Airline Business

Pros and cons SAF haven Cargo clout
How governments and regulators are Carriers cite urgent need for action on Why freight sector went from Covid-era
making consolidation a harder option boosting sustainable fuel production highs to difficult rendezvous with reality
Airline Business
STRATEGY FOR AIRLINE BOARDROOMS WORLDWIDE DECEMBER 2023
FlightGlobal.com/airlines From
INTERVIEW
ADRIAN
NEUHAUSER
Stepping up after
transformation
of Avianca
CONTENTS
Volume 39 Number 4
December 2023
Pros and cons

How governments and regulators are
making consolidation a harder option
SAF haven
Carriers cite urgent need for action on
boosting sustainable fuel production
Cargo clout
Why freight sector went from Covid-era
highs to difficult rendezvous with reality COMMENT
STRATEGY FOR AIRLINE BOARDROOMS WORLDWIDE DECEMBER 2023
4 Is the gain worth the pain?
Airline Business
FlightGlobal.com/airlines From BRIEFING
INTERNATIONAL
INTERVIEW
6 Quarterly review
ADRIAN
NEUHAUSER 8 Airlines focus on marginal gains
Stepping up after
transformation AMERICAS
of Avianca
10 Mixed fortunes among US airlines
11 Alaska decision has Pacific purpose
14 Tie-up creates third way in Canada
16 Profits elusive despite Latin growth
17 ALTA’s smaller players get creative
EUROPE
18 Icelandic carriers limit seismic hit
19 Schiphol noises off after Dutch turn UNIQUE UNDERTAKING
20 Hurdles rising for M&A ambitions Page 14
COVER STORY 22 Carriers plot US-style future
28 Best of both worlds 24 Finnair chief’s leadership learnings
How Adrian Neuhauser ASIA-PACIFIC
transformed Avianca into a 25 SIA touts strategic presence in India
low-cost competitor, drawing on MIDDLE EAST
its network-carrier strengths 26 Middle East airlines look long-term
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34 Making SAF a safer bet Airline leaders fear
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Americas air transport editor Pilar Wolfsteller acceleration of sustainable fuel production
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COMMENT
Is the gain worth the pain?

The past 12 months have seen consolidation moves touch more carriers. But at the
same time, the sentiment from governments and regulators appears to be hardening
against airline tie-ups, raising questions about the future viability of such moves
A s 2023 comes to an end, it feels apt has lagged peers in financial terms
SimoneAmi/Shutterstock
to revisit comments made by during the Covid-19 recovery and was
Ryanair group chief executive Michael rocked by the impact of devastating
O’Leary as the year began, when he wildfires in recent months.
said he had found acquisitions of other Similarly, state-owned carriers such
carriers to be “a pain in the arse”. as ITA, SAS and TAP Air Portugal will
His observations have greater not necessarily ‘drop in’ to established
prescience now, given 2023 has airline groups without a lot of work,
become a year when all the talk of whether that be financial, structural or
post-Covid consolidation moves has operational in nature.
finally translated into a ramping-up of Carriers will not And in Asia, the sense that Air India
M&A activity at several carriers. finally has a path to better times under
Some of O’Leary’s comments already necessarily ‘drop in’ to Tata Group ownership must be tem-
read like a warning from history, amid pered by acknowledgement of the
questions about whether more airlines established airline groups inevitable hurdles in consolidating
might be put off from embarking on four airline brands into two, particu-
proactive consolidations moves.
without a lot of work larly after a long period of government
He said, for example, that “most mismanagement of the flag carrier.
M&A in the case of Ryanair gets Despite the challenges, the answer on
blocked by the European Commission”. “We bought it just before Covid consolidation is still “yes” for many car-
In the months since, the Commis- shut flying down for two years,” he riers, given the advantages inherent in
sion has discussed bolstering remedies said in January. securing incumbency in an industry
required for airline tie-ups on competi- The dial does not just get moved by where even the most poorly performing
tion grounds, in a move that increases events on that scale, however, as the airlines are often formidably entrenched
the likelihood of such activity losing intervening period shows. For example, in local markets. Moreover, access to
its attraction. That has prompted, for analysts have questioned the amount extra capacity in today’s market matters
instance, Lufthansa Group to take a JetBlue agreed to pay for Spirit, amid a more than it has done for some time.
notably cautious approach to framing slump in the fortunes of US budget air- Amid increasingly hostile conditions
and submitting its official intention to lines over the past few months. for making M&A moves, however, there
take a stake in ITA Airways. Indeed, there are further considera- will inevitably be longer pauses before
In the USA, meanwhile, the govern- tions around the health of the airline that answer is given.
ment’s lack of appetite for consolida- you are purchasing. The risk for governments and regula-
tion in the airline industry has been “It’s very challenging from a cost tors is that discouraging M&A activity
plain to see in the lawsuit seeking to point of view, as you are generally buy- where the rationale for joining forces is
block JetBlue Airways’ purchase of ing someone else’s mess and then it strong raises the chances of potential
Spirit Airlines – and in its earlier takes three or four years to tidy it up,” acquirees becoming distressed, failing
unwinding of the former’s alliance O’Leary said. or ticking along for years as unloved,
with American Airlines. In that context, Alaska Airlines suboptimal businesses.
Elsewhere, Qantas abandoned its knows, for example, that Hawaiian is a When that happens, the “pain in the
purchase of Alliance Aviation after carrier in need of some TLC, given it arse” is felt by a lot more people. ■
competition regulators stepped in,
while draconian remedies ended Avi-
anca’s interest in Viva Air. LATEST ANALYSIS
The long and arduous journey of get- Ahead of the next issue of Airline
ting past regulators heightens another Business, which will be published
risk when it comes to M&A activity: in late March, make sure you are The home of Airline
Business on the
namely that you get the timing wrong. signed up to receive our free
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On Ryanair’s experience, O’Leary weekly briefing, which delivers Airlines channel of
described the timing of its acquisition industry insight every Thursday flightglobal.com:
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early 2019 as “spectacularly awful”. airlines
4 | Airline Business | December 2023 flightglobal.com/airlines

QUARTERLY REVIEW
Catching up on key industry news

Rundown of the biggest industry developments, covering the period mid-September through to mid-December
16-30 SEPTEMBER international airport, which TAP Air Portugal under which it “for the foreseeable future”, a
The US Federal Aviation Admin- forms part of a resort complex in plans to sell at least a 51% stake year after detailing plans to sell
istration extended slot relief the west of the kingdom. in the national carrier. their stake.
rules at busy airports in the
Northeast USA through the end United Airlines named former OCTOBER EasyJet signed up to Airbus’s
of 2024’s summer travel season vice-president of investor rela- Ecuadorian carrier Equair new carbon-capture programme,
due to continued air traffic tions Michael Leskinen as its suspended operations just two the first operator to reach a formal
control staffing shortages. next chief financial officer, suc- years after the Latin American agreement over the initiative.
ceeding Gerry Laderman, who is airline emerged. Later in the month, the UK
Cathay Pacific and Malaysia scheduled to retire from the budget carrier said it had reached
Airlines said they would not pro- company in September 2024. Mexican carrier Aeromexico said an agreement with Airbus to
ceed with plans for a joint busi- it would introduce 17 new routes order a further 157 A320neo-
ness, after regulators in Malaysia Air France-KLM announced it is to the USA after the Federal Avia- family jets and take purchase
expressed concern over the “sig- to acquire 50 more Airbus A350s, tion Administration lifted Mexi- rights on 100 more.
nificant reduction” in competition. which will include both the -900 co’s security status.
and -1000 variants. Airlines began to suspend flights
Competition regulators expressed Air France-KLM said it would to Israel after Palestinian militant
concern over budget carrier Ukrainian carrier SkyUp Airlines take a non-controlling stake in group Hamas launched a surprise
Norwegian’s proposed acquisi- said it was aiming to develop US Scandinavia’s SAS, with the attack on the country.
tion of regional airline Wideroe, wet-lease and charter services, potential to become a controlling
saying they would carry out an having secured authorisation to shareholder. The latter would Malaysian start-up MYAirline
in-depth analysis of the tie-up. operate in US territory. switch from Star Alliance to suspended operations indefi-
SkyTeam, should the deal nitely – days after its founding
Bill Moore was named as the next China Eastern Airlines said it be approved. chief executive stepped down –
president of UPS Airlines, step- would purchase another 100 citing “significant financial
ping up from his role as head of Comac C919 twinjets, with deliv- Russian operator Aeroflot Group pressures”.
aircraft maintenance and engi- eries of the aircraft set to com- disclosed several settlements
neering. He succeeded Jim mence next year. with lessors relating to foreign- Regional carriers Air Nostrum
Joseph, who took on a new role built aircraft which were and CityJet formally joined forces
within the company. Ultra low-cost carrier Allegiant retained by Russian airlines in to create a European regional air-
Air’s former chief executive the aftermath of international line alliance, five years after a tie-
Charter and cargo operator IAero Maurice Gallagher took control sanctions imposed over the up was first proposed.
Group, formerly Swift Air, volun- again after his successor John Ukrainian conflict
tarily filed for Chapter 11 bank- Redmond resigned suddenly. Qantas scrapped plans to
ruptcy protection in Florida. Scottish regional carrier Loga- acquire resources charter opera-
Portugal’s Council of Ministers nair’s shareholders Stephen and tor Alliance Aviation – months
Saudia carried out the maiden approved a decree to formally Peter Bond said they would after competition regulators
flight to the new Red Sea launch the re-privatisation of remain owners of the company opposed the deal – noting that
United Airlines
Virgin-Atlantic
Leskinen will become chief financial officer at United Airlines Virgin Atlantic flight highlighted pressing need for SAF investment
6 | Airline Business | December 2023 FlightGlobal.com/airlines

“there is no reasonable path Whitney PW1100G-powered long-time members of its C-suite Lufthansa Group dropped plans
forward” for the merger. aircraft would be grounded in the team as co-chief executives, with to divest a partial stake in its engi-
coming months as technical current chief Ajay Virmani neering unit Lufthansa Technik
Frontier Group Holdings named issues are addressed, on top of becoming executive chairman. after unveiling a new long-term
long-time chief financial officer dozens of jets already grounded Chief corporate officer Pauline growth plan for the division.
James Dempsey as president of by separate MRO challenges. Dhillon and chief strategy officer
the company. Jamie Porteous will become Israeli flag-carrier El Al said it
BOC Aviation appointed finance co-chief executives effective expected a 5-10% reduction in
Qatar Airways’ long-standing chief Steven Townend to helm 1 January. capacity over the fourth quarter,
group chief executive Akbar Al the company, as long-time chief as a result of the Gaza conflict,
Baker steppped down in early executive Robert Martin steps AirAsia X shed its financially and a fall in load factor, but was
November and was succeeded by down at the end of the year. distressed status following an yet to estimate the impact on the
Badr Mohammed Al-Meer, previ- appeal, as it improved its third- first quarter of next year.
ously chief operating officer of Pakistan’s privatisation ministry quarter earnings on the back of a
Qatar Airways’ hub in Doha. picked a consortium led by Ernst strong passenger recovery. 1-8 DECEMBER
& Young as financial advisor for Lufthansa Group and the Italian
Lufthansa Group confirmed that the planned sale of struggling Turkish Airlines unveiled new government formally notified the
new short- and medium-haul national carrier Pakistan Interna- branding for to-be-spun-out European Commission over a deal
carrier City Airlines will begin tional Airlines. low-cost carrier AnadoluJet, for the German carrier to take a
flights in the summer of 2024, which will operate under the minority stake in ITA Airways.
operating out of its Frankfurt and CFM International said it was in AJet Air Transportation name
Munich hubs. active talks with Airbus and Boe- from next summer. Air Malta successor carrier KM
ing about its in-development Malta Airlines opened for book-
Canadian airline company open-fan RISE (Revolutionary Virgin Atlantic highlighted the ings after securing its air opera-
WestJet Group said it had Innovation for Sustainable pressing need for investment in tor’s certificate.
recently completed the integra- Engines) programme as it contin- sustainable aviation fuel produc-
tion of former low-cost subsidi- ues to work on a prototype with a tion, as one of its Boeing 787s Israir Group acknowledged an
ary Swoop into its primary view to testing it in flight around took off on what it described as approach from fellow Israeli
WestJet operation. “mid-decade”. the world’s first transatlantic leisure operator Arkia regarding
widebody flight to be fuelled by a potential tie-up between the
Comac delivered its first pair of Middle Eastern carrier Emirates 100% SAF. two airlines.
ARJ21 converted freighters, as unveiled an agreement for 90
the airframer hailed the “solid additional Boeing 777X twinjets, Canadian operators Air Transat Alaska Airlines said it would
step forward” for China’s aero- among a raft of deals for various and Porter Airlines agreed acquire Hawaiian Airlines for
space sector. carriers announced during Dubai to coordinate flight schedules $1 billion.
air show. and routes under a new joint
Etihad Airways conducted the venture aimed at helping both IATA said it expected the airline
first commercial flight out of Abu Airlines celebrated news that the carriers expand. industry to post a collective net
Dhabi International airport’s Dutch government had backed profit of $23.3 billion for 2023,
long-awaited new Terminal A. off a plan to reduce the number of Avianca said chief executive more than doubling its expecta-
flights at Amsterdam’s Schiphol Adrian Neuhauser would take tions from six months ago. It
NOVEMBER airport next year. the helm of Abra Group, which added that airlines are set for
IndiGo became the latest carrier owns Avianca and Brazil’s Gol, record passenger numbers and
to say dozens of its Pratt & Canada’s Cargojet named two in January. revenues in 2024. ■
Turkish Airlines
Qatar Airways
Turkish Airlines unveiled standalone low-cost unit’s AJet branding Badr Mohammed Al-Meer stepped up to lead Qatar Airways

BRIEFING INTERNATIONAL
GRAHAM DUNN GENEVA
Airlines focus on marginal gains

While the industry return to profit this year is better than expected, forecast improvement for 2024 is only modest
onfirmation from IATA that

C the airline industry will re-
turn to collective profitability
“We had a lot of supply
this year and that passenger vol-
chain issues, which has
umes will shortly surpass pre- significantly impacted
Covid levels is an indication that
the sector has finally normalised. capacity”
While it probably will not feel Willie Walsh
that way for the parts of the mar- Director general, IATA
ket still to fully recover, the indus-
try is as a whole is now approach-
ing business-as-usual mode. revenues of just over $800 billion
Airlines across three regions – in its June forecast, but now esti-
North America, Europe and the mates a collective airline turno-
Middle East – this year will be ver of $896 billion this year.
profitable for the second time since That is driven by strong pas-
the pandemic. Losses elsewhere in senger demand. Global traffic in
Asia-Pacific, Africa and Latin October was within two percent-
America have all narrowed. age points of pre-Covid levels
Indeed, the far quicker recov- and in domestic markets has
ery than first anticipated among been running above 2019 levels
Asia-Pacific carriers – now seen since April.
reaching almost breakeven for the IATA director general Willie
year – was a key factor in IATA Walsh characterises the year as
upgrading its collective net profit good, but flags airline frustrations
estimate for 2023 to $23.3 billion. over issues outside of their con-
That is more than double its trol. “We continue to see a lot of
expectations for the year just six air traffic disruption – principally
BillyPix
months ago. in the US and to a lessor degree in

“We identified a number of Europe. We had a lot of supply
downside and upside risks,” than expected lifting of strict Covid particularly domestic China,” he chain issues, which has signifi-
explained IATA’s director of policy travel restrictions. says. “And the downside risks we cantly impacted the capacity that
and economics, Andrew Matters, “We were surprised things identified just didn’t materialise.” airlines would have wanted to
during the association’s annual came out better than we antici- That strong demand is have put into the market.
media day in December, noting a pated in terms of the strength of reflected in a near $100 billion “Traffic growth during the
key positive development that demand, a large part of that was upgrade in revenue expectations. year saw demand slightly out-
came through was China’s earlier- how quickly China came back, IATA had forecast industry stripping capacity, but I think
Passenger traffic development moves out of recovery position

After several years of lost growth resulting from Andrew Matters, says: “I think we can pretty improvement in load factor. This would take
the Covid pandemic, airlines will finally surpass much stop talking about recovery. The recovery the industry’s passenger load factor back up
2019 passenger traffic levels next year, IATA is over, we are now looking ahead. to 82.6% – in line with 2019 levels.
projects in its latest outlook. “The recovery is not just about traffic vol- The strong passenger market performance
The airline association expects scheduled umes, we’ve also seen a recovery in passenger will drive another year of record revenues.
airline passenger volumes to top 4.7 billion next load factor,” he adds. “You can see that for Q3 IATA already expects passenger revenues to
year. That is growth of over 400 million on the this year the passenger load factor is pretty reach $642 billion – surpassing pre-pandemic
4.3 billion passengers airlines are set to carry much the same as it was pre-Covid. There are levels for the first time – and to climb again in
this year and higher than the 4.5 billion flown in three regions where the passenger load factor 2024 to $717 billion.
2019 before the pandemic hit. Passenger is higher than pre-Covid – so the Middle East, A normalisation in the air cargo market,
volumes had dropped to under 1.8 billion in Latin America and Africa. This has been an im- which had generated record revenue of over
2020 at the height of the pandemic. portant part which helps to underpin the finan- $200 billion at the peak of the crisis, means
Airline passenger traffic, as measured in cial recovery for the airlines.” revenues are expected to fall again next year
revenue passenger kilometres (RPK), is also Notably, IATA expects passenger traffic to $111 billion. However, despite this, both
expected to be 4.5% above 2019 levels. growth of almost 10% next year to outpace an cargo yields and revenues are expected to
IATA’s director of policy and economics, additional 9% of capacity, leading to a further remain above pre-pandemic levels in 2024.

we would have seen more capac- Airline net profit by region: 2022-24
ity coming into the market had ($bn)
these supply chain issues not 15
impacted. [It’s] very disappoint- 12
ing to see the latest problem with 9
the [Pratt & Whitney] GTF
6
[engine], which will impact on
3
airline capacity in 2024 and
0
probably in 2025 based on the
-3
latest assessment we have.”
-6
Walsh also flags continuing
challenges in accessing spare -9
parts for aircraft both in service -12

and under maintenance, which is -15
North America Europe Middle East Asia-Pacific Africa Latin America
further crimping capacity –
though plays a part in keeping Source: IATA global outlook Dec 23
load factors and yields high. 2022 2023 2024 (forecast)

