Analysis Reports
We employ a global team of highly-experienced analysts who deliver a wealth of commentary about the aviation and travel industry. Our analysts don’t just report the news, they look at the big picture to help you understand how the latest news, issues and trends will affect your business. CAPA’s commitment to independence and integrity means every report is filled with accurate data and actionable insights to help you stay ahead of the game.
Virgin Australia's decision to halt its Tokyo route underlines the continued weakness of Japanese demand, and further cuts back its already limited international network.
The Australian airline intends to discontinue the flight between Cairns and Tokyo Haneda Airport from 24-Feb-2025, citing the slow recovery of the Japanese outbound travel market. This trend has also affected airlines based in Japan and elsewhere.
The Haneda route is Virgin Australia's longest flight, and Tokyo is one of just six international destinations served by the airline.
So although it is only one route, it is relatively significant in the Virgin Australia network. The airline is operating far fewer international flights than before the COVID pandemic, almost all of which are short haul.
In many ways the route was a hold-over from Virgin Australia's pre-pandemic iteration, when it had a greater focus on international services.
The airline has been operating the Tokyo flights with narrowbody aircraft, and likely wanted to retain the coveted Haneda slot for strategic reasons.
Making Cairns-Tokyo work would probably be challenging, even absent the current demand slump. The fact that Virgin Australia is cancelling the route in Feb-2025 indicates that it does not envisage a dramatic return of Japanese demand any time soon.
It also reflects Virgin Australia's continued lack of appetite to return to operating widebody aircraft that would be better suited to the Australia-Japan market.
A contrast is emerging between ultra-low cost carriers in Latin America and their counterparts in the US.
For many budget carriers in Central and South America and the Caribbean, opportunities to grow their passenger bases remain robust.
It's a different story in the US, where Frontier and Spirit remain under the microscope after a period of underperformance. Those airlines are being forced to move upmarket as passenger preferences for premium experiences show no signs of weakening.
That added complexity comes at a cost, and it is so far unknown whether the product pivot will result in a change of fortunes, particularly as airlines battle cost pressure - wages in the US continue to grow.
What seems more clear is that Latin ULCCs have a path to build share, rather than stealing it from full service competitors.
Protests took place in the streets of Palma de Mallorca on 21-Jul-2024, when local residents called for limits on tourist numbers.
The organisers of the protest in the largest city in Spain's Balearic Islands, 'Menys Turisme, Mas Vida' (Less Tourism, More Life), claimed that around 50,000 people took part, while police figures were more like 12,000.
The core of the demonstrators' position is that tourism is impoverishing workers and enriching only a few people. They argue that mass tourism has increased the cost of housing, and limited its availability; also that it has weighed on public services and harmed the natural environment.
Other complaints raised by residents, both in the Balearic Islands and elsewhere in Spain, include unattractive new resorts, obnoxious behaviour by tourists, and too much use of water.
Spain ranks second in the world both for tourist arrivals and the value of tourism receipts. Its economy depends more on tourism than the European and global average - especially in the Balearics.
However, the future of tourism will depend increasingly on integrating the different strands of sustainable tourism: economic, environmental, cultural and social sustainability.
Global airport construction and investment report mid-2024 – Part 2 – Americas, Middle East & Africa
This second part of a biennial inspection of infrastructure and investment projects at existing and new airports concludes with an examination of the Americas, the Middle East and Africa. The Asia Pacific and European regions were investigated in Part 1.
Although such activity has reduced everywhere, investment in existing North American airports remains solid, especially at the major gateway/hubs, while at a lower level in the US it is supported by acts passed by the House and Congress since the COVID-19 pandemic.
Investment in new airports throughout the continent remains painfully low.
In Latin America and the Caribbean there is much activity centred on Brazil, both for existing airports and new ones - although some of the new airport projects have dragged on, and have entered the arena of 'speculative'.
The Middle East bears witness to its preference for giant airport projects, which in themselves are testimony to its role as the world's intercontinental hub. Two projects in the UAE and Saudi Arabia weigh in at over USD60 billion between them.
There are fewer new airport projects in the region, those that exist being in Iran and Iraq, but more will be required in Saudi Arabia.
Finally, in Africa, and in the way of the continent, there are numerous speculative projects for large new terminals and new airports, some of which may never go ahead.
Jet2 plc's mid Jul-2024 reporting of its annual results for the year ended Mar-2024 was the last of Europe's listed airline financial statements for 2023.
This has allowed CAPA - Centre for Aviation to compile a ranking of operating margins for Europe's leading airline groups and airlines in 2023 (or nearest financial year).
Pegasus Airlines, Turkey's ultra-low cost carrier, reported the highest operating margin in Europe in 2023, retaining the top spot from 2022. Ultra-low cost Ryanair was second overall, and the leader among the six biggest European airline groups.
