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European airports struggle to claw back passengers; reductions at 56% of airports in 2023 vs 2019
An intriguing presentation by Airports Council International (ACI) at a recent airport conference in Europe is examined in this report, together with some further research undertaken by CAPA - Centre for Aviation.
It reveals what the airport sector would prefer not to acknowledge in what was supposed to be a post-pandemic recovery year: namely, that more than half of European airports that are members of ACI-Europe experienced a continuing shortfall in passenger traffic in 2023 compared to the benchmark year of 2019.
The CAPA - Centre for Aviation research, which measures the Top 5 European airports by passenger numbers against three smaller airports in each of their countries, suggests that in most cases it is, perhaps surprisingly, the primary gateway/hub airports that are struggling to regain even the pre-pandemic status quo, while small regional and especially low cost airports are (in the main) doing quite well.
There are, at the very least, pointers here as to how the air travel business will continue to develop in Europe in the next few years.
Norse Atlantic's new London Gatwick-Cape Town link in northern winter will help reduce summer skew
Norse Atlantic is to launch a three times weekly route from London Gatwick to Cape Town at the start of northern winter 2024/2025, deploying Boeing 787-9 aircraft.
The UK-South Africa market, a duopoly between British Airways (BA) and Virgin Atlantic Airways since South African Airways (SAA) withdrew at the start of the COVID-19 pandemic, will once more experience three-way competition.
Norse Atlantic's entry provides fresh dynamism in a market whose recovery from the COVID-19 pandemic has been weighed down by SAA's exit and lower capacity offered by BA.
For Norse Atlantic, Gatwick-Cape Town will be only its second route outside its core North Atlantic market. The service will be operated by its Gatwick-based subsidiary Norse Atlantic UK, which is scheduled to fly more seats than the parent airline in 2024.
It will help a little in smoothing out the group's heavy reliance on the summer for its scheduled operations.
With Australian airline Bonza halting flights and considering its survival options, the LCC may never get the chance to prove whether its niche business model could have been successful in the longer term.
After struggling to secure enough aircraft to carry out its plans, and making significant network cutbacks, the airline grounded its fleet on 30-Apr-2024 and entered voluntary administration.
As of now, it is unclear whether Bonza will be able to restructure and continue in some form. It certainly faces some major hurdles if it is to do so.
Bonza said that "discussions are currently underway regarding the ongoing viability of the business". The airline said that it was "working as quickly as possible to determine a way forward that ensures there is ongoing competition in the Australian domestic market".
According to local media reports, some of Bonza's five Boeing 737 MAX aircraft have been repossessed by their lessor.
A major question is whether Bonza's current owner - US-based 777 Partners - had the resources, or the appetite, to adequately fund Bonza through its first years of development.
With any newcomer like Bonza, investors have to take the long view and accept a period of weak financial results while it builds to break-even point.
While it was unclear what that break-even point would be for Bonza, the airline is obviously nowhere near the fleet size that would provide the economies of scale to be profitable.
Bonza faced complications in gaining additional leased aircraft, which caused disruptions to its existing and planned network.
This was a major reason behind its current predicament.
CAPA - Centre for Aviation has consistently supported the concept of the privatisation of airports, arguing that it typically brings to the table a mélange of internal and external factors that combine to optimise airport performance generally.
An academic study released in 2022 and updated in 2023, and was prepared in the United States (where there has been very little airport privatisation), has found that those airports where private sector equity funds are invested tend to perform better than their peers across a wide range of operational, infrastructural, financial and performance metrics.
Strangely perhaps, the word 'environment' is only mentioned three times in the report and 'sustainability' not at all. In all likelihood, metrics in those categories will appear frequently in any future revision, because for the foreseeable future sustainability will be very high on the list of what makes an airport attractive to investors and increasingly - to users.
A number of fascinating conclusions were reached in the report, not least that "privatisation consistently leads to better performance only with PE involvement".
CAPA - Centre for Aviation is uncertain about some of the conclusions, but it is undoubtedly the case that this study can serve as a benchmark to attract back private funding to the sector at a time when it needs it most, with M&A activity floundering presently - as it is in most infrastructure sectors.
Western Europe: top 10 aviation nations ranked by capacity, seats per head, local airline share
Western Europe's top 10 aviation markets by 2023 seat capacity divide clearly into the big five - UK, Spain, Germany, Italy and France - and the second tier - Netherlands, Portugal, Greece, Switzerland and Norway.
All but Norway grew double digit rates in 2023, but only Greece, Portugal, Spain and Italy rose above their 2019 capacity.
Germany and Norway were still below 2019 seat numbers by double digit percentages.
In addition to absolute size, examining seats per capita relative to GDP per capita can bring additional insight. Norway and Switzerland lead the top 10 on both, and Portugal, Greece and Spain achieve high seats per capita, in spite of low GDP per capita.
