Analysis Reports

Around the world several airports have been at pains to design new terminal space with lessons learned from the COVID-19 pandemic in mind. One of them is at the Clark International Airport near Manila, Philippines. Pittsburgh Airport in the US is another one to incorporate such measures in its new terminal, which has reached the halfway stage in its construction.

Whether or not these examples become benchmarks for other airports depends on the position taken elsewhere as to the likelihood of another pandemic in the foreseeable future, because any such measures will inevitably mean more open space within terminals – and fresh air can’t earn revenues.

Separately, Pittsburgh has reached a point where it has put its history with US Airways behind it. It is no longer heavily reliant on a single airline, but international direct flight options remain limited.

This is part two of a two-part report.

Around the world several airports have been at pains to design new terminal space with lessons learned from the COVID-19 pandemic in mind. One of them is at the Clark International Airport near Manila, Philippines. Pittsburgh Airport in the US is another one to incorporate such measures in its new terminal, which has reached the halfway stage in its construction.

Whether or not these examples become benchmarks for other airports depends on the position taken elsewhere as to the likelihood of another pandemic in the foreseeable future, because any such measures will inevitably mean more open space within terminals – and fresh air can’t earn revenues.

Separately, Pittsburgh has reached a point where it has put its history with US Airways behind it. It is no longer heavily reliant on a single airline, but international direct flight options remain limited.

This is part one of a two-part report.

The fate of the Colombian ultra-low cost carrier Viva has been sealed, now that Avianca has abandoned plans to purchase its low cost rival. It is not a surprise that Avianca walked away from the deal – which included broadly a year of wrangling with the Colombian government to gain a decision regarding the acquisition. 

Viva’s financial state continued to weaken after Avianca announced plans to acquire the ULCC in Apr-2022.

In Aug-2022 the two companies asked Colombia’s regulator Aerocivil for a speedy decision regarding the transaction – given Viva’s fragile financial state. In the space of a month during early 2023 Viva entered a voluntary restructuring, then ceased operations. After Viva was grounded, Aerocivil approved the deal, but with numerous conditions.

Although the foot-dragging by the government was frustrating, overall Avianca remains in a strong position and – for better or worse – Colombia’s market will continue to remain dynamic in the near term. 

South Africa has always attracted tourist visitors from the old colonial powers, and though diminished, they kept up appearances during the pandemic. Following a big influx of visitors in 2022 and 1Q2023, the country’s tourist authority must now consider whether the time is right to seek new markets, or whether it should continue to focus on these markets in which there will always be a solid base.

The position is made more complex by uncertainty over the future of South African Airways. With there being an imminent takeover, that future looks brighter than it has been for quite a few years, but there is still much work to be done.

And while the country sells itself easily with its big open spaces and beaches, the crime rate is of sufficient concern that the formation of a special tourist police force is under consideration, nationally. The biggest area of concern, though, must be the allegations made in the past week or so that a Russian cargo ship was permitted to transport arms to that country from a South African port.

South Africa is repositioning itself geopolitically, away from its previous ties to the US, UK and the Netherlands, but to gravitate too far, too fast, could have a negative impact on numerous elements of its economy, including tourism.

This is part two of a two-part report.

LOT Polish Airlines expects to handle 10 million passengers in 2023, according to Chief Commercial Officer Michał Fijoł. For the airline this would be an increase of 19% year-on-year after carrying 8.4 million in 2022. Significantly, this would take LOT back to pre-COVID levels of traffic, since it last reached 10 million passengers in 2019.

However, the ultra-LCCs Ryanair and Wizz Air – respectively the biggest and third biggest airlines by seats in Poland (with LOT in second place) – are already above their 2019 capacity levels.

This means that LOT has lost seat share in Poland since before the COVID-19 pandemic. In particular, the two LCCs are eroding its share in Warsaw, where LOT is still the leading airline.

Wizz Air has ambitions to replace Ryanair as the largest ultra-LCC in the Warsaw airports system. These two dynamic competitors are set to continue their aggressive growth, while LOT risks slipping from number two to number three in Poland overall.

