Although it has been a dire three years for the Asia-Pacific aviation industry, recovery momentum is finally beginning to build.
The lack of international travel stunted progress in this region relative to other parts of the world. However, most Asian markets have reopened their borders, including three major ones in recent months.
The most significant one remaining is Mainland China.
The following analysis examines some of the trends occurring within the Asia-Pacific recovery, and was presented during CAPA’s Asia-Pacific Aviation Summit in Singapore on 3-Nov-2023.
TO READ ON, VISIT: Asia-Pacific aviation: after a dire three years, recovery momentum is finally beginning to build
For Europe's airlines, Latin America is the third biggest long haul market (based on 2019 capacity).
The Latin American market is back above 2019 capacity levels; whereas Europe as a whole, calculating for seats as a percentage of 2019 capacity, has been stuck in a mid 80% range for several months.
Not surprisingly, the capacity recovery in the market between Europe and Latin America is between the two, at 93%. This makes it the leading long haul market from Europe on this measure of recovery.
European airlines dominate Europe-Latin America, with a seat share of 78%, but Latin American airlines have recovered a slightly higher percentage of their 2019 capacity.
Air France and Iberia are the top airlines by Europe-Latin America seats, swapping their order from before COVID-19. Azul is the biggest LCC, but low cost share has fallen since the pandemic.
Overall, the Europe-Latin America market is emerging a little more consolidated than before.
TO READ ON, VISIT: Europe-Latin America aviation: close to 2019 capacity & more consolidated
Frontier Airlines is moving quickly to put the Spirit Airlines deal behind it, and is laser-focused in the near term on restoring its unit costs excluding fuel to pre-pandemic levels.
Two major elements to regaining its cost advantage include building back aircraft utilisation and leveraging the advantages from the larger-gauge Airbus A321neos joining the airline’s fleet.
Without the burden of a merger integration, Frontier has a certain nimbleness not afforded to JetBlue and Spirit to explore numerous options for the future. And with its stature as the largest ultra-low cost carrier (ULCC) in the US, there could be ample opportunities to capitalise on.
However, even as Frontier believes it has a lot of runway for growth, management at one prominent US legacy airline believes the ultra-low cost model could be in jeopardy in a post-pandemic world.
TO READ ON, VISIT: Frontier Airlines is confident of its future in a world where JetBlue and Spirit merge
Europe's capacity recovery has again slipped as a percentage of 2019 levels.
In the week of 7-Nov-2022 seat numbers are at 83.8%, which is a shortfall of 16.2% against the equivalent week in 2019. This is the lowest level for this measure since Apr-2022.
Europe remains fifth in the regional ranking, above only Asia Pacific, where capacity is down by 27.4% versus 2019. Other regions are down by a single digit percentage, whereas Latin America capacity is up by 2.0% compared with the equivalent week of 2019.
European airline load factor narrowed the gap to 2019 levels in Sep-2022, after two months of the gap widening.
Moreover, leading European airline groups have all pointed to a winter outlook of robust forward bookings and yields. It seems that tighter capacity is benefitting Europe's airlines.
TO READ ON, VISIT: Europe aviation: capacity recovery dips amid healthy bookings & yields
Canada’s Competition Bureau has delivered an advisory report to the government regarding WestJet’s proposed acquisition of Sunwing.
In its assessment the Bureau has raised concerns that combination could lessen competition in Canada’s vacation package sector.
It is still undecided whether the government will ultimately approve the purchase; but publicly, WestJet continues to exude confidence that the transaction will close in 2023.
Neither company has offered an alternative strategy if the government does not endorse their tie-up. So it could be safe to assume it will be business as usual if WestJet and Sunwing are prevented from moving forward with their plans.
TO READ ON, VISIT: Uncertainty clouds WestJet’s acquisition of Sunwing Airlines
It came as a surprise to some when Korea’s Incheon Airport successfully bid for a short contract to manage Terminal 4 at Kuwait Airport. It seemed as if the Kuwait management was testing the waters.
But now, with Terminal 2, which is still under construction, also to be opened up to external management, and with the local low cost airline Jazeera Airways operating its own terminal there, Kuwait becomes arguably the most privatised airport in the Middle East, even though the degree of privatisation is low where T2 and T4 are concerned – at ‘management contract’ level, without financial commitment.
It isn’t yet clear how the state-of-the-art and environmentally aware design will influence the type of airline to operate there, and how that will impact on external interest in it, but it is probable that unsuccessful bidders for T4 will return for this one.
This is part one of a two-part report.
TO READ ON, VISIT: Kuwait Airport’s new Terminal 2: part one – the private path to becoming a bone fide regional hub
The protracted concession of 14 regional Greek airports to a Fraport-led consortium five years ago proved to be problematic in its early period but management issues were resolved, and it went on to be one of the better deals the Greek government cut during its debt crisis.
Now the second stage, involving 22 airports to be concessioned in groups, beckons, but not before a deal is done on a single airport, Kalamáta, which will be offered separately.
The interest shown in the transaction will be a pointer to what the government can expect in the bigger deal later.
The groundwork is being prepared for the privatisation of 22 more airports around the country. Although the date has yet to be set, officials are soon expected to invite investors to consider taking them on.
TO READ ON, VISIT: Greece studying privatisation of Kalamáta Airport; another 22 to come
Over the past three years several major new airports have opened across the world, including Istanbul and Beijing Daxing. Also Berlin-Brandenburg – although that took an eternity.
At least one fell by the wayside altogether: namely the new Mexico City airport, which was summarily trashed by the incoming president, even though work had already started on it.
The point is that all the above has happened since 2014, when a master plan was first rolled out for a new airport in Addis Ababa. Addis Ababa being the economic powerhouse of East Africa, and home to Ethiopian Airlines – the continent’s most impressive airline and arguably one of its most successful financially, with consistent profits in the years before the COVID-19 pandemic.
Despite added infrastructure, the existing airport won’t be up to the job for much longer. But there has been little progress made, even to firm up a site for the new airport, let alone to start building it.
If the government wants the airline to hold on to its status it needs to get on with it, and quickly.
TO READ ON, VISIT: New Addis Ababa airport eight years in planning has still not seen a spade turned
There has been a continuing lack of take-up of the airport privatisation programme in the US - where whole airports can be leased (but not sold), contrasted with a burgeoning public-private (P3) programme for specific infrastructure.
The recently formally approved lease concession deal on the Tweed New Haven airport in New England combines the two, encouraging the operator Avports and financier Goldman Sachs to manage the airport and to expand it by way of a new terminal and a runway extension. The latter, in particular, is a necessity if the airport is to reach its potential and provide a first class facility for the local population.
Already the environmental lobby is ranged against expansion, winning support of one of the city owners and threatening to launch a process that has delayed another privatisation deal several years.
Like it or not, Tweed is becoming a ‘test case’ for the future of these deals.
This is part two of a two-part report.