than any airline outside Russia, has suspended a number of Asia routes rather than fly uneconomic longer routes to avoid Russian airspace.

TO READ ON, VISIT: Europe-Asia aviation: recovery stalled even before Ukraine crisis

Qantas resumes capacity recovery trajectory after Omicron setback

Positive demand trends are allowing Qantas to boost passenger capacity as it rebuilds its domestic network in the wake of the latest COVID-19 wave.

As Australia gradually relaxes its international travel rules Qantas is also ramping up international services.

The Qantas group had to cut its capacity plans in Jan-2022 when the Omicron variant of the coronavirus hit travel demand.

As the latest wave of the pandemic eases, however, the airline is once again projecting a capacity recovery. Omicron has effectively delayed this recovery timeline, but Qantas is now more optimistic that its projections will hold firm.

TO READ ON, VISIT: Qantas resumes capacity recovery trajectory after Omicron setback

Russia-Ukraine conflict not yet visible in European airline schedules

Russia's invasion of Ukraine is not yet visible in airline capacity data for Europe. Yet many European nations have closed their airspace to Russian operators and Russia has reciprocated by banning airlines from 36 countries. Moreover, virtually no airlines are operating to/from Ukraine.

Nevertheless, data based on schedules filed by airlines indicate that Europe's 27.8% capacity shortfall to 2019 levels in the week of 28-Feb-2022 is 3.2ppts better than last week and the fifth straight week of improvement. This lifts Europe off the bottom of the regional ranking and above Asia Pacific, where capacity is down by 30.3%.

Looking ahead, capacity projections do not appear to reflect the Russia-Ukraine conflict. Europe's capacity for all of 1Q2022 is scheduled at 75% of 2019 levels, rising to 91% for 2Q2022 and 94% in early Aug-2022. Reduced operations in Russia, Ukraine and on Europe-Asia routes over Russia will surely dent these projections. Nevertheless, CAPA analysis suggests that the impact of the conflict on Europe's capacity recovery may be bounded.

TO READ ON, VISIT: Russia-Ukraine conflict not yet visible in European airline schedules

Colombian airlines embark on 2022 with ambitions running high

Although Colombia has battled waves of COVID-19 infections during the coronavirus pandemic, overall the country's recovery has fared better than other regions around the world. Domestic passenger levels in 2021 inched closer to pre-pandemic levels, and passenger numbers in Dec-2021 actually surpassed 2019's performance.

There are numerous developments to watch in Colombia as 2022 unfolds, including Avianca's post-bankruptcy performance, the launch of another ultra-low cost carrier in the country, and the unfolding of a new and unique partnership between two ULCCs on certain international routes.

Colombia was Latin America's third largest aviation market before the COVID-19 crisis, and the stage is being set for the country to remain a dynamic force within the region as the recovery continues, particularly as more low cost competition emerges both domestically and internationally.

TO READ ON, VISIT: Colombian airlines embark on 2022 with ambitions running high

European airlines' active fleet now biggest since pre-COVID-19

Europe's airline seat capacity recovery continues, with three successive weeks of improvement in seat numbers as a percentage of the equivalent week of 2019. Nevertheless, it remains below its (coronavirus) pandemic era peak reached in late Dec-2021.

Europe's seat numbers are now 32.2% below 2019 levels in the week of 14-Feb-2022, which is 2.7ppts better than a week ago (week commencing 07-Feb-2022). Europe is still at the bottom of the regional ranking but is close to Asia Pacific, where capacity is down by 31.5%. Middle East capacity is down by 27.0%, Africa by 21.1%, Latin America by 15.5%, and North America by 12.3%.

Europe's seat capacity is now 68% of the equivalent week of 2019, but this is still some way short of the 91% reached in the final week of Dec-2021.

European airlines are operating more active aircraft than any time since before the pandemic - in absolute numbers and as a percentage of 2019 levels. The fleet in service is now 89% of its 2019 size (using data from CAPA Fleet Database), reflecting growing confidence in the outlook.

TO READ ON, VISIT: European airlines' active fleet now biggest since pre-COVID-19

Air Canada solidifies its commitment to cargo for the long term

Cargo's rising popularity among passenger airlines during the coronavirus pandemic has been well documented, but Air Canada is making a long term commitment to its cargo business as a means of establishing a steady source of diversified revenue. During 2021 Air Canada operated 10,217 cargo-only flights, which was more than double the 4,235 cargo services Air Canada flew in 2020.

The airline has converted some 767 widebodies from its passenger fleet to an all-cargo configuration. The first aircraft began operations in December, and Air Canada expects to have three more in operation by the end of 2022. Air Canada now aims to place Boeing 777 and Airbus A330 widebodies it had temporarily converted for cargo flights back into passenger service by the end of 2022.

The company's allegiance to its cargo business is reflected in recent investments at its Toronto Pearson hub and its decision to convert aircraft into an all-cargo configuration. Those moves are driven by Air Canada's conclusion that opportunities to drive cargo revenue will only grow.