“[It is] so frustrating to see
these issues, but in the main I
think most of the industry is cau- significantly below where we noticeable impact on traffic Overall, IATA sees revenues
tiously optimistic as we come to need to be and significantly growth,” he says. climbing 7.6% in 2024. Not only
the end of 2023 and look forward below where we were prior to the Neither does he see much would this take industry turnover
to 2024,” he says. pandemic,” says Walsh. The change in the disruption stem- to a new high of $964 billion, but
industry averaged a net profit ming from Russia’s invasion of it also outpaces an anticipated
WORK IN PROGRESS margin in excess of 4% during its Ukraine last year. 6.9% rise in costs.
IATA is forecasting only a modest long profit run in the last decade, “I don’t see Russian airspace The performance in 2023 was
rise in industry net profits for including a 5% margin on net opening in the foreseeable future helped by easing oil and jet fuel
next year. While projecting an profits of $35 billion in 2017. and carriers in the region have prices – even if a widening crack
almost $9 billion improvement in made plans for the long-term clo- spread is still a concern. “Going
industry operating profit in 2024 “One of the key sure of Russian airspace,” says forward, our working assump-
to $49.3 billion, it sees higher Walsh. “Had this happened 10 tion is it’s going to be a couple of
interest rates clipping the rise in challenges at the years ago, it would have had a dollars a barrel lower next year,”
total net profitability for the very significant impact because Matters says. “So the good news
industry to just a little over $2 bil- moment is certainly on most of the aircraft flying back is that we are not as high as we
lion in reaching $25.7 billion. then would not have had the were last year, but we are still at a
While the stronger return to
the geopolitical side” range and payload capabilities to relatively high level.”
profit after three pandemic- Andrew Matters serve the market without a techni- While the low unemployment
afflicted, loss-making years is Director, policy and economics, IATA cal stop. That’s not the case today, rates through the current finan-
welcome, IATA recognises the the market is being served.” cial cycle have also been a nota-
industry’s performance is a work Matters adds: “One of the key ble positive for air travel demand,
in progress, with net profit mar- Matters notes: “What this challenges at the moment is cer- he says the related additional
gins of 2.6% and 2.7% for this really highlights is our industry tainly on the geopolitical side, it’s wage pressure is an important
and next year respectively. remains a high volume, low one of the things we are keeping a consideration given how signifi-
“In margin terms we are still margin business. There is still very close eye on. That of course cant a part it comprises of airline
work in progress to ensure the is very difficult to quantify. But I operating costs.
Matters industry going forward is finan- think it’s fair to say that in recent “We often focus on the down-
looks cially sustainable.” years the level of geopolitical sides, but we shouldn’t forget
ahead As a result, he says there “is tensions globally has increased. about the upside risks,” he adds.
not a lot of wriggle room there for It’s not just the Middle East, it’s That seems particularly apt
airlines”. That leaves an industry, not just Russia-Ukraine, I think given how the unexpectedly
inherently at the mercy of there are some simmering ten- early reopening of China helped
external events, without much sions elsewhere. boost demand this year. That
buffer against any further down- “The world has become a bit said, Matters acknowledges: “On
side risks. more of an unfriendly place and balance though I think it is fair to
One of the major negative risks that creates plenty of challenges for say the balance of risks around
remains geopolitical tensions, global industries such as aviation.” our forecast is still tilted toward
most recently compounded by the downside.
fresh conflict in Israel. Walsh is MACRO-ECONOMICS “It’s still a work in progress on
encouraged that October data However, he notes geopolitical the financial side and those
shows little impact at an aggre- tensions are not the only risks it downside risks could very well
gate level as Middle East airline is factoring in. “We are also look- come into play. But overall
traffic is still growing. “So while ing at some of the macro-eco- [we are] cautiously optimistic
it is impacting some individual nomic risks; regulation around on 2024, both in terms of
airlines, when we look at the the world is another important traffic volumes and financial
IATA
region we are not seeing any source of risk.” performance.” ■

BRIEFING AMERICAS
PILAR WOLFSTELLER LAS VEGAS
Mixed fortunes among US airlines

Low-cost operators in particular have struggled to stay in the black, while network carriers enjoy long-haul strength
n the US aviation market, It was expecting 10 aircraft to

I third-quarter results seemed to
show a tale of two sectors.
be grounded in the fourth quarter
of this year, with a full-year 2024
Major legacy carriers continue average of 26 jets, including 41 in
to ride on the strength of their December.
networks – including outstand- “Having 41 aircraft parked dur-
ing demand for international ing the holiday season means [the
routes – while low-cost or fourth quarter of 2024] is likely to
domestic-focused airlines battle be another loss-making quarter,”
with expenses and overcapacity. says Becker. “In fact, we don't see
An additional struggle for both is how the airline can be profitable
Sharkshock/Shutterstock
the industry-wide captain for the foreseeable future.”
upgrade problem. Due to market conditions, Spirit
As a result, some airlines have said recently it would be “evaluat-
lowered capacity growth esti- ing our growth profile and…
mates for 2024, as they try to find ‘Over-saturated’ markets contributed to Frontier’s struggles modifying the cadence of our air-
a balance between expanding craft deliveries” through the end of
like gangbusters high on post- At American too, the captain “The traditional [ultra-low- the decade. The company also has
pandemic euphoria, and keeping upgrade problem has created cost] model of starting with a flat “identified $100 million of struc-
the cost of that growth in check issues. “American should con- fare, and then adding fees for bags, tural cost reductions”.
amid inflationary pressures. tinue to make progress on that seat selection, carry-on, airport
At United Airlines, interna- front through 2024, which will check-in, etc as the main sources OPERATIONAL TROUBLES
tional margins were “well ahead of unlock improved asset utilisa- of ancillary revenue may become JetBlue Airways, meanwhile,
domestic”, it said during its third- tion,” says TD Cowen aviation more of a customer deterrent than posted a $153 million loss in the
quarter earnings call in October. analyst and managing director once thought,” says Mike Boyd, of quarter, driven by operational
The Chicago-based carrier’s execu- Helane Becker. “The company Boyd Group International. troubles and too many seats in
tives struck a bullish tone, saying estimates it could fly 5% more The carriers “will need to the USA.
that would continue into the with the aircraft it already has in develop reasons for consumers to That prompted the airline to
fourth quarter and beyond. place. This is the most efficient fly them instead of traditional air- trim its capacity expectations for
However, similar to other carri- type of capacity increase, and it lines”, Boyd adds. “That means a the full year. Near-term head-
ers, United is facing the fact that would contribute to driving whole new thought process winds include higher fuel prices
it has too many first officers who down unit costs.” regarding what ULCCs offer and and “industry capacity that is
do not have enough hours in Atlanta-headquartered Delta deliver to the customer. The outpacing domestic demand”,
their logbooks to be able to Air Lines says it expects transat- minefields of petty service fee chief executive Robin Hayes says.
upgrade into the Captain seat. lantic demand to remain high systems must go away.” Frontier Airlines in October also
The airline hopes to have through the new year with just a Post-Covid-19 changes in con- reported lacklustre financial
addressed this with a new four- few weeks of off-season weak- sumer behaviour, such as hybrid results as it struggled in “over-satu-
year pilot contract. ness during the early months. work patterns, have also affected rated” core markets such as Florida
Chief financial officer Mike That is a big change from historic travel and ticket purchases. In and Las Vegas. It lost $32 million
Leskinen told investors that in patterns, when the drop-off came addition, inflation has hit the in the third quarter.
the fourth quarter it was flying after mid-October and lasted budget traveller hard. “We’re seeing kind of uneven
“about three [percentage] points through mid-March, Becker says. “Were these factors not enough deployment of capacity in the
lower than we thought just three Premium travel is also up, to tilt demand away from ultra- United States,” chief executive
months ago”, two of which can with customers more willing to low-cost-carriers’ no frills ser- Barry Biffle told investors. “We
be attributed to the captain pay up for additional perks. vice, air traffic control limitations are probably more impacted by
upgrade issue. now make it more difficult for that unevenness than anybody
Higher fuel costs and mainte- CONSUMER DETERRENT discount airlines to obtain the else in the space.”
nance expenses will also be a While legacy carriers can rely on block hour utilisation rates they It is now planning to focus
drag on the airline in the coming their broad networks and addi- need to drive their profitability,” future growth on underserved
months. tional comfort to even out the post- says Citi’s Stephen Trent. point-to-point routes, and adopt
Meanwhile, American Air- pandemic speedbumps, cut-rate For Florida-based Spirit Air- some strategies of European low-
lines posted a $545 million loss airlines have no such luxury. Low- lines, high utilisation is key, and cost carriers by focusing on sim-
for the third quarter as its cost carriers are struggling to pre- if the airspace conditions cannot plified, out-and-back routes to
expenses jumped 9% year on serve their profit margins as support that, Spirit and its low- lessen the impact of ATC and
year, including a 17% rise in jet expenses increase across the board. cost peers will suffer. Another weather-related disruptions.
fuel prices and a one-time charge The attraction of a basement- blow to the all-Airbus airline is Frontier too, however, will be
related to its new and expensive bottom basic airfare could be losing the Pratt & Whitney geared affected by the GTF engine
pilot contract. its shine. turbofan engine recall. inspections. ■

BRIEFING AMERICAS
PILAR WOLFSTELLER LAS VEGAS
Alaska decision has Pacific purpose

Proposed purchase of Hawaiian surprised industry but reflects clear desire for scale in the face of tough competition
ith JetBlue Airways’ pro- and fleets, to the tune of synergies

W posed purchase of Spirit
Airlines reaching decision point
The two brands
will be retained
of $235 million.
“This deal made sense without
as 2023 closes, the surprise news synergies, so the synergies repre-
that Alaska Air Group plans to ac- sent strong upside for the long-
quire Hawaiian Airlines means term value for Alaska sharehold-
US consolidation watchers will ers,” says Tackett. He adds that
have a new deal to follow heading figure is a “conservative” esti-
into 2024. mate, and more can be expected.
Both deals reflect a desire for Minicucci adds: “The opportu-
scale among carriers that are nities far outweigh some of
seeking to better compete with the complexities we have to
the USA’s ‘big three’ airline deal with.”
christianthiel.net/Shutterstock
groups. Notably, Alaska is rela- Indeed, in their initial assess-
tively fresh from completing the ments of the surprise announce-
integration of Virgin America ment, aviation analysts suggested
into its business, meaning the the tie-up could bring benefits to
purchase of Hawaiian would both companies.
mark its second inorganic expan- “This transaction makes good
sion move in less than a decade. “It’s an attractive opportunity the Hawaiian Airlines brand, eve- common sense for both airlines,”
The proposed all-cash acquisi- that you just can’t let go, so that’s rything else about the company writes TD Cowen analyst Helane
tion of Hawaiian, announced in why we acted on it at this time.” will change, Minicucci says. Becker. “For Alaska, it enables
early December, is worth about Alaska’s chief financial officer “This approach will be unique international growth in the Asia-
$1 billion dollars. Alaska will Shane Tackett adds: “The strate- in the industry – it’s a dual brand Pacific region, which is one of the
pay $18 per Hawaiian share, and gic rationale made a lot of sense.” strategy [but] behind the curtain faster growing markets in the
will also assume $900 million of Hawaiian chief executive Peter there will be one operating certif- world. For Hawaiian, it enables
Hawaiian’s debt, for a total of $1.9 Ingram sought to appease critics icate,” he says. their passengers to fly to more
billion. Executives expect it to who might think that the island Still, executives acknowledge places on the US mainland on a
close sometime in 2025, pending archipelago in the middle of the that nothing can be taken for nonstop or one-stop basis versus
Hawaiian’s shareholder and US Pacific Ocean, about 2,500nm granted before the US govern- multiple stops now.”
aviation regulator approvals. (4,000km) southeast of the US ment’s aviation regulators bless Still, analysts at Deutsche Bank
mainland, will be losing its the transaction. point out that Hawaiian’s recent
“This dual-brand hometown airline. “We haven’t spoken to the gov- financial performance is one sig-
“The Hawaiian brand will ernment yet on this, but I think nificant complexity: “One can’t
approach is unique remain an important part of our our deal is unique in a lot of lose sight of the fact that Hawaiian
home state, with Honolulu ways,” Minicucci says. is currently burning cash and has
in the industry” becoming a strategic hub for the The networks are complemen- yet to return to profitability,
Ben Minicucci combined airline,” he says. The tary, he adds, and together the two unlike many of its peers. So
Chief executive, Alaska Air Group deal, he adds, “honours and pre- airlines have 1,400 flights a day, Alaska management will not only
serves the nearly century-long with only 12 overlapping markets. be executing a merger, but a turna-
tradition of the two brands”. “From a competitive standpoint round as well.”
“We liked what we saw,” Alaska The combination would allow that lands really, really well,” he Citi analyst Stephen Trent is
Air Group chief executive Ben Honolulu-headquartered Hawai- says. “It’s a pro-consumer combi- meanwhile taking a “wait-and-
Minicucci told an investor webcast ian to join the Oneworld alliance, nation, it’s pro-competitive, makes see approach”.
on the day of the announcement. which Alaska itself only joined in us larger, to compete against the big “On one hand, the proposed
“[Hawaii] is a top-25 market in the March 2021. four [airlines] that have an 80% valuation looks relatively modest:
country, it’s an $8 billion market Together, the carriers would market share, so we are hopeful it Hawaiian’s fleet of [Airbus] A330
in which we will be the clear mar- offer service to 138 destinations, will be seen in a positive light.” widebodies could provide Alaska
ket leader with $4 billion of reve- they say, including nonstop ser- While those arguments might with better opportunities to
nue, and [Honolulu] becomes our vice to 29 international destina- sound familiar, Minicucci insists capitalise on its Oneworld alliance
second hub. tions in the Americas, Asia, Aus- that the proposed acquisition has global membership and expected
“Strategically [it’s] a step- tralia and the South Pacific, and “no relationship” to the outcome synergies appear to be significant,”
change for us, to accelerate our combined access to over 1,200 of JetBlue’s attempt to purchase Trent suggests. “On the other, there
financial performance and the destinations through Oneworld. US rival Spirit. could be potential regulatory
growth of our network,” he adds. The transaction itself, executives “We are focusing on Alaska’s resistance to this proposal – even
He calls the $1.9 billion price- say, would involve about $400- long-term future,” he says. though the two carriers appear to
tag for the 94-year-old Honolulu- 500 million in one-time costs. The two airlines see promise have less overlap than other merger
headquartered carrier “fair”. While Alaska will maintain in combining disparate networks candidates.” ■

BRIEFING AMERICAS
HOWARD HARDEE CHICO
Tie-up creates third way in Canada

Air Transat and Porter Airlines joint venture is latest development in the country’s crowded and competitive market
f Canadian carriers Air Transat of 29 De Havilland Canada Dash

I and Porter Airlines were previ-
ously courting each other with a
8s and 24 Embraer 195-E2s. Fol-
lowing a recent order for 25 more
codeshare partnership, they just E195-E2s, Porter has unfilled
got engaged with their recently orders for 51 of the type, and
announced joint venture. options for a further 25 aircraft.
“The beauty of this relationship Air Transat, meanwhile, is
is, if you look at our networks focused on long-haul flights –
today, there is almost no overlap,” increasingly of the transatlantic
Kevin Jackson, Porter’s chief com- variety – with its fleet of 22 Air-
mercial officer, told FlightGlobal bus A321s, 12 A330s and three
in late November. “It allows each Boeing 737 Max.
other to come together and feed The Montreal-based carrier also
each other’s networks and be holds long-term lease orders for
Air Transat
nearly entirely incremental in four new Airbus A321XLRs – a
benefits to the other carrier.” long-range variant that is yet to be
The collaboration makes sense Planned collaboration will open up destinations for both airlines certificated – that are scheduled to
on several levels, according to be delivered starting in 2025. The
executives from both companies. In a plan to be implemented lished ultra-low-cost carriers single-aisle aircraft are capable of
Air Transat and Porter have been gradually from next year, Canada Jetlines and Lynx Air nonstop flights of up to 11h and
acquiring new and efficient air- Toronto-based Porter’s network – competing with Flair Airlines for 4,700nm (8,700km). Ponce calls
craft to support longer ranges and which has recently expanded market share. the A321XLR “the right tool to
network expansion plans, and across Canada and to the USA – The partner airlines are watch- cover international markets”.
both have well-established pres- will begin feeding Air Transat’s ing the growth of ultra-low-cost From Porter’s perspective, the
ences in Eastern Canada and rea- long-haul flights to Africa, the carriers (ULCCs) within Canada joint venture with Air Transat will
sons to team up in a relatively Caribbean and Europe. “very closely”, Ponce says. “We allow it to focus on mid-sized
crowded Canadian airline market. “It’s about developing a com- believe there may be too much markets in Canada and domesti-
The companies say the planned petitive network, expanding our capacity in the domestic market.” cally. “Our feed into their market
business collaboration will pay footprint – especially on the suddenly makes those mid-sized
long-term dividends, as Air transatlantic market – and grow- MARKET SPUR markets more attractive – espe-
Transat and Porter will co-ordi- ing those markets thanks to the Air Transat is currently a distant cially with 132-seat aircraft, ver-
nate flight schedules and routes in feeding of Porter,” Sebastian third behind Air Canada and sus 190-seat Max 8 that someone
an effort to expand their respec- Ponce, Air Transat’s vice- WestJet in terms of numbers of air- else might fly,” says Jackson.
tive networks – and compete with president of network planning craft and available seat miles, “It really opens up the destina-
Air Canada and WestJet. and alliances, tells FlightGlobal. Ponce says. “When we add Porter tions for us that we can support
“The idea is that by combining to that, then the situation becomes with high frequency across North
“We believe there may forces together, we can concen- much more interesting, right? The America,” he adds.
trate on what we do best.” fact that Porter is increasing its Meanwhile, Air Transat’s net-
be too much capacity in The agreement builds on the fleet up to 100 Embraer [aircraft]… work of vacation destinations will
codeshare partnership that the and Air Transat having the very become available to all Canadians
the domestic market” pair of airlines have been devel- strong network in the interna- – not just those living in Quebec.
Sebastian Ponce oping for more than a year. tional market creates a real alter- “All of those Canadians who live
VP network planning, Air Transat “Now we get to work together native for Canadians.” west of Toronto can now fly
to time our flights and their Indeed, the combined fleet of Transat, which historically they
flights, and utilise our slots at the two carriers totals about 90 air- really couldn’t do,” Jackson says.
“This is an incredible opportu- Toronto Pearson and Montreal in craft and is growing rapidly – and Perhaps most of all, the alliance
nity that has the potential to trans- ways that optimise feed across covers the spectrum from regional between the pair of Canadian car-
form the competitive landscape in the networks,” Porter’s Jackson turboprops to widebody jets. riers will put them on greater foot-
Canada,” Michael Deluce, Porter’s says. “We have not been able to For comparison, WestJet oper- ing when going eye-to-eye with
chief executive, said in a late do that, historically.” ates 121 aircraft – 114 Boeing competitors, Jackson says.
November social media post. The move comes amid much 737s and seven 787s. Air Cana- “When you look at alternatives
“There will now be a stronger manoeuvring among Canadian da’s fleet is nearly 190 aircraft in the market – whether it’s a
third option for consumers in the airlines, with Calgary-headquar- strong, in addition to 40 aircraft ULCC, or the combined Sunwing
Canadian market by better inte- tered WestJet recently boosting its operated by low-cost subsidiary and WestJet, or you look at what
grating much of Air Transat’s position by completing its inte- Air Canada Rouge, according to Rouge and Air Canada are doing
international and sun destinations gration of Sunwing Airlines and Cirium fleets data. – our alliance will be able to com-
with Porter’s quickly expanding fully integrating low-cost subsidi- Porter has short- and medium- pete significantly and success-
North American network.” ary Swoop, and recently estab- haul flights in hand with its fleet fully with those carriers.” ■