South Africa has always attracted tourist visitors from the old colonial powers, and though diminished, they kept up appearances during the pandemic. Following a big influx of visitors in 2022 and 1Q2023, the country’s tourist authority must now consider whether the time is right to seek new markets, or whether it should continue to focus on these markets in which there will always be a solid base.

The position is made more complex by uncertainty over the future of South African Airways. With there being an imminent takeover, that future looks brighter than it has been for quite a few years, but there is still much work to be done.

And while the country sells itself easily with its big open spaces and beaches, the crime rate is of sufficient concern that the formation of a special tourist police force is under consideration, nationally. The biggest area of concern, though, must be the allegations made in the past week or so that a Russian cargo ship was permitted to transport arms to that country from a South African port.

South Africa is repositioning itself geopolitically, away from its previous ties to the US, UK and the Netherlands, but to gravitate too far, too fast, could have a negative impact on numerous elements of its economy, including tourism.

Ultra-low cost carriers continue to be some of the fastest growing airlines worldwide, but the US ULCCs Frontier Airlines and Spirit Airlines are experiencing margin pressure as they work towards restoring their pre-crisis financial performance. 

Spirit Airlines posted a 16.2% operating margin in 2Q2019, but its forecast for the second quarter of 2023 is 4.5% to 6.5%.  The airline believes that there are drags on its margin performance, including issues with the Pratt & Whitney PW1000G engines powering its Airbus A320neos and pilot attrition, which should gradually improve throughout the year.   

Frontier Airlines is also working to bolster its margins. In 2019 the airline’s adjusted pretax margin was 14.2%. For the first quarter, the airline posted a negative 1.9% margin.  

The two airlines realise the importance of restoring their pre-pandemic margins as a means of showing the investment community that the ULCC business model has staying power. 

Ryanair's 9-May-2023 order of 150 firm and 150 options for Boeing 737MAX-10 aircraft was not really a surprise. However, it was significant both for Ryanair and for Boeing.

The 228 seat configuration planned by Ryanair for its new aircraft is 21% more than its 189 seat 737-800s and 16% more than its 197 seat MAX-8200s. This should allow for a lower cost per seat and closer competition against Wizz Air's 239 seat Airbus A321neos.

If Ryanair exercises all the options, its fleet could grow from 537 at the end of Mar-2023 to 800 in FY2034. The order puts Ryanair on a course to reach 300 million passengers pa in FY2034.

The order is also good news for Boeing, whose MAX-10 is yet to be certified and whose MAX programme overall considerably lags that of the Airbus A320neo programme.

This report considers Ryanair's order and also provides contextual data on 737MAX and the A320neo aircraft numbers.

Brazil’s airport concession programme is coming to a conclusion as CAPA has said often. But even as it does, one of a number of potential reconcessions is coming to a head after bubbling under for several years during the COVID-19 pandemic.

And it isn’t any old airport. It is the Natal Aluízio Alves International Airport, a greenfield project that began in 2011 and was the very first privatisation, commissioned by an appointed ‘dream team’ of one of the world’s largest airport operators and a major transport infrastructure company – both of them from Latin America.

It hasn’t been a dream though, even if it didn’t quite turn into a nightmare. The traffic projections were out of kilter with reality and Brazil’s economic problems, followed by the pandemic, rendered the airport unable to realise expectations.

On top of that, the leading partner in the consortium then faced financial issues during the pandemic.

So the baton will soon be handed over to another investor – and there will undoubtedly be one, because for all the difficulties of operating in that environment, Brazil still seems to have some sort of hold over them.

(That investor revealed itself on 19-May-2023 to be Flughafen Zurich, which is currently the operator of four other Brazilian airports).

The significance of Kuala Lumpur’s original airport, Sultan Abdul Aziz Shah, or Subang, has declined in recent years as Kuala Lumpur International grew and gained a huge LCC terminal, in a country where LCCs are popular.

Subang mainly offers a limited network of domestic flights now, although there are a handful of international services.

Belatedly the government has asked MAHB, the state operator, to draw up a plan to reinvigorate the airport. The response has been to identify it as an aerospace centre, in the same way as Bangkok’s Don Mueang Airport was thus identified 16 years ago.

There will be terminal refurbishments included in the package, but any attempt to grow the airport’s passenger numbers significantly, especially if it means more jet services, is likely to meet with stiff local opposition.