Analysis Reports

Azul and Abra Group have ended months-long speculation of a tie-up by tabling a memorandum of understanding to combine GOL and Azul, which would create Brazil's largest airline group, and solidify Abra's stature as a leading entity in upper South America.

If the arrangement is finalised, Abra would have market leaders in two of Latin America's strategic aviation markets - Brazil and Colombia.

Of course, the companies need to secure requisite approvals for the Azul-GOL combination.

But if Abra and Azul are successful in their endeavours, a new powerful force will emerge in Latin America.

The year 2025 might have got off to a slow start where the air transport business is concerned but the political world now awaits the outcome of territorial and other ambitions of the newly sworn in President Trump that could have huge implications for the aviation industry.

There is going to be a sea change in how countries relate to each other, in the application of business principles, and in attitudes to government, regulation, economic relations, global ambition, the environment and many other things, and in some cases that change could manifest itself in a complete 'volte face' from what has happened in the last four years.

It will take place not only in America. The United States is being prepared to become the undisputed world leader again and that will have reverberations across the globe and include all sectors. The airport sector will not escape, when it eventually comes under the gaze of the US president's cabal of advisors.

For these reasons this Outlook for the airport sector in 2025 is set heavily within the context of political change affecting both it and the wider air transport business, and surveys both the knowns and the unknowns.

This report looks at trends and developments in the airport sector, globally, while also making observations on how external events may influence the sector and air transport generally.

This is the first in an occasional series about small, often regional, airports which have something that sets them aside.

In this one, Punta del Este Airport, on the Uruguayan coast and not far from the capital (Montevideo) comes under scrutiny, along with the town itself.

Punta del Este, with a population of 170,000, might be no more than a small and insignificant town, but a series of natural circumstances and a history of staging international events have combined to turn it into an international jet setters' paradise; much of its high-end tourists come out of Argentina, while its expat population continues to grow, partly to hedge against the impact of political developments in the northern hemisphere.

The question is: does the airport, even if it is ultimately managed by one of the world's leading private sector operators, have what it takes to handle what could amount to a big increase in traffic in the coming years?

Air Lease Corporation executive chairman Steven Udvar-Házy, who has more than 50 years' experience in aviation, does not expect aircraft deliveries to return to normal for at least three or four years.

Neither of the two leading manufacturers, Airbus and Boeing, has been able to meet production targets. However, the scale of the problem is not equal for both of them.

Airbus' 2024 delivery of 766 aircraft was more than twice Boeing's 348, and was the European airframer's sixth straight year of beating its US rival on annual deliveries. Moreover, Airbus' order backlog is 43% more than Boeing's, while both are at record highs.

At 2024 delivery rates, the global aerospace industry will need almost 14 years to clear the logjam of outstanding orders.

This report presents data on passenger aircraft deliveries and the order backlog, both on a global scale and for the two leading manufacturers.

Loganair announced on 9-Jan-2025 that it would join IAG's loyalty scheme in 2025.

Its agreement to adopt Avios as the currency for its ClanLoganair loyalty programme will deepen its relationship with one of Europe's biggest airline groups. Loganair, which styles itself 'Scotland's airline', already codeshares with British Airways.

Loganair is a mainly domestic regional airline with a focus on Scotland. Its international network, only one fifth of its seat capacity, is limited to UK Crown Dependencies (Isle of Man, Jersey and Guernsey), two destinations in Ireland (Dublin and Donegal), two in Norway (Bergen and Stavanger), and one in Denmark (Esbjerg).

Its entry into Avios, on top of its British Airways codeshare, should provide Loganair's customers with further incentives and travel opportunities.

Loganair's decision to join IAG's loyalty scheme also marks another step in its development away from its past as a Flybe franchise.

Meanwhile, after trimming capacity in 2024, Loganair is set to resume modest growth in 2025.

Prospects for the majority of Mexico's airlines look favourable as 2025 gets under way.

Perhaps the one airline exception is the state-owned Mexicana, which opted to cut several routes shortly after it first anniversary and has failed to build up a significant presence in the domestic market over the past twelve months.

While that's not unusual for an airline start-up, it does reflect continued challenges for the airline in its second year of operations.

There is the possibility that geopolitics could create some uncertainty in Mexico's aviation sector.

It's not clear how the threat to impose tariffs on goods from Mexico by the incoming US president could affect the country's economy, and potentially, passenger demand.

But as Mr Trump takes office, perhaps the joint venture between Delta Air Lines and Aeromexico, which has been operating under a threat of dissolution during the last year, could be spared.

The year 2024 having been another disappointing year for airport M&A activities, the business perked up a little with three announcements right at the end of the year: one of them being that RfPs were being sought for a privatisation and improvement contract at Saudi Arabia's Abha Airport, which turns out to be just one of several contracts that will become available in the kingdom this year.

Saudi Arabia is already the most privatised nation in the Middle East where its airports are concerned, and this trend might just spill over into neighbouring states if it can be shown that security issues are not compromised and that the state will always be in overall charge.

For that reason, closely controlled PPP deals using a variety of methods (BOT, BTO, DBFOM etc.) will continue to be the order of the day, rather than wholesale transactions.

PLAY's Dec-2024 passenger numbers fell by 13.5% - not the kind of performance many might expect from a still new low cost airline.

However, this is the result of leasing out one aircraft to GlobalX Airlines in accordance with its new business model, which aims to align its own operations more closely with seasonal demand.

In 4Q2024 it announced its new strategy: 'PLAY forward'.

This switches its core focus from North Atlantic connections over Reykjavik to point-to-point leisure destinations in (mainly southern) Europe, and also expands its ACMI/charter operations for other airlines.

It characterises the Iceland-North America market as highly seasonal, oversupplied with capacity, and increasingly competitive; while its point-to-point network is less seasonal, and has consistently provided a much higher contribution to overheads. The new strategy also involves a new Maltese AOC expected this northern spring 2025.

Still less than four years after its launch in Jun-2021, PLAY is making the transition from a growth-oriented start-up to focusing on profitability.

The tragic crash of a Jeju Air 737-800 on 29-Dec-2024 has turned the spotlight on the South Korean LCC industry, a sector that is in the process of undergoing significant change.

It is yet to be determined what the ramifications of the crash will be for Jeju Air and other airlines.

However, even aside from that, the LCC market is in a state of flux as 2025 begins.

Jeju Air is the largest of the South Korean LCCs, although it will soon be overtaken when Korean Air's and Asiana's LCC subsidiaries are merged. And another independent LCC, T'Way, has also been boosted as a side-effect of the seismic Korean Air-Asiana deal.

Meanwhile, Eastar Jet is back on a growth track, with new ownership.

A scatter plot of European airlines showing cost per available seat kilometre (CASK) against average trip length reveals much about their relative competitive positioning.

Even after many years of convergence ('hybridisation' used to be the buzzword), such analysis highlights ongoing differences between business models and reconfirms a few truisms.

Low cost carriers (LCCs) really do have lower unit costs than full service carriers (FSCs), while ultra-low cost carriers (ULCCs) have even lower unit costs.