Europe's leading airlines typically report margins above the average for the European market, but cannot escape the cycle as it starts to show signs of peaking in 2024.
New interline and codeshare agreements between Air France-KLM and SAS will come into operation on 1-Sep-2024. The agreement will also include reciprocal loyalty scheme benefits and will coincide with the entry of SAS into the SkyTeam alliance.
The new commercial partnership follows the deal agreed in Oct-2023 under which Air France-KLM is to take a 19.9% equity stake in SAS, alongside the lessor/investment firm Castlelake (32% stake), the Danish State (25.8%), and Lind Invest (8.6%).
Currently, Air France-KLM's network airline capacity trails Lufthansa Group and IAG's. Adding the capacity of SAS closes the gap and considerably adds to its European network footprint, particularly in northern Europe.
SAS, which will also join SkyTeam, has been restructuring since 2020 and is now on a more secure footing.
As Air France-KLM is taking only a minority stake, the benefits to both sides will derive from the close commercial partnership.
Global airport construction and investment report mid-2024 – Part 1 – Intro, Asia Pacific & Europe
It is over two years since CAPA - Centre for Aviation published its last global airport construction and investment survey; one of several such reports during the past decade. At that time, many construction activities were suspended, or had been cancelled altogether, in the midst of the COVID-19 pandemic, although in some instances they did continue.
It might have been hoped that there would be a turnaround latterly on the basis that the pandemic, while still active, has been marked down to one of a relatively minor inconvenience in most countries, with travel restrictions absent today also in the vast majority of cases.
But the world is governed by events such as the invasion of Ukraine, and also the knock-on effect on supply lines, business and inflation well beyond that country's borders. All of these have contributed to an ongoing economic downturn.
Consequently, while the full impact of the pandemic will take years yet to play out, in the near term it has reshaped the entire infrastructure industry in four ways: intensifying its focus on operational resilience, the affordability of that infrastructure, the deployment of new technologies, and the need for sustainability.
Those are important reasons why infrastructure investment in both existing and new airports has close to halved since before the pandemic.
This is the first of a two-part report into where construction and investment in the airport sector is focused at present, including an introduction and a deeper dive into the position in Asia Pacific and Europe.
The subsequent second part will look at the Americas, Middle East and Africa.
IAG Chief Executive Luis Gallego has warned that funding the green transition means "flying is going to be more expensive". Meanwhile, Lufthansa Group has announced an Environmental Cost Surcharge to help with the additional costs of meeting environmental regulations.
Air France-KLM has had a sustainable aviation fuel (SAF) levy of between EUR2 and EUR24 since 2022. However, Lufthansa Group's environmental surcharge, of between EUR1 and EUR72, is also aimed at defraying other green transition costs.
European airlines face a greater range of such costs than most other regions.
As with fuel surcharges, the effectiveness of environmental surcharges in genuinely raising additional revenue is debatable. Price elasticity of demand for aviation probably means that surcharges lead to erosion of the underlying fares.
However, they send a signal to governments and regulators. They may help to stem the tide of taxes imposed on aviation in the name of the environment, but which effectively divert funds away from financing the green transition.
USD5 billion ‘New Narita Airport’ project – in what direction will the investment take it?
While there are numerous other cities apart from Tokyo with two main commercial airports, each of them handling both domestic and international traffic, the position there is more complex than in most cases.
Tokyo Haneda was the principal airport until Narita was built in 1978 - 47 years after Haneda, and against the wishes of many local inhabitants. It then went on to be designated as the international airport.
But after an expansion project was completed there, a greater number of international flights were permitted at Haneda, which has the advantage of being closer to the city - that helped it regain international market share, although that is still heavily weighted in favour of Narita.
Latterly the government has tried to direct full service/premium business services and international hub activities to Haneda, leaving Narita to handle full service leisure routes, more often point-to-point, and what has become a growing number of LCC operations as Japan belatedly embraces that marque both domestically and internationally.
Now the time has come for a major revamp at Narita: a USD5 billion project that will decommission one of the three terminals, build a new one and then incorporate all three terminals into one.
The nature of Narita's traffic both now and in the future will dictate the design of these facilities and their operation.
Hurricane Beryl's status as the first major hurricane of the current season is a stark reminder that climate change is creating significant challenges for the aviation industry.
The US National Oceanic and Atmospheric Association (NOAA) recently stated that on 2-Jul-2024 Beryl was the earliest Category 5 hurricane observed in the Atlantic on record, and only the second in that category to occur in July after Emily in 2005.
The agency said that Beryl had "brought catastrophic winds and life-threatening storm surge to the southern Windward Islands as it tracked into the Caribbean Sea, where it continued to gain strength".
Many Caribbean markets have outsized exposure to those increasingly strong weather events driven by climate change, and working to combat the effects will be a challenge for the region's aviation sector.