BRIEFING AMERICAS
GRAHAM DUNN & PILAR WOLFSTELLER CANCUN
Profits elusive despite Latin growth

Carriers in region were the first to return to pre-pandemic activities, but cost burden and politics remain a challenge
W hile it is hardly unusual to

hear airline leaders calling
for lower taxes and better infra-
forum Mexico announced it was
increasing fees collected from
non-government airport opera-
structure, the frustrations voiced tors, leaving uncertainty on how
by Latin American airline lead- the impacted operators may seek
ers come against a backdrop to fill the revenue hole.
where region-wide profitability Similarly, plans for a new
remains elusive despite traffic state-run carrier operating under
and revenue highs. a resurrected Mexicana brand –
No region recovered faster from which has an ambition to
the pandemic than Latin America. increase connectivity and reduce
Traffic data from the Latin Ameri- ticket prices in the country –
can and Caribbean Air Transport have raised concerns of its poten-
Association (ALTA) shows passen- tial impact on competition.
ALTA
ger volumes topping 34 million in Mexico too is in the process of
September – an increase of 5% on Botelho calls for regional co-operation to tackle the problems reducing traffic movements at the
pre-pandemic levels. country’s biggest hub, Mexico
Revenues too have come struggling, and that tends to be the committee Adrian Neuhauser City’s ageing Benito Juarez Inter-
bouncing back. Last year turno- case across that region. says: “We have a role as an national airport, in favour of the
ver at five of the region’s nine big- “We know the economic situa- industry to communicate better newer but more distant Felipe
gest carriers – Aeromexico, Copa tion in some parts of Latin Amer- what we do. It’s a long project. Angles International airport.
Airlines, Volaris, Aerolineas ica, Argentina at the moment is We are in a poor region, so $100
Argentinas and VivaAerobus – the obvious one, also creates a for a ticket in Latin America is The pandemic cannot
exceeded 2019 levels. That has very challenging operating envi- not the same as $100 for a ticket
continued into this year with ronment. We are seeing an in the northern hemisphere. be blamed for Latin
combined revenues for seven improvement in the financial “The procurement capacity of
leading carriers up 28% in the performance, but we’ve still got a our customers does matter. So we America’s airline sector
first half year on year – the com- modest loss in that part of the must communicate this clearly
parable period admittedly still world this and next year.” and we need public policies to
failing to make money
impacted by Covid restrictions. support us,” he adds. “Our respon-
These carriers were notably all DISPROPORTIONATE COSTS sibility is to have a better dialogue
profitable at an operating level Notably, the pandemic cannot be [with the authorities], and that we Earlier plans for a new airport
over the first half – and several in blamed for Latin America’s air- are better understood.” for Mexico City, on which work
the black for 2022. line sector failing to make money. Certainly, the message airline was about 30% complete, were
However, the financial outlook The region’s carriers were, as a leaders were looking to promote abruptly dropped when president
for the region as a whole remains collective, loss-making going into to regulators and politicians dur- Andres Manuel Lopez Obrador
loss-making. So while IATA sees the crisis. ing October’s annual ALTA AGM took office in 2018 – a reminder of
the airline industry returning to “I think the potential for the and Airline Leaders Forum in how political change can impact
collective profit this year, Latin market is huge. But the cost head- Cancun was one of unlocking the long-term aviation planning.
America is one of the three winds that the industry faces potential through more inclusive It leaves airline leaders in the
regions still in the red. here are greater than anywhere and longer-term planning. region seeking and campaigning
And though in its latest out- else,” says IATA director general ALTA executive director Jose for long-term planning in avia-
look issued in December IATA Willie Walsh. Ricardo Botelho says: “The tion policy, but preparing to deal
narrowed estimated losses He points to higher-than- region continues to face serious with continued uncertainty.
among Latin American operators industry-average fuel costs, infrastructure problems, unnec- “We are not going to change
to $600 million this year, it still because it is imported, and the essary and unrelated ticket costs, volatility,” acknowledges the
foresees the region’s carriers higher portion that taxes and currency volatility, rising fuel chief executive of LATAM Air-
losing $400 million in 2024. charges comprise of an airline prices and many other chal- lines Group, Roberto Alvo. “[So]
“Latin America is always a chal- ticket price in Latin America. lenges. This is why we want to we need to be able to adapt.”
lenging region because there is a “Fuel prices, taxes, visa take this moment to ask that we Avianca’s Neuhauser says:
lot happening, and a lot of diver- charges – just looking at those work together.” “The industry is subject to vola-
sity across the region,” says IATA’s issues, I think you see the main Delegates in Cancun did not tility and that happens. We have
director of policy and economics, reason why, at an industry level, have to look too far for reminders economic and political volatility
Andrew Matters. “What we are the profitability is still lagging of policy uncertainty and infra- that leads to uncertainty.”
seeing at the moment is some air- behind the rest of the world,” structure concerns in the region, But he adds: ”We should have
lines are actually performing very says Walsh. with a number of developments a level playing field to continue
strongly, but there are also a num- Avianca chief executive and within Mexico. growing, rather than talking
ber of airlines that are really president of ALTA’s executive Just a few days ahead of the about politics.” ■

BRIEFING AMERICAS
PILAR WOLFSTELLER CANCUN
ALTA’s smaller players get creative

Operators lament challenges familiar to bigger peers but also see tourism and partnerships as growth opportunities
s small Caribbean and Cen- There is a limit to what we can do

A tral American airlines strug-
gle with taxation and infrastruc-
in terms of paying the bills.”
InterCaribbean operates a fleet
ture issues that also plague their of 18 aircraft comprised mostly of
much larger Latin American Embraer 120s, ERJ-145s, and ATR
peers, the carriers are working turboprops.
on creative ways to boost con- “The lower the airfares are, the
nectivity and attract an increas- more the percentage of the
ingly travel-savvy South Ameri- taxation, and that looks terrible,”
can clientele to their part of the he says.
hemisphere. Aside from frustrating tourists,
Speaking at the Latin Ameri- those taxes also make it difficult
can and Caribbean Air Transport for the islands’ residents to use
Association’s (ALTA’s) annual the air service regularly.
Airline Leaders Forum in Cancun “Our islands are 100 to 200
ALTA
in late October, the chiefs of sev- nautical miles from one to
eral small specialty carriers oper- Tropic Air’s Greif says there is a thirst for new holiday destinations another, maybe a little bit more,
ating across the Caribbean Sea but when you are paying this
said that though they are not far Miami,” he says. “That presents Nassau is just 296km (160nm) level of airfare there’s little
in distance from the continent, an opportunity for us.” Greif sees southeast of the US mainland, so chance for the end-customer to
they are still not top of mind for most potential in collaboration when travellers arrive in Miami do much more than travel on an
Latin American vacationers. But with major carriers, in the form of from further afield, it is a rela- essential basis,” he says.
opportunities are beckoning. codeshare and interline agree- tively short and easy hop over the He adds that InterCaribbean
Maximillian Greif, chief execu- ments. The country’s aviation western Atlantic. and other regional carriers have
tive officer of Tropic Air in Belize, infrastructure, too, “needs to rise Trevor Sadler is chief execu- taken those concerns to their
said that the country is an to meet the moment”. tive of InterCaribbean Airways, a respective governments, hoping
“enigma” for many potential tour- regional airline based in the to convince them that lower
ists, and Tropic is a “boutique air- “We are 100% Turks and Caicos Islands – an tariffs and fees represent an
line offering a niche service”. archipelago nation of less than investment in the aviation sector,
With travellers from North better than anything 50,000 people. He says that after and that, in turn, is an investment
America and Europe beginning to the Covid-19 pandemic, the car- in the broader economy.
discover in greater numbers the we did in 2019” rier set out to build a more con- Tropic Air’s Greiff adds: “We
only English-speaking country in Trevor Sadler nected network. So far, that strat- can create all the academic policy
central America, Greif says Belize Chief executive, InterCaribbean Airways egy is working, with the airline position papers, and present
can act as a “gateway, a pathway now servicing 27 destinations large economic impact studies to
between both the Caribbean and across 17 countries. the government, but we have to
Central America”. For Nassau-based Bahama- “We are 100% better than any- convince the voters.
“We are not necessarily on the sair’s Tracy Cooper, the popula- thing we did in 2019,” he says. “It costs $76 to depart Belize;
map yet, we are sort of a mini- tion figures tell the story. “We found a sweet spot and we that creates an entry and exit
Costa Rica, a melting pot that rep- “Right now 85% of tourists [to are doing well.” barrier to our ability to expand as
resents both Central America and the Bahamas] come from North an international airline,” he adds.
Caribbean,” he says. America, but the population in PRICE FRUSTRATIONS “Opportunity translates into
Tropic, which was founded by Latin America is even larger than A common customer complaint, votes which translates into
Greif’s father John Greif III in in North America,” he says. So the however, is the relatively high political will.”
1979, now operates a fleet of 14 airline is looking at a way to bene- cost of tickets for short flights. Air travel is not a luxury, it is a
Cessna Caravan aircraft and one fit from South Americans’ thirst Sadler blames that on taxes, fees necessity, says InterCaribbean’s
Beech 1900, according to Cirium for new vacation destinations. and other government tariffs, Sadler.
fleets data. The airline says it flies According to Cirium, Bahama- which can rise to more than 50% “It’s the same for all of us,”
200 routes across the region. sair has an average of four daily of every ticket. adds Philippe Bayard, the chief
connections from Nassau to For a small fish in a medium- executive of Haiti-based Sunrise
ACCESSIBILITY ISSUES Miami, and “almost every one of sized pond, it is tough to compete Airways. “Latin America is 12
But that said, actually getting to the Latin American carriers fly with other airlines which have countries, and the Caribbean is
and from the country nestled into Miami”. economies of scale on their side. 19 countries. We are on islands,
between Mexico and Guatemala That’s why Bahamasair is con- “We do try to keep our airfares scattered across the Caribbean
often takes much more time than sidering interline arrangements down and in a couple of places we Sea and Atlantic Ocean.
it should. with those carriers, and is setting compete with Copa [Airlines], we “We have shorter distances,
“Right now to get from Belize up plans to launch some compete with American [Airlines], lower quality of infrastructure,
to the Caribbean you have to go to co-operative agreements next year. and we compete against 737s. and the same challenges.” ■

BRIEFING EUROPE
GRAHAM DUNN LONDON
Icelandic carriers limit seismic hit

Fears of volcanic eruption temper near-term outlook for Icelandair and Play, despite strong core performance
celandic carriers have enjoyed “Going forward, there is some

I some of the brightest fortunes
since the pandemic but it is ech-
impact on bookings and revenues
for the next few months but
oes of a previous crisis to hit looking at the longer term the
European aviation which threat- booking flow is moving towards
ens to take the gloss off the year. its former strength.”
Strong passenger demand Growing Play meanwhile
Bradley Caslin/Shutterstock
helped Icelandair deliver record reported a drop in load factors for
revenues and a net profit of $84 November as late bookings were
million for the third quarter, hit. The airline’s chief executive
putting it on track for its first Birgir Jonsson says: “In recent
annual net profit since 2017. days, we have seen the demand
Meanwhile, Play Airlines, the returning to the market, which is Icelandair passenger volumes still increased 13% in November
low-cost start-up which is very positive and reassuring for
tapping a market previously the coming months but a little too ing as it should be,” says Jonsson. “We haven’t tasted the cool aid
mined by Wow Air, turned its late for the short-term travel sea- “It was not an achievement in so much that we want to have
first profit in the third quarter son, before Christmas and in the itself that an airline in Europe is more aircraft next year and grow
after a similarly bright summer. new year.” profitable in quarter three. But for further,” he says.
Though Play posted its first a start-up airline many things The airline will expand again
DIPPING DEMAND ever quarter in the black – a net needed to come together, so we after that. It has signed for two air-
Inbound tourism has been a key profit of $5.2 million for the three were quite happy about that.” craft to arrive in time for summer
driver of the strong performance of months ending 30 September Plans for Play first emerged 2025 to take its fleet to at least 12
Icelandic carriers since the pan- 2023 – rising fuel costs had before the pandemic, though and is looking at potentially bring-
demic. However, Iceland has since already dashed its hopes of post- almost two years were to pass ing in two more narrowbodies.
late October faced fears of a vol- ing a profit for the year as a before the Icelandic carrier The seasonal nature of the
canic eruption amid heightened whole, even before the worries launched flights to European industry means Play is also find-
seismic activity, causing a related over a volcanic eruption. short-haul destinations in the ing ways to balance capacity. As
impact on tourism demand. “We thought for most of this summer of 2021 using three Air- well as consolidating some fre-
While seismic activity was year we would be positive [for bus A321neos. Further Airbus quencies during the winter, that
decreasing, as of early December the full year], then we got the oil narrowbodies followed in 2022, also includes its new Space prod-
the Icelandic meteorological spike late summer and that is not as did the launch of US services. uct, under which passengers can
office was warning that the pos- going down,” Jonsson told Flight- pay to keep the middle seat
sibility of a volcanic eruption Global in an 8 November inter- COMMERCIAL SENSE blocked at a premium.
“persists” along the length of a view – the day before the Blue Having grown to a fleet of 10 air- Alongside the revenue oppor-
magma intrusion north of Lagoon resort was forced to close. craft, Play intends to keep at that tunity, the initiative enables it to
Grindavik. Notably, the activity Even at that stage, Jonsson was level next year. “We have options reduce seat capacity on its four
had led to the closure of popular looking at consolidation rather of introducing a wet-lease over A321s from 214 to 200, requiring
tourist attraction the Blue Lagoon than growth after rapidly ramp- the height of summer, but we will one less crew member per flight.
thermal spa. ing up to achieve scale. only operate 10 aircraft under our “It is a way to cut capacity and
A resulting slowing of inbound “Once we got up to the scale AOC next year. So 2024 is deal with seasonality a little bit,
tourism bookings, particularly we needed – we got the tenth air- optimising, gathering strength, because in the summer we
near-term seasonal bookings, craft flying in June – we began to making sure the wheels don’t fall become more leisure-focused and
prompted both Icelandair and see the business model function- off by driving too fast. we need all the seats we can get.”
Play to warn of a potential finan- The determination to remain
cial impact and to pull their Jonsson says disciplined is in part driven by
respective financial guidance for Play will stick the history of Wow, in which sev-
the year. to a fleet of 10 eral of Play’s executives were
Icelandair Group, which has aircraft in 2024 involved. Jonsson himself had a
restructured over recent years short stint as deputy chief execu-
around its core aviation activities, tive at the carrier in 2014-15.
says that while an accurate fore- “We are going into a business
cast is not possible, it still expects model that has been functioning
to post a net profit for the year. for decades here in Iceland,” he
The carrier reported a 13% rise says. “So there are blueprints of
in November passengers “despite how to do it correctly. There’s
some negative impact” on the also blueprints of how to do it
booking flow. Icelandair chief incorrectly. We are trying to fol-
low the first blueprint.” ■
Play
executive Bogi Nils Bogason says:

BRIEFING EUROPE
GRAHAM DUNN GENEVA
Schiphol noises off after Dutch turn

Government drops move to curb capacity at major hub, but UK plan to consider slots overhaul raises fresh questions
ATA director general Willie While saying the industry has

