Analysis Reports

Loganair expects to be one of the first passenger airlines in the world to deploy new propulsion technology for zero emissions flights by the early 2030s, or sooner. It plans to use hydrogen technology developed by ZeroAvia.

Loganair aims to retrofit its existing DHC-6-400 Twin Otter turboprops, which famously land on the beach on the island of Barra, with a ZeroAvia hydrogen-electric power unit.

The aims of the UK's largest regional airline complement the technology and development timeline of ZeroAvia, among the leaders in applying hydrogen fuel cell technology to power aviation. Moreover, ZeroAvia plans to build a manufacturing facility close to Loganair's Glasgow Airport headquarters.

The Asia Pacific aviation sector finds itself navigating a complex landscape of recovery dynamics, structural shifts, and emerging challenges that collectively signal a fundamental transformation in the region's aviation ecosystem.

The current trajectory reveals a market that has moved beyond simple pandemic recovery metrics toward a more nuanced phase of strategic recalibration and sustainable growth planning.

Those were the key observations delivered by CAPA - Centre for Aviation in its Asia Pacific region State of the Industry address at the CAPA Airline Leader Summit - Asia conference in Singapore on 30-Oct-2025.

The race has been on to locate the site for, and build, a regional hub airport for the CIS countries, those that escaped the clutches of the Soviet Union in the 1990s but initially remained tied to Russia's command economy model.

Latterly, buoyed by oil, gas and mineral wealth (albeit not on the scale people might imagine), some of these countries - the 'Stans' as they are colloquially known - have acquired strong economies and GDP growth, and are increasingly attracting foreign inward investment.

And their location on the map is as central as it gets.

Some of their national airlines have grown rapidly, and private sector investors have started to look more closely at the prospects for the airports.

It has become clear that a hub airport for the 100 million plus people in the region outside Russia would make sense And the first mover is Tashkent, the capital of Uzbekistan, where a PPP will see the government work with a consortium of Korea's Incheon International Airport Corporation (IIAC), Japan's Sojitz Corporation and Invest Vision, a Saudi Arabian developer and investor across public and private investors, to build a new airport.

On the surface, it's a dream team, and already IIAC is talking about the "second and third Incheon airports", referring to Tashkent and the Urgench airport. The airport serves a religious tourism area, which is a tad optimistic, even though there are positive factors in place such as a fast-growing airline and comprehensive network at the existing airport.

But it isn't a region given over to one country taking precedence over another, which is what can happen when a hub airport is designated in these circumstances.

European airports of all shapes and sizes, and particularly the 'low-cost' ones, once topped the wish list of not only the traditional financial investment fraternity, but also the start-ups from the surface transport, construction and real estate sectors, all of whom thought they could do a better job than civil servants.

Most of the latter have long since departed for other pastures.

Those days are firmly in the past, and the only activity of any importance going on currently is usually on-sales of freehold ownership and lease concessions, together with the occasional public-private partnership, and there isn't a great deal of action in total; the entrepreneurs have taken their money elsewhere, or just given up altogether.

There were two glimmers of light in 2024 and during 2025, firstly in the form of the return to the fray of Australia's Macquarie Group and its various funds. Macquarie having previously abandoned UK and European airport investments and now returning to some of those UK ones (while admittedly still offloading others).

Macquarie's soon to be 75% ownership of London City Airport is at a level not seen there for two decades.

Secondly is the commitment of the French private equity firm Ardian, spun out of the giant Axa, which is now the majority shareholder by some way at London Heathrow Airport, with numerous important airports privately owned or concessioned in Italy, and now close to acquiring partially the SAVE Group airports, again in Italy and in Belgium, within a consortium.

That acquisition would give Ardian 14 airports in total, and put it broadly in the same class as the all-powerful VINCI Airports - at least, in Europe.

While it is still too early to declare that European airports are back in favour in the investment community, this does demonstrate that they are at least back in the consciousness, their prospects being encouraged by a relatively new financier to the business (from 2011, as Axa Private Equity) and one that is as old as the hills.

Lufthansa, Germany's biggest airline, is reported to be reducing its domestic network in the coming winter schedule by around 100 weekly flights.

