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Analysis for Global

Copa Airlines: branching out with its new LCC Wingo to regain lost ground in Colombia


After years of fading into the backdrop of Colombia’s aviation market, Copa Airlines is making a bold move to make itself more competitive in the market place. Copa is reigniting competition after the company’s subsidiary Copa Colombia decided to cede domestic market share to other airlines a few years ago, in order to focus largely on international routes.

Copa’s weapon of choice is the creation of a new low cost airline Wingo, operated as a unit of Copa Colombia with a targeted market debut in Dec-2016. Wingo is designed as a lower frills point-to-point airline, operating four Boeing 737s in a single-class 142-seat configuration. It is a shift in strategy for the Copa Group, which operates a full service model leveraging traffic flows over its hub at Panama City Tocumen international airport.

Wingo is also adding service to Panama City’s Pacific international airport, (Panama City Pacifico), which results in Copa’s business units then operating to the city’s two airports. Copa’s commitment to serve Panama’s secondary airport reflects its new strategy to become more competitive in Colombia’s aviation market, and create a defensive shield against further LCC encroachment in the future.

Hawaiian Airlines: cost creep casts a slight shadow over a favourable PRASM performance


Hawaiian Airlines’ geography has been a boon for the airline throughout 2016 as the company’s unit revenue performance has outpaced that of its peers. Hawaiian has benefitted from immunity to the lack of pricing traction in many domestic markets on the US mainland, and rational capacity deployment on is largest North American routes.

The company expects to continue posting a unit revenue outperformance for the remainder of 2016, driven by still favourable capacity trends in its markets. Hawaiian’s own capacity growth is expected to fall between 3% and 4% for 2016, and remain in the low- to mid- single-digit range for the foreseeable future.

Although Hawaiian continues to outperform the industry in unit revenue, the company is facing inflated unit costs in 2016 driven by several factors, including increased compensation and technology investments. The airline is also in the middle of pilot negotiations, and has acknowledged additional cost headwinds once a new collective bargaining agreement is reached.

Iran CAPA Aviation Summit – hope turns to frustration, but optimism remains as growth abounds


When CAPA – Centre for Aviation held its first conference in Iran at the end of Jan-2016 the atmosphere was primarily one of optimism. Immediately preceding the conference the expectation was that Iran and the West would move to rapidly reverse decades of estrangement. The first round of sanctions against Iran had come down – in line with the historic 2015 Joint Comprehensive Plan of Action (JCPOA) nuclear agreement reached between Iran and the ‘5+1’ powers – and major airlines and aircraft manufacturers were coming to the table.

While it was acknowledged that progress on major deals was not going to happen overnight, the hope was that as layers of sanctions came down, Iran would be embraced by the rest of the world. In return, Iran was expected to open itself up progressively to foreign trade and investment, and to travel.

The road ahead was perceived to be one that was both a very different, and far easier, one than the one Iran had already travelled. Aviation in particular was a sector that was expected to shine and lead the way for a new era for the country.

LCCs in Latin America: Peru’s rise as an economic star could draw attention from potential operators


As Latin America attempts to climb out of a two year long recession, Peru has emerged as a bright spot in the region – based on air passenger growth and the country’s economic performance. For the seven months ending Jul-2016 Peru recorded 9% passenger growth to 11.2 million, driven by growth of 10.2% in the country’s domestic market.

Peru’s air passenger growth continues to remain promising, as the country’s largest airline – LATAM Airlines Peru – calculates that the country’s trips per capita are slightly below the still-emerging markets of Mexico, Colombia and Brazil, whose passenger growth potential should remain robust once the country’s economy begins to fully recover.

Periodically speculation arises over the potential opportunity for a low cost airline to break into Peru’s market. The country’s growth prospects certainly warrant examination of stimulative opportunities in Peru, but so far the country lacks a true low cost airline.

Inselair: opportunities for the airline's niche are ripe if the airline commits to an expanded fleet


Growth at the Caribbean airline group InselAir appears to have levelled after the company more than doubled its fleet between mid-2014 and the end of 2015. Its fleet composition has remained steady at 19 aircraft throughout 2016, and its seat deployment for the year has fallen below levels the company recorded in 2015.

As its seating capacity has decreased in 2016 InselAir Group has continued to expand its network during the last year, bolstering its model that connects markets in Latin America largely to the Caribbean. New flights include service to Brazil and Colombia and Quito, allowing InselAir Group to expand its reach into South America to support its network model. The company is fairly insulated from high levels of competition; on several of its routes it is the lone operator.

For a year the InselAir Group has been exploring opportunities to add aircraft with greater range to its fleet, and at one point was considering Airbus narrowbodies.

CAPA-ACTE Global Summit, Amsterdam, 26-28 Oct. The shape of international aviation markets in 2025


This unique CAPA-ACTE Summit will explore how airline partnerships, joint ventures, new airlines and disruptive entrants and technologies will completely alter the competitive dynamic by 2025. Additionally, as new trade routes expand, many new airports and air services will also open.

The next 10 years will witness the most remarkable changes in aviation. The challenges and opportunities they bring will be of similar magnitude.

This singular event, bringing together top level representative of airlines, airports, aviation suppliers and corporate buyers, will embark on an exploration of what the airline industry is likely to face in this coming decade.

Global alliances as the airline system metamorphoses: A view to 2025


The international aviation world will look very different in a decade. The big US airlines are re-emerging from their shells as prosperity (and slow growth in their mature domestic market) prompts them to go forth internationally.

China is inevitably and remorselessly stamping its shape on global markets; the Gulf carriers continue to expand and attract the ire of those who prefer the status quo; and low cost carriers proliferate and metamorphose.

And all this while, sadly, airlines look like remaining confined to the 1940s’ archaic ownership and control rules. Within this confinement, they continue to struggle to find new ways of expanding their geography – and, in some cases, of restricting others’. International markets have another drawback. They tend to be much more competitive, in diverse ways, than nationally protected domestic markets.

Allegiant: ULCC braces for higher capex with Airbus order, but new fleet brings long-term cost gains


Similarly to fellow ULCCs and other US airlines, Allegiant Air’s financial foundation remains solid even as investors continue to zero in on an inflection point for industry wide-sagging unit revenues. During the past couple of years Allegiant’s leverage has decreased, the company’s returns have remained steady and shareholder returns have grown.

Airlines operating all types of business models realise the importance of keeping costs in check in order to sustain a strong balance sheet, and Allegiant is no different. After a strong cost performance in 2015, Allegiant has previously guided to possible unit cost inflation in 2016, but its 3Q2016 projections are now more favourable than expected, which should result in an adjustment to expectations for full year 2016.

Allegiant’s transition to an all-Airbus operator by YE2019 fleet should create cost tailwinds for the airline in the future, stemming from lower fuel costs and the efficiencies of operating a single fleet. The company broke precedent earlier in 2016 with an order for new-build Airbus narrowbodies, and is working to adjust its projections for capital expenditures accordingly.

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