US Department of the Treasury and the Internal Revenue Service released (30-Apr-2024) guidance on the Sustainable Aviation Fuel (SAF) Credit established under the Inflation Reduction Act. The guidance clarifies eligibility for the SAF credit, which aims to incentivise the production of SAF that achieves lifecycle greenhouse gas emission reductions of at least 50% compared with traditional jet fuel. SAF producers are eligible for a tax credit of between USD1.25 and USD1.75 per gallon. [more - original PR]
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.
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iCoupon, Director of International Sales, Viktoriya Soubra at the CAPA Airline Leader Summit - Airlines in Transition 2024
iCoupon, Director of International Sales, Viktoriya Soubra spoke to CAPA TV at the CAPA Airline Leader Summit - Airlines in Transition 2024, in Granada, Spain, about latest industry trends and company developments.
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CAPA - Centre for Aviation, in a report entitled: 'Fleet issues prove to be too much of a hurdle for troubled Bonza', stated (01-May-2024) Bonza 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. 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. A major question is whether Bonza's current owner 777 Partners had the resources, or the appetite, to adequately fund Bonza through its first years of development. [more - CAPA Analysis]
KLM CFO: 1Q2024 results 'have brought pressure to bear on our financial position'
KLM reported (30-Apr-2024) revenues of EUR2.7 billion and an operational loss of EUR290 million for 1Q2024. The carrier noted that while the first quarter is traditionally a "low season", costs are also rising and "fleet deployability was below par in Jan-2024 and Feb-2024", although measures taken to resolve this resulted in an improvement in Mar-2024. Key issues during the period included:
- Aircraft needed to spend longer in the hangar waiting for parts, affected by global supply chain problems;
- Aircraft had to be hired to accommodate the longer maintenance time, while the cost of concluding and extending aircraft leases rose significantly due to global shortages;
- Costs associated with compensating and caring for passengers affected by disruptions;
- Increased labour costs due to the collective agreements concluded in 2023, compounded by KLM not yet being able to operate the corresponding capacity;
- More engineers and new pilots have been hired to catch up after the pandemic, partly because additional pilots are needed in the cockpit on certain routes to Asia due to overflights to avoid Russia and the conflict in the Middle East.
CFO Bas Brouns commented: "To achieve our ambitions, we need to improve our profit margin and reduce unit costs". Mr Brouns said the 1Q2024 results "have brought pressure to bear on our financial position and therefore make these additional measures necessary". He added: "In a drive to reduce labour costs, we'll be critically assessing indirect positions and suspending or discontinuing them wherever possible. We will also be scrutinising and reconsidering investments where necessary". [more - original PR]
Lufthansa Group CFO: 'We cannot be satisfied with the operating result for 1Q2024'
Lufthansa Group reported (30-Apr-2024) an operating loss of EUR849 million for 1Q2024, compared to a loss of EUR273 million in 1Q2023. CFO Remco Steenbergen stated: "We cannot be satisfied with the operating result for 1Q2024", adding: "At more than EUR350 million, the various strikes had a significant impact on our result". Mr Steenbergen said: "Nevertheless, cash flow was positive due to the continuing high demand for air travel", with passenger traffic up 12% year-on-year. The group's airlines expanded seat capacity by 12%, despite the strike related cancellations, reaching 84% of the 2019 level and around 5pp lower than originally planned. The group noted that "despite the significant increase in capacity, the load factor remained consistently high due to high demand", with passenger load factor reaching 79.7%, in line with the 1Q2023 level. [more - original PR]
Lufthansa Group reported (30-Apr-2024) its passenger airlines recorded an adjusted EBIT loss of EUR918 million in 1Q2024, compared to a loss of EUR512 million in 1Q2023. Strikes had an impact of around EUR300 million. Yields decreased 2.5% year-on-year, "partly due to the strike related uncertainty on the customer side and the corresponding lack of high priced last-minute bookings". Unit revenues decreased 6.3%, "also influenced by lower cargo revenues and significantly higher compensation payments to passengers due to the strike". Due to the high losses in the core brand Lufthansa in 1Q2024, the carrier "has initiated measures to strengthen the result this year in the short term". It stated: "Among other steps, it is planned to reduce operating costs, stop new projects and assess the need for additional staff in administrative areas". [more - original PR]
Air France-KLM: 1Q2024 impacted by disruption costs and cargo unit revenue reduction
Air France-KLM reported (30-Apr-2024) its 1Q2024 operating loss of EUR489 million, which was EUR189 million below 1Q2023, was "impacted by disruption costs and cargo unit revenue reduction". The group noted the impacts were partly compensated by a lower jet fuel price, including ETS cost, and higher passenger unit revenue. The company reported an increase in yield across all long haul areas, except for Asia and Middle East, where capacity grew by 32%, while short and medium haul yield also increased. Group revenues totalled EUR6.7 billion, up 5.1% year-on-year. CEO Benjamin Smith commented: "Despite a challenging start to the year with persistent geopolitical tensions, Air France-KLM recorded further revenue growth this quarter, capitalising on a structurally robust travel demand". Mr Smith continued: "However, as anticipated, our operating income was impacted by disruption costs and a slower cargo business". He added: "We nonetheless remain confident in our ability to achieve our 2024 unit cost outlook, and are focused on executing our strategic roadmap to deliver our mid-term commitments". [more - original PR]
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This report aims to benchmark the performance of the world’s major airlines – to understand their relative carbon emission quantity and intensity with respect to passenger and freight transport.