I Walsh believes other govern-
ments will take note of the legal
to “recognise that noise is an
issue”, Walsh expresses frustra-
processes to follow after the tion that air travel is targeted given
Dutch government was forced to the impact from other modes of
drop a plan to cut capacity at transport relative to aviation.
Amsterdam Schiphol airport He cites 2017 European Envi-
amid mounting pressure. ronment Agency data, the latest
The Dutch government had available, which he says shows
last summer proposed cutting four times as many people are
flight capacity at Schiphol – from impacted by noise from rail and
KLM
an annual maximum of 500,000 30 more by noise from roads. “Yet
down to 440,000 – in a bid to find Industry came together to oppose the government’s proposal air travel is the one that seems to
a “new equilibrium” between get all of the attention.”
flight activity and noise pollution Speaking in Geneva after the “Schiphol punches way above
at the airport. move, Walsh says: “I’m hopeful its weight given the local origin SLOT REVIEW
The plan was widely contested there will be a better understand- and destination market that While the Schiphol noise issue has
by airlines, including a legal chal- ing of the process that needs to be exists there. It’s a fantastic hub gone quiet, further government
lenge by carriers and trade associ- followed and that we won’t see airport. I think the impact that it intervention in Europe could now
ation IATA. Notably though it was other governments embarrassing would have had, had the govern- follow at another major European
complaints from US carriers, themselves by reaching for solu- ment not backed down, would hub. In early December the UK
backed by the Department of have been really significant.” government, since Brexit no longer
Transportation, which appeared Complaints from US He also takes heart from the covered by European Union slot
to be a tipping point. united front shown by the airline regulations, launched a consulta-
ln mid-November, the Dutch carriers appeared to sector in challenging the cut. “I tion on whether to revamp its own
government shelved the plan, say- think what was encouraging from rules covering slot-constrained air-
ing numerous countries, includ- be a tipping point an industry point of view is that ports in a move seemingly aimed at
ing the USA, “raised concerns” everybody in the industry loosening the grip on prized slots
about the new scheme, and that it opposed what was happening. by incumbent carriers.
may violate Open Skies agree- tions they think will be popular “The dismantling of the Raising the existing 80:20 slot
ments. It added that the European but which fail to fulfil the legal Amsterdam hub would have ben- usage rates, greater transparency
Commission had also reserved the obligations that they have.” efited some of the other hubs in with slot-allocation decisions, and
right to start infringement proceed- Walsh says he was surprised the Europe, but nobody took that time-restricting the allocation of
ings against the Netherlands “due government embarked on such a view. They all the took the view new slots are among a number of
to… non-compliance with Euro- move given the importance of that this was wrong and that the topics up for consultation.
pean regulations”. Schiphol to the country’s economy. industry had to stand together.” “I think slot allocation is a very
complex issue that isn’t fully
LEWIS HARPER LONDON understood by a lot of people,”
says Walsh. “It really is a very
Heathrow back on the runway for expansion fine, integrated system that needs
to be carefully addressed because
London Heathrow airport is reviewing its long-term work out the answer to that question.” one airport undoing its slot allo-
expansion options, including the possibility of Acknowledging that “expansion as a programme cation rules can have a global
reigniting plans to build a third runway. has a lot of baggage with it”, Annetts nevertheless impact. Heathrow would have a
Plans were in place for the expansion of the UK says that the need for more airport capacity in the UK is global impact.”
hub pre-Covid, but were shelved amid the devastat- demonstrated by “long-term demand forecasts that London Heathrow is one of
ing impact of the pandemic on airline traffic. still look broadly the same as they did pre-Covid”. eight slot-controlled airports in
Speaking at November’s Airlines 2023 conference Heathrow has “plenty of room to grow in the short the UK.
in London, Heathrow chief strategy officer Chris to medium term” with its current two-runway system, “That is not to say we can’t
Annetts said that under new chief executive Thomas but fulfilling the UK’s “full growth potential” would improve things,” he adds. “We’ve
Woldbye, options for long-term capacity growth at require projects such as Heathrow’s third runway and seen various minor amendments
the hub are again being considered. the use of a second runway at Gatwick, he suggests. in the rules over the years, so
“The question is how do you deliver [airport ex- Speaking at the same event, UK transport secre- there is always scope to look at
pansion] and when does it come,” he states. “That’s tary Mark Harper said of a potential third runway at better ways of doing it. But to
the big question that we’re now discussing with the British Airways hub: “If Heathrow want to bring fundamentally dismantle a sys-
Thomas joining us about a month ago. forward a proposal, that will obviously get looked at tem that has been very effective I
“We are now actively reviewing that and trying to in the proper way.” think is something governments
should be very cautious of.” ■

BRIEFING EUROPE
GRAHAM DUNN & LEWIS HARPER LONDON
Hurdles rising for M&A ambitions

Europe’s big groups are making or eyeing consolidation steps but the European Commission might have other ideas
onsolidation is very much in

C the air for the three big Euro-
pean airline groups, all of whom
“We need to compete
are in the process of trying to get
in a global world with a
acquisitions done and with the group of airlines and
prospect of a move for TAP Air
Portugal still in the offing. we need to have scale”
However, consolidation in the Luis Gallego
fragmented airline industry, even Chief executive, IAG
within the large European
aviation area, is far from
straightforward. says. “In other industries, when it
Airline groups have sometimes comes to energy, when it comes
found the concessions required to defence… I think Europe and
by regulators – most often slots at the EU Commission have
the key hubs they are asked to understood that we need to look
give up – too high a price to com- after European interests on a
plete a deal. global scale.
And while airline leaders “That is good news for our
make the case for regulators to industry, because to be globally
take a global perspective in con- competitive, the European airline
Francois de Ribaucourt
sidering competition issues, the groups – not just us, but also at
signs are in Europe that the bar least our two big competitors –
may be about to get higher rather need to grow to a… level of other
than lower. global players. The three Ameri-
In an interview with the can [airline groups] are already
Financial Times, Didier “We see some remedies are not third-quarter results call on 2 number one, two and three in our
Reynders – who in September efficient,” he said. “Some years November, Lufthansa Group industry,” he says.
took on the European competi- ago, we were sure the slots solu- chief executive Carsten Spohr “So I think what is currently
tion brief after previous incum- tion was fine. Maybe the results pointed to a more global happening around the world,
bent Margrethe Vestager took are not there.” approach from Europe in terms of resulting in a new way of the
leave for her candidacy as presi- Lufthansa Group is in the pro- how it sees competition. Commission looking into Euro-
dent of the European Investment cess of acquiring Italian operator “With the geopolitical situa- pean competitiveness, will also
Bank – indicated the Commis- ITA Airways. Asked about the tion, Europe more and more is help to make that logical next
sion may toughen its stance on potential new approach from turning its attention towards step, which is the integration of
airline mergers. European regulators during a being globally competitive,” he ITA into Lufthansa.”
Air France-KLM foresees SAS joining transatlantic joint venture

Air France-KLM sees SAS’s eventual member- between SkyTeam carriers Air France, KLM,
Deal could
ship of its transatlantic joint venture as the Delta Air Lines and Virgin Atlantic, he says.
provide SAS
“biggest benefit” from its investment in the “So we would obviously need anti-trust
with greater
carrier, arguing that the Scandinavian operator immunity from the US [Department of Trans-
opportunities
has been “held back” from fully capitalising on port] and the equivalent from the European
its strengths. Commission, but that would be the biggest
Speaking during the group’s third-quarter benefit that we see in SAS,” Smith states.
earnings call in late October, Air France-KLM Crucially, Smith’s view is that SAS’s operation
chief executive Ben Smith said the initial bene- “completely underperforms from a long-haul
fits from taking a 19.9% stake in the Scandinavi- perspective” because the carrier is not closer
an carrier as part of a consortium – a deal which to its alliance stablemates.
is still subject to regulatory and court approvals “The opportunity with a friendlier group, a
– will come from it “switching from Star Alliance larger group, which can capitalise on the posi-
Natalia Delepine/Shutterstock
to SkyTeam and the commercial relations we tion we already have [in Scandinavia] and even-
can put in place”. tually hopefully come into our joint venture
But the subsequent step would be for SAS to should position us to pull and attract traffic from
become part of the transatlantic joint venture the other two big joint ventures,” he explains.

Lufthansa’s deal with the looking at a market dominance
Italian government is to acquire, position that is not going to be the
initially at least, a 41% stake in case with us for SAS.”
ITA Airways – although it also Gallego, Smith and Spohr have
includes an option ultimately to all made clear that as big network
acquire a majority stake. Spohr airline groups in Europe, they
had previously cited ITA’s rela- have an interest in TAP but are
tively low share of the Italian awaiting details. Portugal’s cabi-
market as a reason why competi- net in September approved TAP’s
tion issues should not be signifi- privatisation and is now working
Markus Mainka/Shutterstock
cant and said he hoped clearance on finalising the details of the
could come from before year-end. planned sale.
Reports subsequently emerged Gallego in September reminded
at September’s G20 summit of that IAG was launched as a “plat-
Italian prime minister Giorgia form for consolidation”, adding:
Meloni’s frustrations over the Potential TAP buyers await details of privatisation conditions “We want to see the conditions of
Commission’s approach, and a the privatisation of TAP, because I
decision will run into 2024 given and we still think the operation is “Of course, going through think it will be something interest-
formal notification for the merger going to take about 18 months. So Covid we were significantly hit ing for both of us.”
was only filed with the Commis- we think this is going to be done with punitive remedies, far in
sion in late November. in the last quarter of next year.” excess of what Lufthansa Group ATTRACTIVE PROSPECTS
“Quality of diligence in such a Gallego echoes Spohr’s plea for experienced. As you know, we Smith notes that clarity on plans
transaction, which is a lifelong Europe’s carriers to be able to had to give up slots at Orly air- for new airport capacity in Lis-
relationship, is more important compete on a global basis. “We port. Lufthansa Group had to give bon will be a key element of
than speed or haste,” says Spohr. need to compete in a global world up slots at Frankfurt, but with interest for Air France-KLM, and
“Our view is ITA is only num- with a group of airlines and we enough flexibility that it didn’t likely other bidders.
ber three in terms of market share need to have scale,” he says. impact them whatsoever. No air- “We’re very interested to see
in Italy, or actually number four But he also makes a case for lines picked up any of their slots, what the next official view is on
depending how you count it, greater scale helping the region’s but ours at Orly were picked up the new airport or reliever air-
with the low-cost carriers being carriers to achieve their sustaina- immediately,” Smith notes. port,” says Smith.
one, two and three. One low-cost bility goals. “That would play a major role
carrier alone has 40% market “In Europe we are going to “Quality of diligence… in how the regulatory bodies
share in Italy, which is resulting have more pressure in the would look at such a transac-
in I think the highest price sustainability area and I think is more important tion,” he says of the capacity situ-
increases the European industry scale is going to be critical to get ation in Lisbon.
has seen anywhere in [20]23, so I this,” says Gallego. “We have than speed or haste” Spohr also reiterates Lufthan-
think it is obvious this transac- committed to comply with the Carsten Spohr sa’s potential interest. “Luf-
tion will increase competition.” mandate. So I hope the approach Chief executive, Lufthansa Group thansa, as all of the major players,
is going to be to help the has expressed interest to look at
REGULATORY OBSTACLES consolidation in the market in this due to its interesting traffic
British Airways and Iberia parent order to help airlines in Europe to He, though, sees less competi- flows, especially from Brazil to
IAG has been trying since before be sustainable.” tion issues from its move for SAS. southern Europe,” he says.
the pandemic to get a deal done to Until recently it looked like “There are no slot restrictions A move for TAP would come
add Spanish carrier Air Europa to Air France-KLM may not test at Copenhagen, there are no slot at the same time it hopes to be
the group. While the pandemic European regulators’ appetite for restrictions at CDG, and there are integrating ITA into the group.
complicated the structure and mergers before TAP Air Portugal no SAS flights into Orly airport, But Spohr plays down concerns
price of a deal for Air Europa, regu- came to market. But while it and there are no Air France that would give it too much on
latory challenges were also a factor remains a potential bidder for the flights from Orly airport into its plate.
in IAG pulling an initial deal for Portuguese carrier, it made a sur- Scandinavia,” Smith says. “If you look at the Lufthansa
Air Europa at the back end of 2022. prise move for SAS (see box) as “That’s not to say other things organisation over the last year, it
However, a fresh structure fol- part of the Scandinavian carrier’s may be requested, but I think has evolved to a matrix where we
lowed, under which IAG has financial restructuring. Air we’re in a reasonably good have been able to plug in and
taken a 20% stake in Air Europa, France-KLM is taking a 20% position, relative to say Lufthansa play other airlines beyond the
and a new deal is being put for- stake as part of a deal, which will at Linate, which is completely five hubs and 13 airlines in total
ward to regulators. see SAS join it in the SkyTeam saturated. we operate.
“We continue the pre- alliance and also offers a poten- “So from a slot perspective, “So I don’t look at that with
notification stage with the Euro- tial route to a majority stake. we’re in a better position when it that much nervousness as I prob-
pean Commission, so we are in “The way we are looking at comes to getting these deals ably would have five years ago,
the process of submitting the SAS and potentially others is to approved. And the fact we are because we have come a long
information,” IAG chief execu- look at a worst-case scenario from only 19.9% should have the regu- way in optimising our ops struc-
tive Luis Gallego said during a regulatory remedies perspec- latory bodies look at this deal in a ture to play that business model
IAG’s third-quarter results call in tive,” said Air France-KLM chief different way, than being in a across five hubs, and we can also
late October. executive Ben Smith during the majority situation like we are play it over six or maybe seven if
“We are engaging with a poten- carrier’s third-quarter results call, seeing at ITA. we have the opportunity to do
tial partner for potential remedies, also in late October. “Of course, in Spain we are that,” he says. ■

BRIEFING EUROPE
Bertomeu backs “We are the two big independ-

consolidation rationale ent suppliers of capacity for
majors that remain in Europe,”
Bertomeu says.
SARA is targeting a fleet in
excess of 100 aircraft in the next
three years, he adds.
“In the future I think that
majors, our clients, will arrive at
the conclusion that this is the kind
of thing that is better externalised
and better with somebody they
can trust, with experience, and we
deliver that,” Bertomeu says.
But while the rationale for con-
solidation in Europe’s regional
sector is still strong, Bertomeu
Air Nostrum
notes that some important things
have changed since the deal was
initially announced in 2018.
LEWIS HARPER LONDON
Notably, the Covid-19 pan-
Carriers plot US-style future demic meant that airlines around

the world, including Air Nos-
trum and CityJet, switched to
survival mode.
Air Nostrum chief believes the long-awaited tie-up with CityJet is still the right move In CityJet’s case, that meant
entering examinership – a process
ven though it took five years who can start the process in operating different planes in the in Irish law under which compa-
E to get a deal over the line, the
coming together of European re-
Europe.”
And Bertomeu insists that the
same place for different majors.”
Bertomeu’s view is that what-
nies can protect themselves from
creditors while they restructure.
gional carriers Air Nostrum and fundamental drivers of the move ever trends have played out in the Air Nostrum, meanwhile,
CityJet still has a compelling ra- remain unchanged since Air Nos- past in Europe – such as moves accrued loan-related debt amount-
tionale, in the view of the Span- trum first explored opportunities towards big European carriers ing to €244 million ($257 million).
ish carrier’s chief executive Car- to partner with Irish carrier bringing regional operations in- As a result, Bertomeu says, the
los Bertomeu. CityJet several years ago. house, as was the case with deal had to be restructured to
The agreement announced in “The idea is to make a strategic Cityline and Lufthansa – Europe’s reflect the fact that a deeper merger
mid-October involves the crea- [European regional airline] group future is likely to look more like the was not possible, and European
tion of SARA – the Strategic Alli- with common decisions and syn- US model, where regional opera- competition regulators needed to
ance of Regional Airlines – with ergies,” he says. tors such as SkyWest and Republic approve it for a second time – as
Air Nostrum parent Air Invest- His conviction that consolida- Airways dominate the market by they did in March this year.
ment Valencia taking an 80% tion is strategically important to providing capacity to the majors. It also meant that after Euro-
stake and CityJet parent CF Miga Air Nostrum comes from three Air Nostrum is already in that pean Commission approval was
Investment Holdings taking 20%. considerations: similar moves market space in Europe, flying for received again, stakeholders also
Speaking to FlightGlobal, the among the large airline groups in flag-carrier Iberia, while CityJet needed to ensure the deal met the
long-serving chief of Air Nostrum Europe; the vulnerability of undertakes wet-leasing for carri- conditions attached to Air Nos-
– who also serves as chief execu- smaller, independent regional car- ers including SAS, Lufthansa and trum’s state aid and CityJet’s
tive of SARA – explains his con- riers – which has been demon- Brussels Airlines – a client base examinership.
viction that even at the height of strated recently by the double- that the consolidated group Consequently, “no one is buy-
the Covid-19 crisis, which forced collapse of Flybe and challenges at would eventually aim to expand. ing anyone” under the revised
the partners to pause their tie-up wet-lease providers such as Xfly; “Of course, in the States it’s deal, which Bertomeu says the
plans, consolidation loomed large and positive evidence provided by easier because it’s not country- two carriers have been working
when he considered the future of the regional airline consolidation related like in Europe, so there on for 18 months or so.
Europe’s regional airline sector. that has played out in the USA. are a few more inefficiencies [in “If something happens, we
“My strong point of view is “I am convinced… that the Europe]… but I’m sure this is will be there [for each other], but
that… when a sector starts the regional sector is going to consol- going to happen,” he says. we will not be able to invest
consolidation process and the idate,” he states. “And it is going money in the other because of the
rationale that justifies the consol- to consolidate because it has hap- REGIONAL AIM constraints of the level of debt we
idation process is strong… you as pened with the bigger airlines, By joining forces in SARA, the have,” he states.
an independent company have the [European] majors. aim is for Air Nostrum and Despite the revised terms of the
three options: whether you are “It has happened in the low- CityJet’s 74 aircraft – 48 from the deal, however, Bertomeu firmly
the one that starts the consolida- cost sector, where there are two Spanish partner and 26 from the restates his belief that it is the right
tion, or you are prepared to be or three big players [in Europe]. Irish one – to be at the forefront of move for the new partners.
consolidated… or you are going “It has already happened in the Europe’s journey towards that “The rationale of starting the
to be out,” he explains. States, where there are big plat- point in the region’s liberalised consolidation is still there,” he
“If I can, I prefer to be the one forms with different licences, even air transport market. says. “I believe that 100%.” ■