This report also looks at local airline seat share in each of the top 10 Western European markets. Local airlines have more than 30% in nine markets and they lead in seven (Ryanair is the leader in the other three).
Italy stands out as having by far the lowest seat share held by local airlines.
With visitor flows from China to New Zealand recovering strongly, capacity in this market is expected to exceed pre-pandemic levels during the southern hemisphere winter season.
The resumption of flights to New Zealand by Sichuan Airlines means that six Chinese airlines are now operating there. Some of them plan significant capacity increases in coming months.
New Zealand was already a popular market for mainland China's airlines before the pandemic, which is a major reason why capacity and demand is rebounding more quickly than in many of China's other international markets.
Although China's outbound travel has been generally slow to gain momentum, it is a good sign that it returning to pre-pandemic levels in certain markets - particularly a long haul destination like New Zealand. This bodes well for other countries that are waiting for Chinese traffic flows to bounce back.
China-New Zealand routes are dominated by the Chinese airlines, but having this many extra foreign airlines boosts Auckland Airport's competitiveness.
The China market is important for New Zealand, both in terms of current service and potential demand. This market was growing rapidly before the COVID-19 pandemic, and there is scope for further expansion that will be helped by having such a broad range of Chinese airlines already flying to New Zealand on multiple routes.
easyJet is celebrating the 20th anniversary of its first Berlin flight, which flew to Schoenefeld from Liverpool on 28-Apr-2004. In 2018 easyJet added Berlin Tegel to its airport network when Air Berlin exited, and it soon became the biggest operator by seats in the German capital city.
When Berlin Brandenburg Airport replaced its two predecessors on 31-Oct-2020, easyJet became the first airline to take off from the new airport the following day.
easyJet expects to fly to more than 50 destinations from Berlin this summer, including five new destinations. Moreover, it has demonstrated its commitment to Brandenburg with on-site investments, including a hangar.
Nevertheless, easyJet rationalised its Berlin operations in 2022 and it is far from its pre-pandemic capacity: for the week of 29-Jul-2024 its Brandenburg schedule has only 39% of the seats that it offered across Schoenefeld and Tegel in the equivalent week of 2019.
In 2018 and 2019 easyJet was Berlin's biggest airline. Ryanair assumes that mantle this northern summer.
Branding has become increasingly important as a field of marketing, and noticeably so in the air transport sector - where airlines are no longer assessed by their 'sexiness', as they were 40 or 50 years ago, but by a host of metrics that collectively identify their 'brand value', 'brand equity' and 'brand sustainability'.
A leading brand valuation and strategy consultancy, Brand Finance, has published an annual report on how branding applies to airlines and airports in 2024.
In the former case the biggest brands by all the metrics are also the biggest airlines with few exceptions.
The same is true of airports, with a noticeable paucity of winners among small airports in the sustainability category, where some of them have actually been the most active. Most of the 'leaders' are from cities that are global powerhouses.
Meanwhile, a spat in California between two neighbouring airports over the selection of a new name for one of them demonstrates how, at the end of the day, an airport's name can be its most important feature and benefit of all.
Both United Airlines and Alaska Air Group appeared to have cracked the code to create meaningful results in 1Q - typically the weakest quarter for US airlines.
Each airline's profitability in 1Q2024 was wiped out by the grounding of their respective Boeing 737 MAX-9 fleets early in 2024, after the inflight blowout of a door plug on an Alaska Airlines 737-9.
Hopefully, the aircraft groundings should be a one-time event; but United and Alaska are bullish that profitability in 1Q2024 could become a common occurrence.
Edinburgh Airport – VINCI to take a controlling interest; becomes second largest UK airport operator
Quietly and stealthily, the French airports operator VINCI - with more than 70 assets worldwide, the leading private sector operator - has been building its portfolio in the UK, while all eyes have been on its acquisitions elsewhere.
Having already acquired Belfast International (100%) in 2018 and a majority stake in London Gatwick Airport the following year, VINCI has now moved to take a similar position to that at Gatwick by acquiring 50.01% of the equity at Edinburgh Airport, which serves the Scottish capital city and the second most visited tourist city in the UK.
The transaction should be completed in the summer of 2024, at which time VINCI would become the second largest airport operator in the UK by passenger numbers.
At the same time GIP, the majority shareholder at Edinburgh now, continues the downscaling of its airport activities...except where they concern VINCI, which is becoming the de facto operating partner of the funds manager (which has recently been wrapped up in the giant BlackRock asset manager).
But there are other factors to consider while the deal is secured, such as the position of the minority investors at Edinburgh, which represent major Australian pension funds.
And it does pose the question of whether VINCI might be tempted to go for a 'full house' of UK capital city airports by taking a look at least at what Cardiff Airport has to offer.