Ryanair is cutting more than 800,000 seats from Germany this winter.

Both moves follow calls by the German Aviation Association (BDL) for the nation's coalition government to support its competitiveness as an aviation location through tax relief.

Germany's coalition government agreed to reduce aviation taxes when it took office in Apr-2025. However, it has rowed back from this commitment as a result of budget pressures - in spite of widespread dismay from the aviation sector.

Meanwhile, Germany continues to slip behind other major European markets in its post-pandemic recovery.

In many ways Argentina has become an unlikely poster child for liberalisation in the aviation sector in Latin America. After years of protectionism, the country's President Javier Milei introduced reforms that have produced favourable results in Argentina's airline sector.

But mid-term elections in Argentina scheduled for 26-Oct-2025 are in some ways a referendum on Mr Miliei's first two years in office, and perhaps could offer clues to the longevity of his reforms.

The word uncertainty has been used with regularity during 2025 to describe the travel sector. In fact, the aviation industry is in the middle of a paradoxical situation, with uncertainty both growing and diminishing at the same time.

Travel is more 'normal' than it has been since air travel plummeted by more than 90% in early 2020 with the onset of the COVID-19 pandemic. In the ensuing five years fears (or hopes) of permanent structural shifts in aviation have all but evaporated.

Global travel patterns have, with a few exceptions, returned to what they once were. The air travel industry is enjoying consistently strong demand, near record profitability, increasingly stable operational performance and more visibility around major cost inputs such as fuel, labour and raw materials.

At the same time, the industry faces a global outlook that is increasingly uncertain.

Following the 'Year of the Elections' in 2024, where more than 3.7 billion people across more than 70 countries participated in elections that decided national governments, 2025 was always going to bring some change.

On top of this, the world is experiencing a growing risk environment.

Geopolitical tensions and state-based armed conflicts are growing in number and scale. Societal and political polarisation continue to spread, underpinned by the production of misinformation and disinformation. This is exacerbated by rising wealth inequality, and then accelerated by the ever-increasing scale and pace of technological advancement.

For years the "Big 3" in the US market were defined as the nation's largest global network airlines - American Airlines, Delta Air Lines and United Airlines.

But now, Delta and United have concluded that a bifurcation has occurred in the industry, and they have become the definitive industry leaders in the market.

The obvious question is where does this leave American?

And when will the airline make headway in closing the margin gap with its global network rivals?

Azerbaijan's Sovereign Wealth Fund, SOFAZ, has joined the ranks of airport investors, with a small GBP50 million investment into London Gatwick Airport in tandem with existing investor GIP, once the operator there but now a minority shareholder, just (49.9%).

The investment does not affect the ownership of the airport's operating company and is being seen as more of a partnership arrangement, with SOFAZ using the opportunity to feel its way into the business by linking up with organisations that are long established in the sector.

That may seem unusual but it makes sense. SOFAZ has no experience of airports, but it does bring knowledge of other sectors, like solar farms, that could prove useful.

London Gatwick was so badly impacted by the COVID-19 pandemic that a deal like this would not have been credible only a couple of years ago but a renaissance, together with other factors and coupled with government support for a new runway, has changed the game.

The question now is how this new investor, the second SWF to get itself involved with London Gatwick, will work with other interested parties there, for there are many. There is at least no suggestion of any tension between the two main shareholders, GIP and VINCI Airports, which hold almost equal equity.

The other question is to what degree if any SOFAZ will wish to invest, in any way, at other airports in Europe, because opportunities will assuredly arise despite the sluggish level of M&A activity in the sector.

IATA boss Willie Walsh says that oil suppliers are "price gouging" when selling airlines sustainable aviation fuel (SAF), which is crucial to aviation's 2050 net zero target.

This is because they are passing on the cost of compliance with EU and UK SAF mandates to their airline customers.

This adds even further to the cost of SAF, already much more expensive than jet fuel.

Moreover, through the law of unintended consequences, it acts as a disincentive to the development of the embryonic SAF market that the mandates are aimed at stimulating.

Mr Walsh argues that European regulators should eliminate SAF mandates.

He may have a point.