BRIEFING EUROPE
LEWIS HARPER LONDON
Finnair chief’s leadership learnings

Topi Manner’s five-year tenure at carrier saw a ‘double crisis’ that has given him some hard-won wisdom to impart
W hen Finnair chief execu-

tive Topi Manner makes
his recently announced depar-
fuel, and crew and aircraft
utilisation.
Today, Asia accounts for just
ture from the Oneworld carrier
“Trust is the above 30% of Finnair’s revenues,
by March 2024, he will step hardest currency Manner says, compared with
away from the airline industry around 50% pre-Covid.
with a whole new appreciation that you can have” Manner highlights Oneworld
of crisis management and busi- membership as central to Fin-
ness transformation. nair’s reimagined strategy.
“During the past three and a He gives the example of an
half years we have been going “important commercial partner-
through what we call a double ship” with Qatar Airways, which
crisis,” he said in September dur- has seen Finnair add daily flights
ing an event in London to mark from Helsinki, Stockholm and
Finnair’s centenary. “The pan- Copenhagen to Doha, in a strategic
demic hit everybody hard in avi- pivot towards the Middle East.
ation, but our key markets in Furthermore, Finnair has
Japan, China and South Korea added flights to the respective
Finnair
were the slowest ones to reopen. hubs of Oneworld partners Amer-
“And then, obviously, the Rus- ican Airlines and Alaska Airlines,
sian invasion of Ukraine and the “It boils down to trust between adding: “Engaged people are the in Dallas and Seattle, widening its
subsequent Russian airspace clo- people in the company and with magic potion of Finnair.” North American reach.
sure hit right into the middle of various stakeholders surrounding Crucially, therefore, Manner’s Finnair has also been wet-
our strategy of connecting Europe the company.” CV does not just include the fire- leasing aircraft to British Air-
and Asia via the short northern Expanding on what that means fighting that meant Finnair made ways, with four of its Airbus
route – a strategy we had been in a practical sense, Manner it to its 100th year; he has also A320s operating from Heathrow
successfully following for 20 explains: “That needs communi- brought the airline back to pre- during the 2023 summer season.
years, carving out a niche in cation, that needs dialogue in the Covid profitably levels, at least a They are expected to return to
global aviation.” company, and that needs people year earlier than expected, Finnair operations in 2024.
understanding the specific cir- through a strategic rethink. Elsewhere, two of its A330s are
SHOCK RESPONSE cumstances of the company; why “In September last year we soon to begin service for Qantas
Those outside shocks have made certain decisions are taken and introduced a new strategy with a on a long-term wet-lease basis,
for a busy and challenging few why certain decisions are benefi- single and clear focus of restoring operating from Sydney to Singa-
years, by any chief executive’s cial for the company at large.” Finnair to pre-Covid profitability, pore and Bangkok. In what Man-
standards. But what leadership He cites aligned incentives as even if the Russian airspace were ner describes as a “ground-break-
lessons will Manner take with an effective way of fostering that to remain closed for a very, very ing co-operation”, Finnair crew
him when he leaves Finnair to trust, including employees and long time, even decades,” he states. will be based in the latter two cit-
become chief executive of Finn- the management team having the The new strategy involves a ies, keeping busy two aircraft that
ish telecom and digital services same targets and KPIs. more diversified network across no longer have the range to oper-
firm Elisa? Trust was particularly impor- short- and long-haul services. ate on the carrier’s Asia routes.
Time will bring more clarity on tant when it came to instigating “We have been able to redirect Finnair also recently
that question, Manner says. But redundancies and negotiating our network successfully and announced that it would be
he asserts that “humility” is a with unions, Manner says. profitably,” he says. “We have adopting Avios for its frequent-
vital attribute for a leader. “At times you have been hav- been opening new destinations flyer programme – the loyalty
“Executives are sometimes ing fractures in the trust, but in the US, in India and the currency used by BA, Iberia and
trained to think that you can when you now look at it in retro- Middle East, [and] with that we Qatar Airways.
make your own circumstances,” spect I think the trust has been have been finding new customers Someone else will eventually
he says. “The past couple of years holding in Finnair and keeping and traffic flows to support our lead Finnair through its near- and
have shown that that doesn’t the company together,” he says. intra-European network.” long-term challenges. But wher-
always hold true.” With trust in place, “we have ever that leaves the airline,
A culture of trust is also cru- been able to adapt” to the exter- ADAPTING STRATEGY Manner will be remembered as
cial, he continues: “When you nal shocks, he states. Finnair continues to operate to playing a key role during some of
look at the transformation we Beyond that adaptation, Man- several destinations in Asia, even its darkest days.
have done – radical transforma- ner describes Finnair today as “a though flight times have “‘Never a dull day in aviation’,
tion like we have needed to do – faster company, more nimble, increased by 30-40% amid the that’s what they said when I
to adapt to these external shocks, more focused, more agile and closure of Russian airspace, joined,” he recalls. “Based on the
I would say that trust is the hard- more entrepreneurial” than it which has brought “a massive experience of five years, I really
est currency that you can have. was when he joined in 2019, cost increase” when it comes to can say that is true.” ■

BRIEFING ASIA-PACIFIC
GREG WALDRON SINGAPORE
SIA touts strategic presence in India

Excitement about big growth market contrasts with China’s tentative traffic return since Covid restrictions were lifted
ingapore Airlines is bullish was given a boost when visa

S about India’s long-term pros-
pects and feels its 49% stake in
requirements were waived for
Singapore citizens.
Vistara positioned it well for an “So we are seeing, as a result of
evolving Indian airline market. this relaxation, more demand
Speaking in November follow- into China,” he says. “It is fair to
ing the release of the Singapore say at this point, the traffic from
Airlines Group’s six-month earn- China coming out at least to Sin-
ings, chief executive Goh Choon gapore isn’t quite the level that
Phong said that India has for we saw before.”
some time been key to the carri- Nonetheless, he feels that over
er’s long-term vision, pointing to time demand from China will
the sheer scale of the world’s fully recover and that the SIA
most populous nation, with 1.4 Group is well positioned to take
billion people. advantage of it.
SIA Group
“India is a huge, huge market,” Goh’s remarks corroborate
says Goh. “It is fast growing; it’s comments made at SIA’s results
going to be the third largest econ- Goh: Tata’s Air India move was not anticipated on Vistara launch briefing by chief commercial
omy in the world and is already officer Lee Lik Hsin.
the third biggest travel market in rationale for the Vistara invest- gave it a strategic position during “China’s resumption is not yet
the world. Our investment in ment, as it allows direct access to a tectonic shift in the Indian exactly at pre-Covid, for a whole
India allowed us to participate India’s growth – a key considera- airline market. host of reasons, one of which… is
directly in the growth of India.” tion given SIA’s tiny home mar- Goh adds that Tata Group demand,” says Lee. “We have not
ket in Singapore. Moreover, SIA enlisted SIA’s help to conduct
MERGER PLANS already co-operates with Vistara, due diligence when it was “From our operations
SIA’s 49% stake in Vistara is set and “that kind of discussion will considering its acquisition of Air
to become a 25.1% stake in fel- continue” when Vistara is part of India. we know and can feel
low Star Alliance member Air Air India. India’s rising importance
India following the pending “We have been operating to corresponds with a softening of the potential for India”
merger between the two airlines India for a long time, and from our Asia’s big air traffic growth Goh Choon Phong
– a deal expected to complete by operations we know and can feel engine in the 2010s, China. The Chief executive, Singapore Airlines
March 2024. SIA’s partner in Vist- the potential for India,” says Goh. country’s reopening earlier this
ara, Tata Group, acquired Air He adds that SIA and Tata orig- year – after the abandonment of
India from New Delhi in early inally shared a vision to build leader Xi Jinping’s ‘zero-Covid’ fully restored our China flights
2022, and set about merging the Vistara into one of India’s largest strategy – has been somewhat though we are progressing in that
two full-service airlines, as well full-service airlines. When Vist- tepid, and this key market has respect, having restored 23 out of
as its low-cost units Air India ara was launched in 2015, Tata’s yet to return to pre-pandemic 25 points, with the capacity at
Express and AirAsia India. acquisition of Air India, then traffic levels. about three-quarters of where we
In Goh’s view, SIA’s future par- bleeding cash under government There are encouraging signs, were pre-Covid.”
ticipation in Air India is consist- ownership, was not anticipated. with Goh noting that demand for Lee also says that SIA has yet
ent with the carrier’s original Still, SIA’s investment in Vistara travel to China from Singapore to see corporate travel return to
pre-pandemic levels. The airline
has been able to replace this with
Scoot expanding group fleet roster with E2s additional leisure travel, and this
has supported load factors in the
Scoot will take delivery of its first Embraer E190-E2 jet His comments are the latest updates from the premium cabin.
in March next year, as it focuses on building up its airline on its incoming fleet of E2s. The SIA Group Overall, the SIA Group sees
short-haul network. unit announced in February it would be taking nine strong demand until the end of
Leslie Thng, the low-cost operator’s chief execu- E190-E2s on lease from lessor Azorra. the financial year, but competi-
tive, says Scoot will take delivery of another four E2s The jets will seat 112 passengers in a single-class tion is rising with other airlines
through 2024, and that the type will be deployed on layout – the smallest aircraft in the SIA Group’s fleet. adding capacity, says Lee, which
“a mix of new and existing destinations”. Asked if the airline was looking at growing its will put pressure on yields.
Thng, who was speaking at the Association of Asia long-haul network – Scoot flies to Athens and Berlin “But overall, from a total
Pacific Airlines’ Assembly of Presidents in Singapore, in Europe, as well as Jeddah in Saudi Arabia – Thng demand perspective in respect of
declined to comment where Scoot will be launching says the airline’s “short-term focus” is to induct the filling our flights, we still feel that
flights to, except to reiterate that these details would new E2s and deploying them to the Southeast Asian for the whole financial year we
be disclosed “when we are ready to”. market. will still have a positive picture,”
he says. ■

BRIEFING MIDDLE EAST
GRAHAM DUNN & DAVID KAMINSKI-MORROW DUBAI
Middle East airlines look long-term

Emirates orders 110 widebodies at Dubai air show while other carriers in the region map out expansive growth plans
hile Emirates and Fly-

W dubai made headlines
with a series of major expansion
announcements at the event, the
Dubai air show underlined that
growth is on the agenda for
operators across the region –
even those that did not order
new metal.
Emirates’ orders for a further
95 Boeing widebodies and 15
more Airbus A350-900s, even if
airline president Tim Clark is not
ready to add any A350-1000
commitments yet, underlined its
continued growth horizons.
Speaking a day after Emirates
committed to another 90 777Xs,
Clark said he was “more confi-
dent” on the timeline for the
twinjet – although he points out
that it remains over five years late
BillyPix
– with Emirates expecting to take
its first in October 2025. Emirates set tone of the show with string of major deals securing widebodies into next decade
Clark says he thinks Boeing
and the US Federal Aviation door, we have to place orders deals with the aim of operating Max narrowbodies to its fleet
Administration (FAA) are “get- now because the lead time for most of its 123 in-service exam- after agreeing to lease 18 units
ting on top” of the regulatory deliveries is so long,” he adds. ples for as long as possible. from Air Lease. This fits into the
requirements in relation to the “We have to face bumps in the “We have to keep a careful eye Star Alliance carrier’s own five-
aircraft’s capabilities. road as to what manufacturers on [the supply chain], so we’re year growth strategy.
“So I’m hoping it’ll be OK for can do.” cannibalising some of the early “By 2028, we have ambitious
us,” he adds, but acknowledges The order for 777Xs includes aircraft and storing the parts,” plans to reach a fleet up to 125,
that – given the 777-9 is a new 55 777-9s and 35 777-8s – the -8s Clark explains. “We’ll try to keep both narrowbodies and widebod-
airframe, with a new engine in are due for delivery from 2030. It 116 going for as long as we can. ies,” says EgyptAir Holdings
the General Electric GE9X – also ordered five more 787-9s. Back-end of the next decade, it’ll chairman Yehia Zakaria. “For the
“we’re not out of the woods at all Not that the fresh order means drop to 90.” network we hope to reach up to
with regards entry into service”. Emirates is ready to give up on its There was an eye-catching 100 destinations by 2028.”
“Irrespective of the difficulty Airbus A380s any time soon, order for 30 787-9s from
of getting these aircraft out the after disclosing maintenance Emirates’ sister carrier and nar- TURNING AROUND
rowbody operator Flydubai, Another airline in growth mode
marking its expansion into wide- is Royal Jordanian. The airline
body services. committed to six Boeing 787-9s
Both Emirates and Flydubai at Dubai, is leasing three more
also disclosed a number of agree- Dreamliners and will revamp its
ments to support their growth, existing 787-8 fleet.
notably plans for major new “The leased ones are coming
MRO facilities in the Dubai first, two in 2025 and one in
World Central airport area. 2026. Then the Boeing ones will
Middle East carriers placed come, one in 2027, one in 2028
commitments for 158 aircraft, and so on. Almost one or two a
over a third of the orders at Dubai, year,” explains Royal Jordanian
Notably, all but the Flydubai order chief executive Samer Majali.
were for widebodies. That “The -9 is obviously bigger
included fresh commitments from and more efficient, but the -8 is
EgyptAir, Royal Jordanian Air- also very good and, in this cli-
lines and Royal Air Maroc. mate of lack of aeroplanes, we
BillyPix
Alongside EgyptAir’s deal for are also going to refurbish our

Neves sees no reason why Etihad cannot grow 10% annually 10 A350-900s, it is adding 737 787-8s in co-operation with

Showman Al Baker exits the Qatar stage
Boeing to be able to extend their
life as long as possible.”
Royal Jordanian has turned
around losses, disclosing a JD27.5 While the second outing of the Dubai air show since from a small regional carrier into one of the world’s
million ($38.8 million) net profit the pandemic felt like business as usual has fully re- leading global airlines in the span of just 20 years.”
for the third quarter and a profit at turned, it was missing a regular fixture after long- In November, Qatar disclosed it more than dou-
the nine-month mark to JD10.8 standing Qatar Airways group chief executive Akbar bled net profits for the six months ended 30 Septem-
million. Majali says the positive Al Baker stepped down in November. ber 2023, the last set of results under Al Baker’s
figures are the result of a new He was one of the longest-serving airline leaders, leadership. The Oneworld carrier posted a net profit
strategy for the flag-carrier which having led Qatar Airways since 1997997 – just three of QR3.7 billion ($1 billion) over the first half of its
focuses on projecting Jordan as a years after the carrier commenceded operations – and financial year, an
tourism destination and Amman was synonymous with the airline during a period in increase of 114%
as a gateway to the Levant region. which he led its transformation into
nto a major global over the same
However, disruption from the operator. The Doha-based carrier er underlined that period a year
Israeli-Gaza conflict will badly position by maintaining much of its activity during earlier.
affect fourth-quarter performance the pandemic and was the 10th biggest airline group
and set back the airline’s efforts to in the world in 2022 by revenue.
return to profitability this year. Al Baker regularly took centre-stage
-stage at air shows,
Majali says that, for the full year, including Dubai, helping to fill up
p aircraft manu-
break-even is probably the “best facturer order books and reporterer notebooks in
we can hope for”. equal measure.
While Etihad Airways may not Qatar announced Al Baker’s departure in late
have been ordering any aircraft October and he stepped down on 5 November. He
this time in Dubai, the carrier’s has been be succeeded by Badrr Mohammed Al-
chief executive Antonoaldo Meer, chief operating officer of Qatar Airways’ hub
Neves was at the show mapping airport, Hamad International.
out its Journey 2030 strategy. The “Under [Al Baker’s] leadership,, Qatar Airways
carrier marked its 20th anniver- has grown to become one of the e most recog-
sary by in November moving into nisable and trusted brands globally,
ally, synony-
the newly opened Terminal A at mous with customer service quality ity and the
Abu Dhabi airport, formerly highest of standards,” the carrierr states.
known as the Midfield Terminal, “His vision and commitment
and originally slated to open six enabled the ground-breaking
Qatar Airways
years ago in line with Etihad’s development of Qatar Airways
original growth strategy.
“Twenty years is an important
mark for us,” Neves told reporters Neves, the former TAP Air Portu- and expects to pass its previous for more tease than reveal over
during a briefing at the show. gal chief executive who took the peak from 2017 by late next year the planned deal. But a 787 on
“The way I see Etihad is two helm a year ago, has a clean slate or early in 2025. “This year we static display adorned in Riyadh
very different phases. The first 15 for the journey ahead. added 16 planes, we grew 35%,” Air colours – and the unveiling of
years was about setting the aspi- says Neves. “Next year we are a second livery – ensured the car-
ration very high – and that’s “We have a clear going to be growing 20% to 25%. rier offered a reminder of its
good. You don’t get anywhere if So we can deliver growth. plans, even if it is still 18 months
you don’t set the bar very high.” mandate… deliver “We are in a region where GDP away from launch.
Etihad’s initial expansion was is growing at least 5% every year, Riyadh Air is led by former
rapid and widespread, both extraordinary and in [a] region that is growing a Etihad boss Douglas, who tells
through its own activities and its lot – aviation usually grows two FlightGlobal more announce-
bid to fast-track growth through a
customer service times [as fast] at least,” he says. “I ments are in the pipeline.
series of equity investments in and… make money” don’t see any reason we cannot “We will during the course of
partner airlines across Europe, grow 10% per annum over the Q2 [2024] reveal the interior,” he
Antonoaldo Neves
Asia-Pacific and Africa. While next seven years. says. “During the course of next
Chief executive, Etihad Airways
that drove scale, it also brought “We are taking a very business- year, there will probably be two,
complexity as partner problems oriented approach to our maybe three reveals of what
increased. It meant Etihad under growth,” Neves adds. “We have a digital native actually looks like,
Tony Douglas’ leadership had “I think we have the right size clear mandate from the share- and the demonstrations of how
begun retrenching and unwinding and we have an opportunity to holder. And the mandate is very it works.
its equity-alliance strategy, even grow again,” he says. Etihad’s simple. Deliver extraordinary “We’ve got a roadmap because
before Covid prompted a need to Journey 2030 envisages a dou- customer service and at the same we know when we are going to
further downsize. bling of the fleet to 160 aircraft time, make money.” go live in [20]25,” Douglas adds.
Fittingly, as the carrier and passenger numbers reaching “We don’t want to turn all the
embarks on its fresh growth 33 million by 2030. RIYADH AMBITION cards face up now, because then
course, Etihad has just exited the Expansion is already in motion. Neither was there a touted you have played your whole
last of its equity holdings, with Etihad has carried 13 million pas- narrowbody order forthcoming hand, [but] what we are trying to
Air Serbia returning to full gov- sengers over the past year, 30% up from ambitious Saudi start-up do is build engagement, build
ernment ownership. It means over the same period a year ago, Riyadh Air, as the carrier opted excitement.” ■

