Analysis Reports

The World Travel & Tourism Council (WTTC) has published a report on a topic that is slightly unusual: namely, the economic value of tourism to cities, taking into account its contribution to GDP and employment as well as the usual traveller ‘spend.’

The main conclusion is inescapable.

While ‘old world’ cities in Europe still top the list, as well as North American resort cities such as Orlando and Las Vegas, there is a shift in favour of Asia Pacific. Beijing, for example, is expected to more than double its tourism sector value to USD77 billion in the next 10 years, leapfrogging the current first-placed Paris.

Where actual tourist spend alone is concerned, the top two cities in 2022 were Dubai and Doha, both helped by the Soccer World Cup being played in Qatar.

Again, Asia Pacific cities are expected to overtake or challenge them in the next 10 years.

Mexico had reached some level of stability before 2020 as the country’s passengers were divvied up among two ultra-low cost carriers – Volaris and Viva Aerobus – and the country’s only full service operator – the Aeromexico Group. 

Due to Mexico’s more relaxed COVID-19 policies, the country’s ULCCs resumed their capacity growth by the end of 2020, and Aeromexico emerged from Chapter 11 restructuring in late 2022. 

But as 2023 gets under way: potential new entrants, a proposed government-owned airline, and a regional operator with aspirations to operate electric aircraft, could inject some new dynamics into the market that at some point could potentially create overcapacity in Mexico’s aviation sector. 

Air India is moving closer to finalising the aircraft orders it needs to support its growth ambitions. These deals will further expand the massive backlog of narrowbodies destined for the Indian market.

The airline is expected to place orders for about 500 new aircraft, as Air India’s new owner carries out its plans for a long term upgrade and expansion of its fleet. Reuters reports that the total will comprise more than 420 narrowbodies and 70 widebodies, split between Boeing and Airbus. 

If these numbers are correct, it means that Indian airlines will soon have more than 1,200 narrowbodies on order collectively. While there is undoubtedly huge potential in the Indian market, these orders will also increase competitive pressure.

Air India’s goal is to strengthen its market share in the international and domestic arenas, as well as improving the standard of the existing fleet. The impending (and recent) fleet moves show that the new owners are obviously committed to invest the vast sums needed to achieve these goals.

When Swansea Airport, in South Wales, last hosted scheduled services many airports in the UK were operated by surface transport operators (e.g. buses) or real estate companies. Indeed, nearby Cardiff, the Welsh capital, was home to the realtor TBI, a then-major operator which was later absorbed by Spain’s Abertis.

Even Cardiff Airport has had its problems at times, and Swansea’s route network was always limited – it closed to commercial flights in 2004. But unlike other UK airports that have succumbed to economic reality (Ipswich, Plymouth, Manston, Sheffield City and recently Doncaster-Sheffield, for example), Swansea looks set to host scheduled service again from Mar-2023.

It is starting small, with just one route, and will assuredly remain small. There is local opposition even to this tiny increase in activity, the infrastructure is basic, and the management could change in the future.

But just getting going again (as with Manston) is a feather in its cap.

In the week of 16-Jan-2023 the North Atlantic market is at 95% of its seat capacity of the equivalent week of 2019. However, the low cost segment has reached only 45%. 

Nevertheless, this masks a renewed dynamism in the Europe to North America low cost market, which has undergone a reboot since the depths of the COVID-19 pandemic.

There have been four new entrants since 2021: JetBlue, Eurowings Discover, Norse Atlantic and PLAY.

Three low cost operators left the North Atlantic market in 2019 and 2020: WOW air, Norwegian and Eurowings.

Low cost seat share on the North Atlantic is projected at more than 4% in the first six months of 2023, only two years after falling to zero. During the first phase of low cost disruption from 2013 it took four years for LCC share to exceed 4%, in 2017, before reaching a peak of more than 8% in 2018.

LCC gains in seat share are mainly at the expense of non-aligned airlines. However, there are also signs that the immunised North Atlantic joint ventures are starting to suffer some erosion of their share.

Earlier in Jan-2023 CAPA published a report summarising the state of the world’s airlines “in 15 numbers”. The airport business does not have quite the same propensity for mathematical evaluation, but the figures below, which are offered “in 11 numbers,” will be of interest all the same.

Perhaps the most impressive numerical statistic is that passengers boarded at the world’s airports in 2022 amounted to 83% of the 2019 figure, despite the ravages of the pandemic.

Things are definitely looking up, but as Stephen Carter, CEO of Informa plc (CAPA’s parent company), said this week, “If the last few years have taught us anything, it is that we should not take anything for granted... the world outside us remains uncertain, economically and geopolitically, causing pressures and strains in many countries and for many communities”.

Note data on cargo airports has been omitted as reliable statistics and sources remain at a premium for 2022/23. A report on that sector will follow. Data on subjective matters such as ‘airport quality’ were also overlooked.

Two smaller South Korean airlines are expanding the widebody operations they launched the past two years, providing a degree of home-based long haul competition to the dominant Korean airlines.

Air Premia plans to boost its Boeing 787 fleet this year to further its international ambitions, after launching its longest route – to Los Angeles – in Oct-2022. The low cost carrier T’Way has just launched its first long haul route – to Sydney – in Dec-2022, using Airbus A330s that it added in 2022.

These developments have positive aspects for Korean Air, which has been working with regulators in the US and elsewhere to assure them that there is enough competition in these markets to allow its proposed merger with Asiana to go ahead.

The Air Premia and T’Way long haul moves are obviously not enough to shake up South Korea’s overall international market share. However, those moves will be significant on the specific routes they have entered, and both airlines are likely to expand to more international routes.

J D Power’s annual survey of airports in North America has become a rating standard over the years.

The 2022 survey reveals traveller satisfaction levels yo-yoing between 2021 and 2002; improving when there were hardly any passengers, and then crashing again when they returned.

Close analysis suggests that some aspects of the survey are beyond the control of the airport, while others are strangely overlooked.

The survey cannot differentiate between public and private airports because there are very few of the latter, but it does provide other useful data.

China reopened its borders to international aviation from 8-Jan-2023 – much later than any other major market.

The size of this market and the length of time it has been all but closed has weighed heavily on the recovery of overall capacity between Europe and Asia Pacific. 

There have been some signs of a surge in demand for international travel to/from China. However, several European countries have reintroduced COVID testing requirements on travellers arriving from China.

Capacity projections derived from airline schedules indicate that the recovery in Europe-China seat numbers will remain stunted, at least into the middle of 2023.

If this outlook is fulfilled, this will ensure that Europe-Asia Pacific capacity remains the laggard of Europe's main route regions.

Colombia’s airlines embarked on 2023 facing higher taxes – the country’s government eliminated VAT (value added tax) reductions that were instituted during the COVID-19 pandemic to help airlines weather the crisis.

Although Colombia did not offer direct financial aid to its airlines, the tax reduction and other measures that were instituted to ease the burden for operators garnered praise from the industry. 

Now Colombia, which has experienced one of the swiftest recoveries worldwide, faces the potential that increased taxes and other macroeconomic factors could quash the country’s quick rebound in demand. 

The moves by the government could also send a message that as trends return closer to normal, old habits adopted by governments in Latin America could appear to be hard to break.