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

21 November, 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.

Reassessing the future role of China in world aviation: part one - it will not be business as usual

When China emerges from its COVID hibernation it will be a different aviation force. It will not be business as usual. The world has changed greatly since Jan-2020; and China has changed too.

Financial markets anticipate that China under President Xi will lean more towards central strategy, with a greater role played by national policy goals than previously. This reflects a sense that President Xi's focus on national security and pandemic policies will go unchallenged - even if it means slower growth and shareholder discomfort.

China has in the past used the power of its outbound tourist expenditures to punish states for stepping out of line. Beijing pressure on agents, airlines and the public at large can steeply reduce tourism traffic to the countries who are the target of Beijing's displeasure.

Aircraft orders have also been weapons in this armoury. But there are many other issues that have altered the shape of China's aviation outlook since 2019.

TO READ ON, VISIT: Reassessing the future role of China in world aviation: part one - it will not be business as usual

Europe: independent low cost airlines' share of narrowbody fleet jumps

Jet2.com's firm order for 35 A320neo aircraft in Oct-2022 once again casts the spotlight on Western Europe's leading independent low cost airlines and the size of their fleets.

This analysis of the CAPA Fleet Database's records of Western Europe's low cost airline fleets compares the five leading independent LCCs with LCC brands of the three big legacy airline groups.

The combined narrowbody fleet of Ryanair Group, easyJet Group, Wizz Air Group, Jet2.com and Norwegian is now bigger than that of IAG, Lufthansa Group and Air France-KLM across all their airlines.

The leading independent LCCs have more than three times the narrowbody numbers of the legacy groups' low cost brands. They also have a multiple of their narrowbody orders.

The independent LCCs' combined share of Western Europe's narrowbodies has bounded upwards since COVID-19. Their share will continue to grow.

TO READ ON, VISIT: Europe: independent low cost airlines' share of narrowbody fleet jumps

Dominican start-up Arajet works to forge change in the Caribbean

The Dominican Republic start-up Arajet has grown rapidly since its debut in Sep-2022, offering flights to broadly 15 destinations in Latin America from its base at Santo Domingo Las Americas International Airport.

Arajet is attempting to write a new chapter in Caribbean aviation through its ultra-low cost model, and the company's management appears to understand the unique characteristics of operating in the region.

The airline's CEO Victor Pacheco recently told CAPA's sister publication Routes Online that Arajet believes it can connect the Americas through Santo Domingo, and although Copa Airlines operates a hub and spoke model through Panama City's Tocumen International airport, there are no airlines in the Caribbean and Central America that are "doing a hub-and-spoke with a ULCC cost base".

That could be a key element in the airline's future success as it works to stimulate traffic and grow Santo Domingo into a hub.

TO READ ON, VISIT: Dominican start-up Arajet works to forge change in the Caribbean

Europe aviation: intercontinental yield even stronger than intra-Europe

CAPA's regular analysis of Europe's capacity recovery from the COVID-19 pandemic shows that the trend continues its broadly sideways trajectory.

A report from IATA contains charts indicating that 2022 passenger demand and airline revenue in Europe will reach lower percentages of 2019 levels than capacity. Nevertheless, airline revenue is set to recover faster than passenger numbers, both within Europe, and between Europe and other continents. This indicates yield strength, particularly on intercontinental routes.

Europe's capacity has halted its recent slide as a percentage of 2019 levels. Europe remains fifth in the regional ranking, above only Asia Pacific.

In the week of 14-Nov-2022 seat numbers are at 84.9%, a shortfall of 15.1% against the equivalent week in 2019. This is an improvement of 1.1ppts from last week, but Europe's capacity recovery has not moved significantly outside the range of 85% to 86% of 2019 capacity for the past six months.

TO READ ON, VISIT: Europe aviation: intercontinental yield even stronger than intra-Europe

Hong Kong and Zhuhai authorities strengthen airport cooperation

In several parts of the world geography and manmade construction have conspired to offer opportunities for airports in close proximity to cooperate with each other - or at least to avoid unnecessary conflict.

As examples, the airports in Copenhagen and Malmö, situated in different countries but within the same conurbation and connected by a bridge; and San Diego and Tijuana on the US/Mexico border, where another bridge connects the US side to the Tijuana airport.

A bridge/tunnel, the world's longest, also connects Hong Kong with Zhuhai in mainland China.

One airport being wholly international while the other is uniquely domestic, there are opportunities for Zhuhai in effectively becoming a Chinese domestic terminal for Hong Kong.

That appears to be the goal, but not all factors combine to make it a shoo-in.

TO READ ON, VISIT: Hong Kong and Zhuhai authorities strengthen airport cooperation

Gibraltar seeks expansion of route network into the 'Spanish hinterland'

A complex situation existing between the European Union, the UK and the British Overseas Territory of Gibraltar has isolated that territory from direct European air services since the UK left the EU.

Now, mindful of Gibraltar's proximity to Spanish mainland vacation resort cities, the Gibraltar government is hopeful that the territory may be able to sign up to the Schengen Agreement before the end of 2022.

Gibraltar's Minister for Business and Tourism Vijay Daryanani said recently that an agreement for the British territory to enter the EU's Schengen area would make it more attractive for European airlines and enable an expansion of its route network. He added that Gibraltar is attractive to European airlines as a gateway "in the hinterland into Spain", with "no other airport within a 50 kilometre radius".

That membership would mean not only the potential for direct services from European countries, but also much easier cross-border travel, expanding what is essentially a 'city-break' destination into a gateway for established Spanish vacation regions.

TO READ ON, VISIT: Gibraltar seeks expansion of route network into the 'Spanish hinterland'

Kuwait Airport's new Terminal 2: part two - former bidders could return for new management contract

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 two of a two-part report.

TO READ ON, VISIT: Kuwait Airport's new Terminal 2: part two - former bidders could return for new management contract