INTERVIEW ADRIAN NEUHAUSER
REPORT
PILAR WOLFSTELLER
LAS VEGAS
Best of
both worlds
With traffic surging in Latin America, Adrian Neuhauser
has transformed Avianca into a low-cost competitor
that draws on the strengths of its network-carrier past
A
drian Neuhauser, the soon-to-be and Ultra Air – folded earlier this year.
head of holding company Abra With a population of more than 50 million in
Group but speaking to Airline Colombia, there is a lot of money to be made.
Business during his final weeks as Neuhauser was elevated to the top job at the
Avianca chief executive, is not generally for- world’s second-oldest airline in April 2021
getful when it comes to numbers. The Chilean when former chief executive Anko van der
national is a former investment banker who Werff left for Scandinavian flag-carrier SAS.
holds dual degrees in business administration Neuhauser had been recruited as the firm’s chief
and economics, with a focus on finance. financial officer in 2019 from Credit Suisse.
These days, though, he could be forgiven His profile fit the company’s needs well. He
for losing track of an essential figure that most had acquired industry knowledge while
airline executives can rattle off in their sleep: working on transportation deals at various
exactly how many aircraft his firm operates. financial institutions, is native-speaker-level
“We've been adding planes really, really bilingual and has a deep understanding of
fast,” Neuhauser says of Avianca with a laugh. Latin America – attained while growing up as
“Every time we ask the question, we get the son of a United Nations official and living
different numbers.” in several countries across the hemisphere.
That is because air travel in the airline’s “Investment banking is a great learning
home country of Colombia is going through a experience, a great thing to do for a few years
structural transformation, requiring it to move and then you can deploy what you learned on
quickly to lap up the opportunity. more interesting things,” he says.
In the fourth quarter of this year, Avianca
will operate an average of 150 more flights VOLATILE TIME
daily than it did in the third quarter, or about With just two years of airline experience
4,800 additional flights monthly. It has hired under his belt, Neuhauser, now 50 years old,
more than 1,000 people, bringing its work- was tasked to lead the struggling carrier
force to about 13,000 employees. through perhaps the most volatile time in the
“It's very, very strong growth and it's industry’s history.
required a tremendous effort by our operating “It was unexpected,” Neuhauser says of the
team, by our finance team, to bring the planes promotion. “It wasn't part of my life or career
in, to get the people in, to get them hired [and] plan, but it's been a lot of fun. It's a big chal-
explain to them what we're doing and get lenge. And it's a big honour.”
them aligned. We’re a few weeks into it, but In late November, he got another promo-
it's been very, very, very seamless.” tion. From early 2024, Neuhauser will
The payoff? Filling capacity gaps left when become the next chief executive of Abra
two smaller Colombian carriers – Viva Air Group, the holding company that Avianca

and Brazil’s Gol formed in 2022. Abra is an
effort by both carriers to reduce costs, achieve
greater economies of scale and expand routes,
services, product offerings and loyalty pro-
grammes across the South American conti-
nent. Unlike a full merger, the airlines operate
independently and maintain their own brand-
ing, management and strategies.
Rising into his new job is in essence a con-
firmation and acknowledgement of what he
has achieved at Avianca in a short period.
He took over the company at a critical time.
The world was in year two of the Covid-19 pan-
demic, vaccines had just been rolled out, gov-
ernments were struggling with decisions on
lifting travel restrictions, passenger demand
was nowhere near where it had been in 2019
and Avianca was in the middle of a court-over-
seen Chapter 11 bankruptcy protection process.
“Our employees have a lot

of pride in the company’s
long history and the role
that it plays in Colombia”
In May 2020, Avianca and fellow Latin

American airlines Aeromexico and LATAM
Airlines Group – all of which had received little
pandemic-related financial support from their
respective governments – had filed for bank-
ruptcy in the wake of the global health crisis.
In December 2021, just seven months after
Neuhauser became chief executive, Avianca
was the first of the three to complete the finan-
cial restructuring and emerge from bank-
ruptcy protection. It was now free to begin the
long slog to a new normal.
“The biggest challenge has been designing
the reinvention of the company and then
bringing 104 years of legacy along,” Neuhauser
says. “Our employees have a lot of pride in the
company's long history and the role that it
plays in Colombia and in Latin America.
“And the most rewarding part is getting the
entire organisation rowing in the same direction.”
The pandemic forced airline managers
worldwide to be exceptionally imaginative in
order to keep the lights on. So too at Avianca.
During the crisis and months-long shutdown,
Avianca suspended some labour agreements.
At the end of it all, the company lost some
Avianca
employees, mostly in administration roles, ❯❯

INTERVIEW ADRIAN NEUHAUSER
❯❯ but on the operations side it retained “Viva was a game-changer in Colombia,” he

“pretty much everybody”. says. “It had been there for many years, it was
“Our agreement with the pilots gave us flexi- the airline that ultimately forced us to change
bility during Covid,” Neuhauser says of one of our business model. We had to learn from them.
the creative moves that helped the airline They were a low-cost innovator, they democra-
bounce back. “Instead of letting pilots go, we tised the market and we saw a lot of value in
would rotate them. So they would fly less hours, that. It was something worth preserving.”
but every day they would fly some proportion of While Viva was a significant target, Avianca
hours. And that let us recover very quickly.” never had any interest in taking over Ultra, Neu-
Avianca’s recovery continues at a blistering hauser says. That airline, which only launched
Markus Mainka/Shutterstock
pace. In the third quarter of this year, the air- flights in 2022, closed shop in March.
line increased capacity as measured in avail- “It's not hard to sell seats in this industry –
able seat kilometres by almost one-third com- to walk out there and say ‘Hey, I've got 180
pared with last year, with another 23% rise tickets for $1 each’ and fill 180 seats. That's
slated for the rest of 2023. not the challenge.
But while the numbers look impressive for “The challenge is filling the seats at a fair
Avianca, the Colombian market’s overall Fleet simplification price and [doing it] profitably, being able to
growth is in the single-digit range. Why? Avi- cover your cost of capital and grow and pay
anca and other airlines are filling a gap cre- Running a lower-cost operation requires your employees adequately and service your
ated when Viva and Ultra collapsed in the thoughtful fleet decisions too. Once home debt and continue to invest.
early part of the year. to almost every Airbus narrowbody model “What happens with a lot of these upstart air-
available – A318s, A319s, A320s and A321s lines is, they come in with big marketing [budg-
SEEKING STABILITY – Avianca has simplified to the max. ets], very cheap tickets – but they're not cover-
Avianca had made a play to take over Viva in As of 20 November, the carrier operated ing their operating expenses, let alone their cost
early 2022, with the airlines’ owners saying 113 A320s and nine A319s for use as spares. of capital, and ultimately we see them fail.”
the arrangement would improve both compa- Avianca deploys the Airbus narrowbodies on As demand rose following the pandemic,
nies’ financial stability. domestic and short-haul routes around the Avianca’s new management team saw oppor-
“We approached the authorities and said, continent and to the Caribbean and tunity to create something distinctive: a low-
‘Look, we don't think it's in anybody's best southern USA. cost carrier with legacy carrier benefits.
interest to have the chaos of a failed airline, Between September and the end of 2023, “We've taken the best of the low-cost model
no one wants that. We would like to be Avianca was due to have increased its in- and combined it with a lot of things that are
allowed to take it over,’” Neuhauser says. service narrowbody fleet by 15 airframes to unique to Avianca, whether it's our frequent
Colombian aviation regulator AeroCivil support the surge in service. It still has more flyer programme or lounges or the fact that we
took a long time to come to a decision. than 80 narrowbodies on order with Airbus. fly widebodies with a full business class, or
“Their initial answer was no, which we On the widebody side, Avianca has bet that we're a member of Star Alliance, or that
didn't expect,” he states. “The authorities on the Boeing 787 Dreamliner, and currently we sell over 50% of our tickets through tradi-
looked at it [as] the status quo versus the operates 13 of the 787-8 model. tional distribution methods as opposed to
merger, as opposed to looking at [Viva] failing “That plane makes every mission we want selling directly,” Neuhauser says.
versus the merger.” to make out of Bogota,” Neuhauser says. “I don’t know what that’s called, but that’s
After Viva ran out of money and ceased “It’s very efficient, it’s comfortable for pas- where we are.”
operations on 28 February, AeroCivil finally sengers, and we can reconfigure them to a Neuhauser thinks this mix is the right
green-lighted a takeover. But it attached some configuration that’s more consistent with our answer to the current uncertainty, while
costly strings, including requirements that new business model.” keeping in mind the economic realities of the
Avianca honour or refund unused Viva tick- The carrier took two rows out of business region in which the airline operates.
ets, cancel some international frequencies, class, increasing the capacity of its 787s to “Purchasing an airplane ticket is a major
return some valuable slots at Bogota’s El 290 seats from 250. “That’s going to allow us decision” for people, Neuhauser says. “As a
Dorado International airport and maintain increased revenue with a plane that we think management team, we should not be designing
Viva’s low-cost options. is great.” an airline just for us, we should be designing
“We were okay with doing a transaction that In 2024, Avianca plans to take three more an airline for the population that we serve.”
we thought was sort of net neutral,” Neuhauser 787s that formerly flew for Norwegian and are That population is getting a taste of the
says. “But doing a transaction that would currently being retrofitted with new cabins. benefits of affordable air travel between far
impact our ability to compete on an even basis Not only are the 787s going to Europe and flung cities over unreliable, lengthy and often
when other [airlines] were not going to subject the USA, Avianca is also strategically deploy- dangerous ground-based networks. As in
themselves to these long-term restrictions – no, ing them on flights within Latin America, for many other Latin American countries, the
that package of remedies didn’t work.” example to Buenos Aires and Sao Paulo. alternative to an airplane has always been
Avianca walked away from Viva in May. “It gives us a product upgrade on routes a bus. And for the growing middle
Though the transaction ultimately fell where people are willing to pay for business class, air travel has become a more viable
apart, Neuhauser credits Viva with aiding class,” he says. financial proposition.
Avianca’s transformation. “It's about getting you from point A to point

B safely, cleanly, respectfully, in a friendly And for investors, Abra presents an inter-
way, on time, with your bags,” Neuhauser esting opportunity. “You no longer have all
says. “We don't try to enchant you with an your eggs in one basket in Brazil or in Colom-
incredible experience and feed you a meal on bia or in Central America. You've got a bal-
a two-hour flight. ance. Some countries do well when others do
“Frankly, you don't need a meal on a two- poorly. Some currencies do well when others
hour flight.” do poorly. So having that balance from a port-
About 30% of the airline’s customers are folio perspective at the investor level has also
flying for the first time, he adds. But the pivot been helpful,” Neuhauser says.
is not just about them Abra will begin to bear fruit in 2024, when
“It’s about the small business owner in he steps up to take the top job, with the air-
Medellin or Cali that wants to sell his product lines “aggressively supporting each other”,
in Bogota, and he can now go once a month Neuhauser said on the company’s recent
instead of every six months,” Neuhauser says. third-quarter earnings call.
ALTA
“The day trip from Medellin was just not an “The more needle-moving events will start
option, and now it is.” next year,” he told investors.
That option now exists also because the Taxation talk In October 2023, Aerolineas Argentinas
new Avianca’s reliability has vaulted it to the signed a memorandum of understanding with
top of Cirium’s global on-time performance Whenever Latin American airline leaders meet, Abra, and negotiations to add Sky to the
leaderboard. During 2022 it ranked sixth in discussion quickly turns to perceived govern- group are ongoing.
the world, and this year has taken the number ment overregulation and hefty taxation. “We have an interest obviously in making
one or number two spots every month since According to IATA, Colombian taxes and that something deeper – that’s subject to dis-
April. That would have been unimaginable in fees on domestic airline tickets are more cussions with [Sky’s] controlling shareholder
the past, according to Neuhauser. “We are than 25%, and taxes on international tickets and then eventually to regulatory approval,”
massively focused on getting the basics right.” can exceed 50% of the total cost. he says.
The airline’s reinvention has also come In a region with such limited infrastructure But as new Latin American post-pandemic
with a new logo – a lower-case “a”, signifying and information systems, Neuhauser says, the travel trends shake out and Avianca’s commit-
that flying is no longer for just the wealthy governments also just want to make a buck. ment to its Abra partners deepens, a long-
few, but for the many. Its new tag-line: “The “Governments need sources of income, touted joint venture with Star Alliance col-
sky belongs to everyone”. and in the countries in which we live, the leagues Copa Airlines in neighbouring
“That’s cemented in a very elegant way easiest place to collect that is when there’s Panama and United Airlines seems essen-
what we're trying to be about. We are accessi- transaction – it’s an easy funnel to control. tially dead.
ble from an economic standpoint, but also “So even though in theory we would like “We don’t see that progressing,” Neuhauser
how we provide the service, the way we com- to have more progressive taxation systems, says. “We love working with United – that rela-
municate with people,” Neuhauser says. we end up with taxation systems that are tionship will continue to evolve – but our model
very regressive. We end up with very high change makes it more difficult to imagine that
FRESH COMPETITION transactional taxes on things like air tickets.” we could do something with Copa, [which]
Avianca’s main rival in Colombia is Chile’s As travel volumes grow, taxes could effectively is too close to us geographically.”
LATAM Airlines Group, which has a sizeable decrease proportionally with that growth. Regardless, Avianca’s post-pandemic strate-
domestic Colombian operation. But soon, an “Let’s look at this as a pool that we need to gic pivot looks like it is working so far. The com-
ultra-low-cost entrant will challenge Avianca maintain and, therefore, as we grow, we can pany is making money again, recently posting a
in new ways. reduce the unit tax, and that creates a virtu- nine-month profit of $85.8 million while the
Chilean discounter JetSmart plans to ous circle where over time we can then grow wider industry across the region is expected to
launch service on 27 Colombian routes early faster and we can reduce the proportional operate at a loss this year once again.
next year under its fourth air operator certifi- taxation and the cost to the consumer,” At the airline’s helm, Neuhauser sees him-
cate. JetSmart had also made attempts to Neuhauser says. self as a facilitator, rather than the driver of
acquire Viva and later Ultra, but ultimately “We think this is something that we can the crucial changes.
decided to go it alone. work with authorities to change over time.” “What’s interesting when you take on a role
“That will be interesting,” Neuhauser says. like this is that you realise it's not about making
“Competition always makes you a better decisions. Making decisions is hard, but it's
player and makes you kind of sharpen your “We need to provide solutions for our cus- almost the easiest part. For those decisions to
teeth a little more.” tomers [to] cover the entire region, to be able actually work and be effective you've got to get
In May 2022, Avianca and Gol formed to take a person from any country in the the entire organisation to rally behind you, and
Abra Group, in part to better compete with region and fly into any other country in the it's very cool to see the results come to fruition.
these kinds of advances. The venture aims to region,” Neuhauser says, adding that Abra is “Very few things are my idea,” he adds.
help the airlines better negotiate with vendors set up to preserve the legacies and histories of “We've got this amazing team and I get to play
and suppliers, and to benefit customers both brands. orchestra director.”
through codeshare deals and reciprocal fre- “A lot of value gets lost when you paint all At Abra, he’ll have an even bigger stage
quent flyer benefits. the planes the same colour,” he says. upon which to play that role. ■

INTERVIEW JOHANNA A BERGI
REPORT
LEWIS HARPER
INNSBRUCK
Success
without scale
Running a small regional airline in Europe is replete with challenges – not least
because the economic benefits from size are structurally out of reach – but still
Atlantic Airways chief executive Johanna a Bergi can eye growth opportunities
tlantic Airways chief executive Air France-KLM carriers, but Bergi says the now we have [A320]neos and because of the
A Johanna a Bergi does not equivo-

cate when asked to name the big-
gest leadership challenge in run-
ning a small regional airline in Europe.
“Our biggest challenge is the economy of
airline is yet to secure slots despite applying
“for years”.
“We will still keep applying for slots as we
hope it will be accepted as a new destination,
but we will see,” she says.
fuel saving we are able to do the direct line
between the Faroe Islands and the US.”
The carrier’s handful of US services con-
nected Vagar with Stewart International air-
port, outside New York City.
scale – we are a national airline and it’s diffi- Furthermore, the airline is working on a “This route is more of a statement than a
cult to grow in a very small home market,” codeshare agreement with Icelandair, as part of big [ambition],” she explains. “We are not
she told FlightGlobal during the recent Euro- which the latter will launch services to Vagar going to be a big hub; we don’t have the run-
pean Regions Airlines Association (ERA) airport – Atlantic Airways’ home – from 2024. way, we don’t have the equipment.”
General Assembly in Innsbruck. On the carrier’s services to the USA, which
“It’s expensive to be small.” began in August 2023, Bergi suggests ambi- OPTIMISING OPERATIONS
So how does the state-owned carrier – tions are limited, however. When demand for services to the Faroe Islands
which serves the Faroe Islands, a small, The airline operated “just one or two flights is lower during the off-season, the carrier con-
self-governing Danish archipelago between but it went very well”, she states, while tinues to provide charter services to tour opera-
Scotland and Iceland – position itself to describing the operations as an “extreme tors from Billund and Copenhagen, Bergi says.
achieve growth? minority of our activities”. A glance at flight-tracking websites shows
The trick, Bergi suggests, is to “do a good “But it is a milestone and something that is Atlantic Airways aircraft heading from those
job and be competitive and build up a niche possible thanks to technology,” she says. airports to destinations such as the Canary
company in the region”. “Before we had [Airbus A320]ceos only and Islands and Sharm el Sheik in November.
Indeed, within constraints that are com-
mon to many regional airlines in Europe,
Atlantic Airways still sees a path to expan-
sion through the tourism market.
Among its recent announcements, it is
planning to serve London Gatwick from
summer 2024, adding to its main route to
Cophenhagen and regular flights to Billund,
Keflavik, Oslo and Edinburgh.
“We hope to attract people in the London
area,” Bergi states. “We see a lot of people
from the UK come to the Faroe Islands –
different people, nature lovers who want to
spend time away from a city.”
She notes that Gatwick would offer Atlan-
Atlantic Airways
tic Airways connections with “a little bit of a

hub” at the London airport.
Atlantic Airways also wants to serve
Amsterdam, in an extension of its tie-up with The addition of A320neos means Atlantic Airways can now fly directly to the USA

almost can’t travel more,” she states, reiterat-
ing that tourism is a more likely source of
growth for the carrier.
Still, “first of all we are the national carrier,
so we always want to provide our own people
with different possibilities to travel abroad”,
Bergi states.
The Faroe Islands’ small population of
around 50,000 also means recruitment can
be tough.
“If you want to work in the industry in the
Faroe Islands you don’t have so many
options, so that’s good and bad.
“You don’t have freedom to choose, but we
appreciate the people that are with us.
“To have an AOC organisation is very
demanding, there is more and more focus on
compliance, safety and security, but I am very
happy with the people we have at the moment.”
“If you want to work in the

industry in the Faroe Islands
you don’t have many options,
so that’s good and bad”
The airline’s fleet currently features two

A320ceos and two A320neos – plus a couple of
helicopters. It has two more A320neos on order
directly from Airbus, “but that will be in 2027,
so it’s a long time away”, Bergi says of deliveries.
She cites the difference in size between
Atlantic Airways’ fleet and those of SAS and
Icelandair – around 90 and 45 aircraft respec-
tively – stating that her airline can never
Atlantic Airways
expect to reach that kind of scale.