TO READ ON, VISIT: Air Canada solidifies its commitment to cargo for the long term

Ryanair and Wizz Air lead adding seats for summer

Ryanair and Wizz Air continue to lead European aviation's recovery, but other leading groups are becoming more bullish. In the week commencing 21-Feb-2022 Ryanair had 104% of its 2019 seats. It is the only European top 10 airline group by seats that is ahead of 2019 capacity. Wizz Air, on 83%, had the second highest percentage. Europe as a whole is on 69%; the top 10 groups are collectively at 72%.

Europe's 31.1% capacity shortfall to 2019 levels keeps it at the bottom of the regional ranking, but it is very close to Asia Pacific, where capacity is down by 30.6%. Middle East capacity is down by 26.9%, Africa by 20.3%, Latin America by 12.8%, and North America by 12.3%.

Schedules for the last week of Jul-2022 project total Europe capacity at 93% of 2019 levels, with the top 10 groups collectively at 103%. Wizz Air plans to surge to 159%, and Ryanair is projected at 117%. Turkish Airlines, SAS, Air France-KLM and easyJet also plan 100% or more of their 2019 capacity levels by late Jul-2022. Lufthansa Group, at 89%, is most cautious among the leading groups.

President Putin's disastrous invasion of Ukraine will not help in any regrowth. And the cost impact of fuel prices with oil now over USD100 per barrel is also unwelcome.

TO READ ON, VISIT: Ryanair and Wizz Air lead adding seats for summer

AirAsia, AirAsia X plot course for network recovery

AirAsia's Malaysia-based airlines are making progress in rebuilding their fleets and networks, and these efforts are expected to gain more momentum after the planned reopening of Malaysia's borders.

The coronavirus pandemic has been tough for both AirAsia and its long haul sister company AirAsia X. AirAsia was hit by extensive domestic travel restrictions in Malaysia last year, but it has managed to restore much of its domestic flying since the fourth quarter of 2021.

AirAsia X is less fortunate as it does not have a domestic network, therefore its widebody fleet was grounded for much longer. But it has managed to restart its international network - albeit at a very small scale initially. More growth is planned by both the long haul and short haul airlines when international opportunities more fully emerge from the second quarter onwards.

TO READ ON, VISIT: AirAsia, AirAsia X plot course for network recovery

Flughafen Wien projects return to profitability in 2022 anchored on previous big cost savings

Flughafen Wien is unusual in that it is an entity comprising one highly significant primary level airport in the centre of Europe and two smaller ones also in Europe that have no evident connection to it. Many observers will be interested to see what the corporate entity expects to experience in the immediate future; the next financial year.

The outlook for the group is better than might have been anticipated at this time in 2021, with projected revenue increases, a small net profit and gains at the EBITDA level this year, all largely brought about by a controlled cost-cutting regime throughout the two years of the coronavirus pandemic to date.

But as one crisis looks as if it is beginning to subside, others are waiting in the wings. They include public perception of political decisions at home and the outcome of political decisions made abroad.

TO READ ON, VISIT: Flughafen Wien projects return to profitability in 2022 anchored on previous big cost savings

Applications for US Airport Terminal Programme open - difficult decisions; private sector excluded

At least one of US President Joe Biden's infrastructure related bills having been passed, the hand-out stage for the airport fraternity has been reached and there are many hopeful of a hand-out.

But there isn't much money to go around.

Although some of the environmental criteria remain from when the scheme was first announced, at least some new ones have been introduced, broadening it out somewhat. Those new criteria may prompt some airports to lodge a claim, and examples of how that could happen are included in this report.

Surprisingly, just as the investment world is reaching a point where it might consider the airport sector again, and despite there having been considerable interest in the last attempted airport lease three years ago, the private sector seems to have been excluded from this programme - which could be a bad move on the US administration's part.

TO READ ON, VISIT: Applications for US Airport Terminal Programme open - difficult decisions; private sector excluded

Norway's Avinor postpones decision on New Bodo Airport on financial grounds

Norway's state-operated but corporatised airports and air navigation services provider Avinor has responsibility for 35 airports across the country, from big ones like Oslo Gardermoen, to mid-sized city ones, to the small, mainly coastal area ones that are essential for local communities to flourish.

Avinor has invested a great deal in Oslo Gardermoen airport in recent years, which is reasonable as it is the premier gateway to and from the city. But the small coastal airports need some TLC too, and even more so when they could be the arrival point for a new kind of tourist from North America, where the country is increasingly being discovered.

That is why the non-metropolitan population will be watching events carefully at Mo I Rana and Bodø, where new airports have been planned for some time but where one of them - Bodø - has now been postponed on financial grounds.

TO READ ON, VISIT: Norway's Avinor postpones decision on New Bodo Airport on financial grounds

HIAL airports - keeping Scotland's remote communities connected to the world via Inverness

Many countries around the world have to ensure that remote communities are served properly by air routes.

In the UK the most evident example is in the Highlands and Islands of Scotland.

One company, Highlands and Islands Airports Ltd (HIAL), has much of the responsibility for hosting services. With 11 airports, its activities are centred on the airport where it is headquartered, at Inverness.

Inverness is connected to some of the remote islands by way of public service obligation (PSO) routes and it has a mandate to ensure the social-economic benefits of these communities.

Right now, though, its principal aim is to restore an Inverness-London Heathrow air route; one which, in theory at least, should benefit those remote communities also.

TO READ ON, VISIT: HIAL airports - keeping Scotland's remote communities connected to the world via Inverness