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

24 October, 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.

Hong Kong aviation: part one – recovery is picking up, but outlook still uncertain

Airlines are beginning to add back services to Hong Kong in response to easing of quarantine restrictions. Although the latest rule relaxation is a welcome development for the airline industry, it is still uncertain how extensive or rapid the capacity recovery will be in Hong Kong, and whether there has been any permanent damage to demand.

Hong Kong has been one of a handful of major Asia-Pacific markets that have been slow to remove COVID-19 entry restrictions. Cathay Pacific executives have made the argument that the recovery rate will be similar to that in other Asian markets, just starting later.

It is certainly true that Hong Kong has some underlying advantages as an aviation hub. However, some observers believe Hong Kong’s slow opening has put it at risk of suffering a structural reduction in demand. This is based on the fact that some connecting flows have switched to other Asian hubs while Hong Kong has been constrained – and may not switch back.

This is part one of a two-part report.

TO READ ON, VISIT: Hong Kong aviation: part one – recovery is picking up, but outlook still uncertain

North Atlantic aviation recovery proves to be robust

Traffic data from IATA for Aug-2022 show that the North Atlantic was – at that stage – among the strongest long haul regions globally by passenger traffic.

Current capacity data show that North Atlantic seat numbers are at 89% of 2019 levels in the week of 10-Oct-2022, making this Europe's strongest long haul market. Moreover, it has been outperforming Europe's total capacity recovery since May-2022, after lagging for much of the COVID-19 pandemic.

North American airlines have recovered more rapidly than their European counterparts, reaching 95% of 2019 capacity versus 84%. The big three US groups and IAG are, unsurprisingly, the top four North Atlantic groups by seats.

Following Norwegian's withdrawal, LCC seat share has slumped since before the pandemic, in spite of new entrants.

TO READ ON, VISIT: North Atlantic aviation recovery proves to be robust

US airlines tout record revenue as profitability lags

US airlines continue to exude optimism regarding the demand environment despite numerous headwinds, including fuel cost uncertainty, the spool-up of staffing and training of employees, and retuning to pre-pandemic efficiency.

Despite the shift into what has historically been a weaker time of the year, the country's operators do not see any signs that the robust demand that was a mainstay of the summer time period is waning.

Those airlines also believe there is upside in the near term as they focus on getting capacity and aircraft utilisation back up to pre-pandemic levels, which should ultimately move profitability in the right direction.

TO READ ON, VISIT: US airlines tout record revenue as profitability lags

UK’s Edinburgh Airport sale rumours emerge again – who might buy it and what would it be worth?

In a period when merger and acquisition activity in the airport sector still lags well behind what it was before the COVID-19 pandemic, the suggestion that Edinburgh Airport could be sold will inevitably invoke much chatter on the Twittersphere.

Such a sale has been mooted on several occasions in recent years, but now may not be the best time to do it, with the war in Ukraine showing no signs of ending and a highly uncertain economic situation.

But then, if an investor sees opportunities in other markets and perceives only a continuing deterioration in the UK, then it could be argued that there is no time like the present.

TO READ ON, VISIT: UK’s Edinburgh Airport sale rumours emerge again – who might buy it and what would it be worth?

Americas aviation: ambitions ride high among Canada’s ultra-low cost start-ups

Up until a few years ago, Canada was one of the last major air travel markets without the consistent presence of an ultra-low cost carrier (ULCC).

But that has quickly changed in the recent past as Flair Airlines, WestJet’s Swoop and, more recently, Lynx Air, have launched to take advantage of what those entities deem as pent-up demand for cheaper air travel.

Whether or not the Canadian market will absorb all the growth planned by those airlines is yet to be revealed; or if changes will eventually take place among Canada’s ultra-low cost start-ups.

But for now, particularly for Flair and Lynx Air, their growth will continue unabated.

TO READ ON, VISIT: Americas aviation: ambitions ride high among Canada’s ultra-low cost start-ups

Americas aviation: Mexico’s domestic recovery continues full steam ahead

Mexico’s domestic airline passenger levels have either met or exceeded pre-crisis levels through Aug-2022, and the government’s projections show that those trends should continue for the remainder of the year.

Domestic demand in Mexico’s market has remained steady, however a downgrade of the country’s safety rating by US authorities has hindered expansion by Mexican airlines into the country’s most important international market.

And it is not certain when an upgrade will materialise.

More recently, Mexico’s government has confirmed that it is contemplating establishing a state-run airline that could potentially launch in 2023 – raising questions about how that entity will compete against private operators.

TO READ ON, VISIT: Americas aviation: Mexico’s domestic recovery continues full steam ahead

Canadian airport infrastructure: part one – no longer reflecting modern ambitions; part two – time to look again at privatisation?

The failure of the Canadian authorities to ensure adequate air travel movement during the summer was well documented. Delays and queues ranked among the worst in the world.

Now a major Canadian newspaper has lambasted the Ottawa government for its failure to ensure investment in airports, blaming the ‘not for profit’ ownership culture which denies access to share capital in favour of debt financing.

It also blames the extravagant 'Crown Rents' that the major airports are charged, and insists they should be reinvested in the airports.

Strangely, one option, which was examined and discussed in detail five years ago and then shelved, is privatisation. In its many forms now, including public-private partnerships, it merits reconsideration.

TO READ ON, VISIT: Canadian airport infrastructure: part one – no longer reflecting modern ambitions; part two – time to look again at privatisation?

Athens Airport equity sale back on the radar: part one – is a stock market float wise?

Greece had taken a battering economically long before the pandemic and more recent events.

The country's debt crisis occasioned punitive measures to counteract its bailout, including the need to sell off infrastructure, which included airports.

Some are already gone, but the state still indirectly holds 55% of Athens Airport. A gaggle of potential investors had already been identified but fears of low offers (which have surfaced at other transactions during the last few years) have possibly driven the government to consider a stock market float.

But with the airport in reasonably sound shape, the industry dragging itself back on course, and the pandemic possibly coming to an end, it might be better to hang on and wait to see what investor sentiment looks like in a few months' time.

This is part one of a two-part report.

TO READ ON, VISIT: Athens Airport equity sale back on the radar: part one – is a stock market float wise?

Las Vegas International Airport – no longer gambling on its future

Las Vegas is one of several US cities, those whose economy is heavily influenced by leisure activities, to have suffered badly from travel restrictions imposed during the COVID-19 pandemic.

But it quickly recovered from 2Q2021 onwards, and its main airport has experienced record passenger growth figures in the past few months.

Las Vegas’ airport handled 4.9 million passengers in Jul-2022 – an increase of 17.2% year-on-year and a new monthly record for passenger traffic. It is the second consecutive month that the airport has recorded a new all-time traffic record, having handled 4.7 million passengers in Jun-2022. 

The airport has recently been renamed in honour of one of its strongest proponents, and with the regional economy prospering it can look forward to resuming its place as one of the USA’s major gateways.

TO READ ON, VISIT: Las Vegas International Airport – no longer gambling on its future