Helpfully, however, while smaller carriers
have complained of the outsized impact of
parts shortages, maintenance issues and
“That is definitely how we optimise [our getting bigger and bigger, and it’s very expen- reliability problems on aircraft availability in
operations],” she says. “Both getting some sive to be part of these loyalty [programmes].” recent months, Bergi notes that Atlantic
charter outside in the off-season and then to On that topic, smaller carriers are vulnerable Airways’ Airbus narrowbody fleet is powered
get more passengers on our flights.” to the reverberations of consolidation moves in by CFM engines, stating: “It’s as good as it gets
But that can only take a small airline so far, the wider industry, Bergi says. For example, in a challenging moment.”
Bergi concedes. Ultimately, smaller carriers she is “curious to see” what Air France-KLM’s That is beneficial for a small airline that is
have to accept that while they face challenges moves to take a stake in SAS might mean for being hit by some pretty big external head-
familiar to many of their larger peers, a lack of Atlantic Airways’ codeshares with Air France winds, in common with peers.
scale means some of them are felt more keenly. and KLM, given the Scandinavian carrier is one “Inflation, war, fuel prices… we have the
“You talk about passenger rights, EU261, of the few operators – alongside Norwegian same challenges,” Bergi says. “And then there
when you are so small it hits you so hard,” operator Wideroe – that serves Vagar airport. is how the customer reacts to… all these
she says. “Then also about sustainability and things; will they spend money on their house,
the conversion to more sustainable solutions LOCAL FOCUS on their debts?
as well – it’s always expensive to be the first And while some airline chief executives can “We are trying to attract more tourism to
mover, but I definitely think technology will take heart from the growth potential in home really get the scaling,” she says.
help us in the long run. markets, Atlantic Airways has no such luxury. “It’s tough to be a small airline but we are
“Then more companies are merging and “Local people are travelling a lot – they still okay.” ■
FlightGlobal.com/airlines
December 2023 | Airline Business | 33
SUSTAINABILITY SAF
REPORT
LEWIS HARPER
MADRID
Making SAF
a safer bet
Absent government incentives and energy industry action to accelerate sustainable
aviation fuel production, airline leaders fear being overwhelmed by the cost burden
ore airline leaders are starting to demonstrates the scale of the financial chal- “There is no way with margins of 4%, 5%
M openly acknowledge that the

extra costs associated with the
industry’s net-zero transition
through to 2050 are almost guaranteed to
increase ticket prices for consumers and
lenge that we as an industry face,” IATA
director general Willie Walsh said on a panel
at the symposium in Madrid.
Walsh says airlines have little

that this industry can absorb [extra costs cre-
ated by purchasing SAF], so it has to be
passed on to the consumer, which will mean
higher ticket prices and clearly that will have
an effect on demand,” he says.
impact the pace of the sector’s growth. Walsh predicts that structurally higher
The most significant of those extra costs is choice but to pass those costs ticket prices will not be enough to stop indus-
likely to be the purchasing of sustainable avia- try growth, but it will “definitely impact the
tion fuel (SAF), speakers agreed at IATA’s on to consumers pace of the growth”.
World Sustainability Symposium in October, He recalls that an average airline industry
which is central to the net-zero effort in most net margin of just 4.4% in the decade 2010-
sustainability roadmaps. With no other pathways to reduce their 2019 – which is considered a financially suc-
The key question, airline leaders suggest, is carbon footprints by 2050 on the scale that cessful one – was achieved with Brent crude
how quickly policymakers and the energy SAF is forecast to achieve, airlines have little averaging $80 per barrel and jet fuel $93 per
industry can achieve the scale of SAF produc- choice but to pass those costs on to consum- barrel, equating to 27% of the industry cost
tion that would begin to chip away at that ers, Walsh says. Crucially, he notes that jet base. Double those costs – or worse – and the
cost burden. fuel is already the most significant cost item industry’s positive margin is wiped out.
“We know today that sustainable fuel is at on most airline balance sheets, meaning any
least twice, if not… four times what jet fuel increase will be keenly felt in what is histori- SCALE INCENTIVES
was costing, so if you think about it, it just cally a low-margin industry. Amid that approaching cost challenge, the
magnitude of the impact is contingent on how
rapidly the nascent SAF production sector
can begin to achieve the economies of scale
needed to bring down the price of its output,
speakers at the symposium agreed.
That is why policymakers must do all they
can to stimulate the development of the SAF
industry, Walsh says.
At the same time, to avoid an existential
impact on finances, Walsh and other speakers
– including those covered in the following
pages – insist airlines cannot be expected to
fund the SAF transition, amid an urgent need
for governments to incentivise producers to
build sustainable fuel plants.
“Governments have to realise that it can’t
be done by the airline industry on its own,”
Walsh says. “It’s going to require everybody to
support it and it will require the right policy
IATA
decisions to ensure that we get sufficient sup-

The IATA chief cited the potential impact of higher fuel costs in a low-margin industry ply of sustainable fuels at the right price.” ■

Air France chief outlines €1bn cost challenge from fuel prices
Air France would face an annual cost increase
of around €1 billion ($1.05 billion) if it were to
reach 10% sustainable aviation fuel (SAF) use- “We need SAF from
age by 2030 at today’s prices, according to the
carrier’s chief executive Anne Rigail.
biomass, but we all
Speaking on a panel during the IATA World know it won’t be
Sustainability Symposium, Rigail explained
that cost is the biggest challenge faced by Air sufficient by 2030”
France in relation to sustainable fuel, in a re- Anne Rigail
gion where public, corporate and governmen- Chief executive, Air France
tal pressure on airlines to address their envi-
ronmental footprints is perhaps greatest, but
SAF production lags that seen in the USA.
“At the moment we put a bit more than 1% of
SAF in our aircraft departing Europe [and] the
cost is €100 million for Air France,” she states.
“We want to be credible on our targets –
10% SAF useage by 2030 – [but] if there is not a
big investment incentive [for fuel producers], it
will be more than €1 billion on our cost.”
Putting that extra cost into context, group-
Air France-KLM
level data shows that Air France-KLM’s total
fuel bill in the second quarter of 2019 was
€1.66 billion.
In the notoriously low-margin airline indus-
try, the question facing Rigail and airline exec- significant contribution to contrail-reduction. Corporate customers are also becoming
utives around the world is: “So how does that “More and more, there is this question of ‘is more discerning, Rigail says, as they adopt
fit with the business model?” the airline industry only 3%’ [of global emis- science-based targets (SBTs).
To address the cost challenge, Rigail sug- sions] or, as there is discussion in France, is it “The only offer we can bring them compli-
gests that Europe’s SAF mandates must be al- 6-9% because of contrails?” she says. ant with SBT is a SAF contract,” she says.
lied with incentives for fuel producers to devel- “The beauty of power-to-liquid fuels is that Concern about addressing Air France’s envi-
op production facilities in the region, thereby they should prevent most of the contrails, ronmental footprint further extends to the
increasing the availability of local SAF and because that is becoming the next challenge SkyTeam carrier’s pilots, who are “very keen” on
bringing prices down. As things stand, the in- for us.” exploring “greener ops”, Rigail says.
centives offered to US fuel producers, partly Such factors only make SAF more critical to Sustainability measures that do not bring
through the Inflation Reduction Act, are being the net-zero effort, Rigail explains, especially blockbuster emissions reductions – be they
reflected in vast regional pricing disparity. given that when it comes to long-haul flights, “eco-piloting” or the long-desired improve-
“The SAF we buy on a voluntarily basis is pro- ”we know that there will be no electric aircraft ments to Europe’s ATC network – can still deliver
duced in the US, because it’s €2,000 per tonne or hydrogen aircraft in the 50 years to come”. outsized financial business benefits, she insists.
and in France it’s €5,000 per tonne,” Rigail says. Adding to the pressure on Air France, em- “Each percentage that we gain will be 1%
“So we definitely need some incentives, like ployees and the wider general public in its less SAF to buy – so in terms of cost it’s huge”,
the ones we see in the US.” home country have notably strong views and Rigail notes.
Rigail notes that she is keen to avoid the high expectations on sustainability. Broadly, In contrast, carbon offsetting has fallen off
“totally stupid” situation where European they expect businesses to take timely actions the public agenda in France.
carriers are forced to carry SAF “in a boat” that directly reduce their environmental impact. “There is a regulation in France to offset all
from the USA to meet mandates. And they expect shorter-term targets on the of the emissions on point-to-point domestic
A key part of the SAF production ramp-up, road to achieving net-zero emissions in 2050. flights,” she says. “But we never talk about it.
Rigail suggests, should be the diversification Why? Because we get a lot of backlash from
of feedstocks. NEXT GENERATION the public opinion because everyone is saying
“We need SAF from biomass, but we all For Air France, ramping up SAF useage, accel- ’okay, you are planting trees, but look at the
know it won’t be sufficient by 2030,” she says. erating investments in new aircraft – currently [wild]fires, it’s useless, you should put less CO2
“We need eFuel, [which] at the moment is a running at about €1 billion a year, Rigail says – into the air’.”
lot more costly.” and implementing operational improvements Still, Rigail is happy to state her belief that
The power-to-liquid facilities that produce have therefore become the three key levers for Air France can achieve its net-zero targets.
eFuels take “five to seven years” to build, she delivering emissions reductions in the required “For sure, in the short term, it will be costly
says, “so it’s now that we need to take the timescales. Rigail estimates that the arrival of for the airlines,” she says of the net-zero jour-
decision [and have] the incentive [in place] for new-generation aircraft will contribute about ney, bringing the inevitable risk of air travel be-
the energy suppliers, so that they take the 50% to Air France’s carbon reduction effort by coming more expensive. But she adds: “I am
right decisions”. 2030, for example, with the majority of the rest quite confident that we see only the difficult
Rigail says eFuels are particularly important coming from SAF. The latter then takes a bigger parts at the moment… [And] I am quite confi-
because evidence suggests they could make a role heading towards 2050. dent that it will happen.”
❯❯

SUSTAINABILITY SAF
Healy says airlines

cannot foot able to get us where we need to go,” he says.
the bill That is why, in common with many of his
peers, Healy views power-to-liquid SAF as a
compelling and important proposition.
“I was at the New York Climate Week a few
weeks ago… and one of the key takeout mes-
sages was how we are tending to underesti-
mate the exponential nature of technological
change,” he recalls.
“When you look at the opportunities of pow-
er-to-liquid… as it matures and the costs come
down for green hydrogen based on the vast
amounts of renewable energy that we are now
seeing installed… combined with lower elec-
trolysis costs, combined with lower carbon-cap-
ture costs… it’s perfectly plausible that you will
see the removal of [SAF bottlenecks caused by
IATA
limited biomass availability] early in the 2030s,
which could lead to exponential growth.”
Cathay chair believes China SAF policy Cathay’s signing of a memorandum of under-
standing with the state power investment com-
is key to righting ‘pretty dire’ outlook pany is all about the airline being able to “help
those suppliers” of future power-to-liquid SAF to
The chairman of Cathay Pacific believes China “They have a number of experts from various understand the potential opportunity, he states.
will eventually release a sustainable aviation fuel parts of the industry working together and eval- Still, the huge investment required to devel-
(SAF) policy that will provide a much-needed cat- uating different approaches,” he says of the op the SAF industry is not something airlines
alyst for investment in the nascent sector amid a Chinese government. should be paying for, he adds.
“pretty dire” outlook for availability today. “I imagine that [China’s SAF policy] will
Speaking during IATA’s World Sustainability include an element of mandates, but it will also COST SHARING
Symposium, Patrick Healy acknowledged that include the sort of stimulation for investment in “The investment that’s required industry-wide
like other regions around the world, “Asia is production which is so necessary for everyone between now and 2050 is enormous; I think the
well behind the USA” in terms of SAF produc- to achieve our goals and… that will be then a last number I saw was $3 trillion… something
tion, but that he is confident China will release a major catalyst in that region.” like 5,000 SAF plants by 2050.
SAF policy that starts to redress the balance. Furthermore, his hope is that while the pro- “So these are eyewatering sums of money.
“What is most important for our medium- duction outlook does not match net-zero tar- And one thing I can say for sure is you’re not
term [net-zero] goals is China’s policy; obviously gets today, the situation could change rapidly going to find that with the airlines.
China has yet to release a SAF policy but I’m for the better. “You look at our balance sheet… it’s com-
very confident that it will,” he states. pletely out of the question.”
Before China makes its move, however, “The policies that exist Moreover, Healy says he finds it “odd” that
Healy acknowledges that the current outlook people think airlines should foot the bill.
for SAF production in Asia is poor. globally at the moment are “It’s an entire infrastructure that needs to col-
“Short to medium term the situation looks laborate from governments, to OEMs, to finan-
pretty dire, to be frank – the numbers don’t ap- not structured in a way which cial investors, to fuel suppliers, etc,” he says.
pear to add up,” he states. “There’s going to be “And of course, we have a role to play, the
a shortfall, everyone’s going to be struggling to
allows rational investment” most important of which is to give very clear
get the SAF to meet those medium-term com- Patrick Healy demand signals through our commitments and
mitments – you can already see that’s unavoida- Chairman, Cathay Pacific through our willingness to pay the premium
ble because of the time it takes to build new that’s required.”
SAF plants. While SAF will make the biggest difference to
“The policies that exist globally at the mo- He points to the “exponential curves” that the airline industry’s environmental footprint by
ment are not structured in a way which allows can develop when new technologies or indus- 2050, there are also some “lower hanging fruits”
rational investment. And that’s the challenge tries achieve critical mass. for Cathay to reach for, Healy acknowledges.
which needs to be met. Power-to-liquid SAF production is a potential “There is no path to net zero for any airline,
“But that doesn’t mean we are doomed,” process that could contribute to exponential certainly not for us, without offsets,” Healy says.
he adds. growth, he suggests. And that is fortunate, be- He also points to the investment in newer, more
For starters, an advantage of being a later cause Healy’s view is that biomass-based SAF efficient aircraft as making a significant differ-
mover on policy, Healy notes, is that China can has its limits in terms of production potential. ence to the net-zero roadmap.
learn from experiences elsewhere, including That supply gap is potentially exacerbated “The issue is, even adding all of that up and
the “carrot”-focused policies in the USA, which by the competition for biomass feedstocks that comparing it to where we need to get to by
are seen to encourage production of SAF, and airlines face. 2050, industry-wide, SAF will still be at least
“stick”-focused policies in Europe, where “The feedstocks for the HEFA pathway are 65% of the solution,” he says.
airlines face SAF mandates alongside what likely to be limited – they are likely to be broader “The real effort, the real emphasis, the real
some see as a lack of producer incentives. than they are today… but still, it’s unlikely to be focus has to remain on SAF.”

LATAM chief highlights stark lack of progress in Latin region
LATAM Airlines Group chief executive At the same time, “we need to think “A [SAF] plant takes four or five years to
Roberto Alvo has warned that Latin about how to bring in South America and build,” Alvo says. “Today in Chile, just
America is making no progress on the Latin America into this conversation at the getting the permits for a billion dollar
development of a sustainable aviation fuel pace that we can take”, Alvo says, adding investment will take an additional four or
(SAF) industry, putting at risk airlines’ that policy approaches in other geographies five years.
ability to meet net-zero targets. – such as Europe’s SAF mandates – would
Speaking at the IATA World Sustainabil- not work in the region. GREAT OPPORTUNITY
ity Symposium, Alvo concurred with peers He explains that Latin American carriers “So we’re 10 years away from seeing the
that SAF is critical to the industry’s net- are often operating in “poorer countries” first crop of SAF being produced in Chile if
zero ambitions and that “today is not the with lower yields and geographies where we started today, and people are not
time to think that this won’t happen”. customers do not have the option to starting today because they don’t have a
But the situation in Latin America is consider alternative forms of transport. clear path on which to think about the
stark, Alvo explains, with decisions of investment.”
SAF production essentially That is frustrating, Alvo
non-existent, leaving the suggests, because “the feed-
region “one step behind”. stock is there, the technol-
“Today there is not a sin- ogy is there and the people
gle drop of SAF being pro- are there”.
duced in South America,” Furthermore, the crea-
he says. tion of a SAF industry “is
LATAM Airlines has set also a great opportunity for
its own target of 5% SAF economic development in
usage by 2023, but this is the region”, he says.
“not because we know “But we need the right
where this is going to come framework”.
from – it’s just because we Alvo also says that the
need to make sure that we industry and policymakers
can start this conversa- need to keep an open mind
tion”, Alvo says, adding on other measures in
that he does not think the the net-zero journey, with
airline “has the luxury” of SAF not being a “silver
failing to do so. bullet”.
“We needed a sign of Acknowledging that car-
demand, as the largest air- bon offsetting has down-
line group in the region,” sides, he explains that
he states. LATAM is instead directly
That sign has so far been investing in projects,
met with no response, and including one that protects
Alvo is reluctant to con- “0.5% of the surface of
sider the imposition of for- Colombia”.
mal mandates by govern- “Those wetlands capture
ments and regulators until tonnes of carbon per hec-
that changes. tare,” Alvo says.
“Unfortunately, at this Such work is important,
point in time we have no he insists, because SAF and
set of public policies to other efforts will still leave
Alvo says policies
incentivise producers to the airline sector with
need to change
IATA
start thinking about SAF,” residual emissions that will

he states. “Today, I don’t need to be accounted for.
have any confidence that we will get even It is important, therefore, that policy “We are not going to get to net-zero if we
close to 5% [by 2030] with the current set of solutions on SAF do not “kill the industry do not either sink carbon by industrial
policies that we have.” altogether” by bringing about extra costs means or sink carbon by natural means,”
that airlines and the travelling public he states.
CLARITY NEEDED cannot afford. Whatever the means, Alvo is clear that
In common with peers elsewhere around “We need to develop the industry in a airlines can only do so much on their own.
the world, he suggests that “clarity and sustainable way,” Alvo says, noting that if “I’m willing to be confident [about
certainty of investment” are crucial if fuel LATAM Airlines Group were to cover all of net-zero targets], as long as all the stake-
producers are to build SAF plants, arguing its fuel useage with SAF today, the cost holders face the same path and do this in
that it is important for policymakers to would exceed all of its revenue. the same direction, because this is not
clarify the conditions under which the fuel He further provides a reality-check on something we are going to solve by our-
can be produced. the timescales involved. selves,” he concludes.

