Every 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.
Europe 2017/2018 airline capacity outlook: highest winter seat growth in 10 yrs despite bankruptcies
Growth in airline seats from Europe will accelerate to 7.2% in winter 2017/2018, versus 5.7% last winter, according to CAPA analysis of OAG data. This is around 1ppt lower than without Monarch’s collapse and Ryanair’s reduced growth, but will still be the highest winter growth for 10 years, in spite of other recent airline bankruptcies. Airberlin’s closure from 28-Oct-2017 may reduce growth fractionally, but most of its capacity will likely be reallocated, and Alitalia will continue this winter.
Wizz Air and TAP Portugal are the fastest growing European groups, while Turkish Airlines, Pegasus and Finnair are also growing at double digit rates.
Europe to Africa will grow fastest, but there will be above trend growth in every other region from Europe (including intra-Europe), apart from Europe-Middle East, where growth will be close to trend. Only to Latin America will growth be significantly slower than last winter. On intra-Europe, LCC seat growth will be almost three times non LCC growth. On the North Atlantic, above trend growth is being driven by LCCs and other non JV operators. On Europe-Asia Pacific, accelerating growth is mainly the result of Asian airline expansion.
This CAPA report presents growth and airline group seat share for each major destination region from Europe.
Tigerair Taiwan enters profitability and plans to settle in before growing fleet
Tigerair Taiwan has entered profitability after coming under the full ownership of China Airlines and separating itself from Tigerair Group as well as seconded management. After V Air ceased operation, Tigerair Taiwan became Taiwan’s only local LCC but with accumulated losses of TWD1.3 billion (USD43.1 million). Tigerair Taiwan aims to reverse this within four years and is already under way with a TWD174 million (USD5.7 million) profit in 1H2017 compared to a loss of TWD420 (USD13.9 million) in 1H2016.
Tigerair Taiwan is being more flexible by accommodating tour groups and charters. A notable charter programme to Japan could lead to the airline adding scheduled service. Southeast Asia is of interest to Tigerair Taiwan but is over-competitive and faces protectionism via slot allocation. Korea is significantly under-served but bilaterally constrained.
Tigerair Taiwan will receive its 11th A320 by the end of 2017, slightly behind its original forecast of 12 aircraft in three years. Tigerair Taiwan is sensibly waiting for opportunities to emerge before adding aircraft.
Air Canada finding unit revenue upside now that its network diversification reaches maturity
Air Canada is planning a pivot in its fleet and network strategy as its widebody fleet revamp draws to a close in early 2019. For the past several years the airline has charted rapid international growth, working to close competitive gaps with its large network rivals across the border in the US.
With the arrival of its first Boeing 737 MAX narrowbody in 4Q2017, Air Canada is embarking on a narrowbody overhaul, replacing mainline Airbus narrowbodies with next generation Boeing single aisle aircraft. That should result in a deceleration of Air Canada’s capacity growth as the airline works to stabilise unit revenue and yields, after longer stage lengths and a higher mix of leisure passengers drove decreases in those metrics during the past three years.
The airline now also has an ability to expand its low cost unit, rouge, and strategically deploy rouge onto regional routes as a tool to compete with potential new ultra low cost airlines aiming to enter the Canadian market place.
As it dies, airberlin sells NIKI, LGW, other aircraft to Lufthansa/Eurowings. easyJet talks continue
On 12-Oct-2017 the Lufthansa Group agreed to acquire Air Berlin subsidiary Luftverkehrsgesellschaft Walter (LGW) and the Austrian leisure airline NIKI for EUR210 million. The combined fleet of 50 aircraft operated by these two airlines, plus a further 20 A320 family aircraft from the Air Berlin Group, will be deployed under Lufthansa’s Eurowings lower cost point-to-point brand.
The purchase is subject to approval by the creditors’ committee, the administrator in the insolvency proceedings of Air Berlin, and the EU Commission’s competition authority. Lufthansa expects the transaction to be finalised by the end of the year. Even if competition concerns result in regulatory remedies, Eurowings will strengthen its position in Germany and consolidate its position as Europe’s number three low cost/point-to-point operator (although its CASK is by no means low cost).
Although 12-Oct-2017 had been identified as the deadline for discussions with the two preferred bidders for Air Berlin Group assets, talks with easyJet have still not reached a conclusion. If agreement is reached and approved, easyJet could jump from number six to number four airline in Germany, and would very likely enter the domestic market.
Airberlin terminated its long haul operations on 15-Oct-2017 and will cease to operate at all under its own AB airline code AB on 28-Oct-2017.
AirAsia Japan Mark II plans launch on 29-Oct-2017, becoming Japan’s first major independent LCC
Two years after the AirAsia Group announced its intention to re-enter the local Japanese market, the venture finally plans to launch on 29-Oct-2017 with double daily Nagoya-Sapporo flights.
AirAsia Japan Mk II was announced in Jul-2015 and in Oct-2015 it received its AOC, but not final approval. A Mar/Apr-2016 launch was envisaged, but slipped due to regulatory matters and, seemingly, soft protectionism.
The airline becomes the country’s fifth local LCC, but the first major LCC that is independent of any existing airline group. AirAsia Japan enters a market that already has 59 LCC aircraft and 10% market share, and having encountered hefty start-up costs from having two aircraft in-country, it will need to prove it is not too little, too late. At AirAsia Japan’s base at Nagoya there has been a growing presence from the LCC’s competitor, Jetstar Japan.
Airbus teams up with Bombardier to deepen Delta ties and outmanoeuvre Boeing
The Bombardier-Delta-Boeing triangle created by a recent tentative decision of the US government to place tariffs on 75 CSeries jets in Delta’s order book is the latest chapter in a years-long grudge match between Delta and Boeing – one that was spurred by Delta’s campaign to institute reforms of the ExIm Bank as part of the airline’s quest to quash what it deemed as unfair competitive advantages held by the three large Gulf airlines, Emirates, Etihad and Qatar.
Now Boeing’s rival Airbus has joined the fray, pledging to take a stake in the CSeries programme, which would allow Bombardier to sidestep the potential tariffs imposed on the new generation widebody aircraft. The result of the deepened ties between Airbus and Bombardier is that Airbus now influences approximately 75% of Delta’s order book.
The Airbus twist puts the administration of US president Donald Trump in an interesting position. The airframer has pledged to add a new assembly line at its US manufacturing plant to build CSeries jets, which obviously creates US jobs and supports his “America First” agenda.
Building some of the CSeries jets in the US would also smooth ruffled feathers of two of the US’ major allies – Canada and the UK; each country has factories that help manufacture the CSeries. The leaders of Canada and the UK have voiced their vehement opposition to the tariffs, and pledged retaliation against Boeing if the charges are levied against the CSeries.