CARGO OVERVIEW
REPORT
LEWIS HARPER
BRUSSELS
Liege airport
Battered –
but not beaten
Air freight’s journey back to ‘normality’ has disabused it of notions that pandemic impacts
might become structural. Now the question is when demand might regain momentum
L
ess than two years ago the air cargo At the same time, airline belly capacity has Company consultant Soufiane Daher during a
sector was still enjoying its Covid-era returned with a vengeance, wiping out the panel discussion at the International Air
high, with executives keen to embrace positive impact on freighter operators in par- Cargo Association’s (TIACA’s) executive
the chance to leverage its elevated ticular from a capacity deficit at the height of summit in Brussels in early November.
status against the struggling passenger side the pandemic. So, where does that leave the air freight
of the industry. And while rising yields on the passenger sector today?
Might this be the moment to secure invest- side of the business have been offsetting some “Throughout the pandemic, there was a
ment in fleet expansion and much-needed of the higher costs experienced by businesses surge of enthusiasm within our industry as
digitalisation projects, while permanently globally in 2023, falling yields on the cargo cargo and logistics gained prominence,” said
taking a seat closer to the ultimate decision- side have created the opposite dynamic. the chairman of TIACA, Steven Polmans, in
makers in boardrooms worldwide? his opening address to the Brussels summit.
If the answer was ‘yes’ 18 months ago, GEOPOLITICAL TENSIONS “However, I have cautioned on multiple
things feel very different in the sector as Moreover, the global economy – the strength occasions that this new-found recognition
2023 comes to a close. of which tends to dictate air cargo’s fortunes should not be taken for granted.”
In the interim period, the shipping industry more than anything else – is going through a Polmans laments the fact that following air
– which tends to account for around 97% of tough patch, exacerbated by the ratcheting up cargo’s “opportunity to shine”, many players
global freight tonnage, versus air cargo’s 3%, of geopolitical tensions around the world. “have let it slip away”.
according to Xeneta data – has regained much “We’re in a period where inventories are “The world swiftly returned to its usual
of the reliability and cost advantage over air very high, so there’s less of a demand for air rhythm,” he states. “While some or perhaps
freight that it lost during the pandemic. freight, relatively speaking,” said McKinsey & many in our industry continue to cherish the

memories of those exhilarating days, the time
to wake up from this dream has passed and “Demand is the result of global
the momentum has faded.
“But the challenges and work before us economic activity, but when it
have not.”
Indeed, his comments came against a back- comes to capacity, most of it
drop of a largely consistent fall in cargo yields
since Covid-era highs, with demand in ton-
comes from passenger
nage terms on course to be around 4% down transportation, which is a
year on year for full-year 2023 and below
2019 levels, according to TIACA projections, totally different industry”
on rising capacity and therefore deteriorating Turhan Ozen
load factors. Chief cargo officer, Turkish Airlines
DEVELOPING NARRATIVE
Data from air cargo specialist WorldACD
shows how the narrative has developed over
the past four years. When indexed to
pre-Covid levels, air cargo rates that peaked at
Turkish Airlines
around 225 (first-quarter 2019 = 100) in the
first half of 2021 were down at around 125-
130 in October this year.
And while those yields remain above 2019 Indeed, speakers at TIACA’s summit agreed Speaking on the same panel, Brussels Air-
levels, so do costs – whether relating to hard- that 2023 has largely been a year to forget for ports’ director of cargo Geet Aerts acknowl-
to-find skilled personnel or fuel prices. Nota- the sector, exposing its age-old challenges edges that “I think we all had our hopes up”
bly, the latter tend to make up a bigger pro- around the supply-demand balance and vul- for 2023 but were left disappointed.
portion of air cargo costs than on the nerabilities to outside factors. UPS’s air freight director for the Europe
passenger side of the business. “Demand is the result of global economic region Marco Tafuro meanwhile describes
It is also acknowledged by many air cargo activity, but when it comes to capacity, most 2023 as a “challenging year” in which a
operators that, unlike on the passenger side of of it comes from passenger transportation, “shift from air cargo to other modes of
the business, the 2019 demand baseline that which is a totally different industry,” points transport put additional pressure on the vol-
is being missed in 2023 was not a particularly out Turhan Ozen, chief cargo officer at Turk- ume of the industry”.
strong one, given the impact of trade tensions ish Airlines, during a panel debate.
between the USA and China during that year. “Therefore, we end up with a 12% decrease REALITY CHECK
No wonder Bernstein analysts characterise in chargeable weight but having the rates go TIACA’s Polmans says the sector is ultimately
air cargo as being “battered by post-pandemic down by 35% because the capacity is even experiencing a rendezvous with reality.
normalisation”, forcing it to spend recent quar- higher than the 2019 levels, because of belly “This year air cargo is expected to witness a
ters “cutting capacity to support margins.. capacity,” he says of the carrier’s experience. 4% drop in volume, with yields declining
even further,” he states. “We must not look
away from this reality: returning to the vol-
umes of 2019 is still some time away and
enjoying the yields of recent years is very
unlikely in the near future.”
Despite the clear challenges, however,
might 2023 be ending on a slightly more posi-
tive note, boding well for next year?
Some indicators certainly suggest so, even
if enthusiasm among air cargo executives
regarding the demand outlook for the next six
months or so is hard to come by.
IATA data for October shows that global
demand measured in cargo tonne kilometres
(CTKs) was up by 3.8% compared with Octo-
ber 2022 – a third consecutive month when
eric1207cvb/Shutterstock
freight demand has increased year-on-year

after an inauspicious few months leading up
to that point.
“Recovering demand, slightly stronger
Demand softness has occurred alongside the return of belly capacity around the world yields and the uptick in trade are all good ❯❯

CARGO OVERVIEW
❯❯ news,” says IATA director general demand indicators at the end of a year tend to reduces the reliability, which makes shippers
Willie Walsh. be followed by even better figures at the start a little bit worried.”
Other stakeholders also note that air freight of the next. Van de Wouw’s view is that, historically,
rates had ticked up slightly heading into the There are also some indications that ship- the reliability of shipping is inexorably linked
final quarter, but it was unclear whether that ping’s improved reliability might be chal- to decisions on whether to use shipping or air
was simply because operators were charging lenged in the coming months, potentially freight to transport goods – having far more
more to offset higher fuel costs. benefiting air cargo. influence than factors such as the environ-
Still, projections from air cargo data pro- “Interestingly enough, we have seen [ship- mental impact of different transport modes
vider WorldACD showed demand was ping reliability] go down a little bit,” said and price.
expected to increase by 1% in the final quar- Xeneta chief airfreight officer Niall van de At the same time, there has been some tenta-
ter of the year (comprising -1% October, +1% Wouw during a presentation at the TIACA tively better news about the global economy in
in November and +2% in December). event. “They say there is a bloodbath in rates the fourth quarter – particularly in the USA.
WorldACD further cites trends between on the ocean side which means more blank According to Jens Tubbesing, chief execu-
2010 and 2019, which suggest positive sailings, they cancel the vessels, which tive of US-based cargo sales specialist Airline
Limited demand for outsize cargo spells end of the line for nose-loading types
Low airline appetite for nose-loading freighters next-generation aircraft… as an airline we do sessments offered by Berthonneau and Theis,
means the Boeing 747-8F is currently on course not really want it. he states: “And that’s the type of message
to be the capability’s swansong in terms of “The value of it does not really justify [the that we received.
purpose-built commercial aircraft, despite it cost], so from an airline point of view, we are “Some airlines, it’s more important, but over-
featuring on around 250 in-service airframes not asking Boeing or Airbus to develop this all it’s a relatively small market for outsize cargo
today, according to speakers at TIACA’s kind of option.” that really requires the nose-loader,” he adds.
Executive Summit in Brussels. Lufthansa Cargo’s director of sales and han- With Boeing’s incoming 777-8F having no
During a panel discussion, Boeing’s regional dling Georg Theis concurs with Berthonneau’s nose-loading capability, Airbus focused on
director of marketing Tom Hoang said the ca- assessment. “The door is pretty large on the bringing its A350F into service – having never
pability would be available to airlines for some 777, so it comes down to the 1% to 2%,” he offered a nose-loading capability on its com-
time yet, given the service life left in 747 pro- says of the market Lufthansa is missing out on mercial aircraft – the only Antonov An-225
duction freighters, but added: “We do not by not operating 747 production freighters. destroyed in the Russia-Ukraine war and 22
have any plans to have a nose-loader on any Theis acknowledges that some airlines An-124s left in service with an average age of
new airframes at this point.” might think differently – “I know there are 32 years, according to Cirium data, Hoang
Among airlines that offer freight services, the friends in the Benelux that prefer those air- emphasises that the capability nevertheless has
vast majority simply do not see the capability as craft,” he says, in reference to 747 operator at least two decades to run, based on existing
critical, Hoang explains, which makes its inclu- Cargolux – but Boeing’s Hoang confirms that Boeing airframes.
sion uneconomical. demand for nose-loading capabilities was not “When we look the 747-400 production air-
Indeed, speaking on the same panel, Qatar strong enough to justify its inclusion in the next craft with the nose-loader, there are about 140
Airways’ vice-president of cargo network plan- generation of freighters. still in service,” he says. “Average age is about
ning and strategic partnerships, Elodie Ber- “When we designed the 777-8F, that was 20 years old, so we’re looking at still 10 more
thonneau, says: “If we look at the nose-loading one of the questions that we asked the work- years left for the 400 nose-loader.
type of cargo that we have, it represents only ing [group]: how important is the nose-loader “The 747-8F, we delivered about 107 exam-
1% to 2% of the cargo we carry, so the justifica- to you and what percentage of it is being ples… the average age of that is about seven
tion of having a nose-loading capability for the used?” Hoang recalls. In reference to the as- years, so you’re looking at 20 more years of life
for the 747-8F,” Hoang continues.
Qatar Airways says the capability is “And so we think that there’s still going to be
not a priority on future freighters a significant number of 747s that will be in ser-
vice to carry such cargo for the next 20 years.”
A decision by Airbus suggests the outsize
cargo requirements from the airframers them-
selves could offer a path to limited nose-load-
ing capacity entering the market, even if no
new-build commercial offers are forthcoming.
Last year the airframer set up a new com-
mercial outsize transport service intended to
Matheus Obst/Shutterstock
capitalise on the remaining flying life of its

A300-600ST Beluga fleet, which it has been
phasing out of its internal logistics operations
as it brings A330-700L BelugaXLs into service.

Network Services, “the last couple of months
of 2023 will end on a quite positive note”.
He cites factors including high consumer
spending, falling inflation, plateauing interest
rates and a stabilising housing market as posi-
tive signs for the air cargo industry.
McKinsey’s Daher also describes the air
cargo outlook as “challenging” but notes
“pockets of opportunity”, particularly in the
Tada Images Shutterstock
USA. “There’s some positive momentum

there… I think it’s one of the very few markets
that has seen an upgrade in the economic fore-
casts,” Daher says of the US market.
“US consumers are sitting on about at Ecommerce demand is an opportunity for long-term growth in the air freight sector
about $1 trillion of savings that are still avail-
able, so they’re less impacted by the increase “Europe is probably one of the weakest growth “towards the end of 2024”.
of interest rates. regions right now in terms of economic Tafuro adds, however: “Unfortunately we
“That’s positive towards Q4 this year; that growth,” he states. “There’s been a contrac- were positive at the beginning of this year
potentially US consumers will start consum- tion in production.” with a bit of improvement in second half that
ing even more.” There are, he adds, “early signs of improve- didn’t materialise.”
ment” out of Germany, for example, where Brussels Airports’ Aerts says that with geo-
BRIGHT SPOT export orders are coming back, hinting at the political tensions rising – most recently in the
Ecommerce continues to be a small but signfi- potential for data to improve. Middle East – he is reluctant to predict any-
cant bright spot for the air freight sector when In Asia, Daher also notes some signs of thing but “neutrality” in 2024 when it comes
it comes to structural growth prospects. improvement in economic fortunes following to demand growth.
“I think business growth without ecom- the “severe real estate crisis” in China. “I think we’re pushing it one year further,”
merce wouldn’t be there,” says Tubbesing. he says of demand growth prospects for 2024.
“And I think the trend is here to stay.” “That’s my guesstimate – at best, remain a lit-
He cites China outbound demand on trans-
“Europe is one of the weakest tle bit flat, maybe a little bit up but that’s my
pacific routes as particularly strong for ecom- regions right now in terms of hope speaking.”
merce – to North and Latin America. He does suggest, however, that a positive
Running counter to the positive indicators, economic growth. There’s been end to the year for the US economy might be
however, IATA data shows that amid that an indicator that things could improve more
small increase in year-on-year demand in
a contraction in production” quickly than currently expected.
October, capacity was up 13.1% on the same Soufiane Daher Hong Kong Air Cargo Terminals chief exec-
basis, largely the reflecting the return of belly Consultant, McKinsey & Company utive Wilson Kwong, also speaking at the
capacity over the past year. TIACA event, meanwhile predicts “a lot of
That means load factors are trailing pre- volatility, judging by all the events which are
Covid levels by a few points. With such a mixed outlook and risks happening right now”.
IATA also acknowledges that the uptick in weighed to the downside, most air cargo play- “But I think next year we’ll see a small
air cargo demand fortunes does not necessar- ers are cautious about expectations for 2024 – growth compared to this year,” he says of the
ily reflect a vastly improved outlook for global certainly the first half of the year, anyway. demand picture.
trade. Walsh argues that this shows the “I’m optimistic that by the latest Q4 next
“strength of air cargo’s value proposition” in year, demand is going to start to pick up,” WEAK SENTIMENT
the current economic environment, but it is says Turkish Airlines’ Ozen. The geopolitical situation weighs heavy on
difficult to ignore the fact that the sector is “Of course, geopolitical challenges, risks, the sentiment at Challenge Group, however.
beholden to outside factors by its very nature. wars or possible threat of wars, any kind of “In 2024 in terms of the global economy
With that in mind, the Purchasing Manag- conflict can jeopardise this,” he adds. and all the geopolitical situations,
ers Index (PMI) and the new export orders Still, Ozen’s hope is that with European unfortunately it will not change and hope-
PMI both remained in negative territory in and US governments able to focus more on fully it will not escalate more, but the signs
October, IATA notes, suggesting an annual growth than dealing with high inflation in the are not that good,” says the air cargo group’s
decline in global manufacturing. coming months, “air cargo will be the first to managing director Yossi Shoukroun, also
While global cross-border trade stablised in react very, very positively”, he says. speaking in Brussels.
September, it was still 5% down on 2019, UPS’s Tafuro says he has “a similar view” “On top of that, an impact will be that the
IATA adds. to Ozen’s. cost of fuel will increase,” he says.
And while McKinsey’s Daher was positive “For sure we expect some of the chal- Air cargo’s moment in the sun may have
about the US outlook, he notes that other lenges to continue, at least for the first half of passed, but navigating tricky market condi-
regions are only showing tentative signs of 2024, but we want to remain positive,” he tions means few executives are finding time
economic improvement. states, citing expectations of some demand to dwell on any missed opportunities. ■

ANALYSIS MARKET OUTLOOK
Why ‘follow the money’ seems apt

Strong financials in 2023 should not have been a surprise – and a return to normality in 2024 should not be either
CHRIS TARRY should be focused on what is good

CTAIRA for the business. For example, we
wait to see, and indeed it will take
some time to see, the benefits that
Air France-KLM’s management
perceives will emerge from its
minority stake in SAS.
As we have regularly noted, the
A t this time of year there is an

inevitable period of reflec-
tion on what has passed, but
outcome of any business is of
course determined by large
numbers often moving in different
also, and perhaps more impor- directions, many of which are
Supavadee butradee/Shutterstock
tantly, a look ahead to the next determined by external factors,
12 months given that budgets and here we are still some way
were, or should have been, from what economists might
signed off some months ago. describe as steady-state condi-
Taking each of these in order, tions. As ever, generalisations are
notwithstanding the record profits dangerous and there is a need to
reported by many airlines, recent As ever, labour costs will be an important factor in the next year consider each at a regional and
financial results should not have company level.
been surprising. They have why, and how will management and Air France-KLM was down We suggested earlier that we
occurred against a backdrop of use this additional strength? In 4% over the period under review would highlight the key factors or
pent-up demand and constrained simple terms, which airlines will and some 35% from its March catalysts for change for the next 12
supply, but where structural costs be the winners, which will be peak. On the other hand, Ryanair months. Inevitably these are
on the supply side have already broadly unchanged and which was up 44% since January and almost depressingly familiar,
risen and continue to do so, mean- will be the losers? touching new peaks. where most lie outside the control
ing economics are resetting Moving to Asia, Singapore Air- of managements and inevitably
unfavourably for managements STOCK ANSWERS lines was up 17% since the start include: GDP growth at each end
and the business owners. While not perfect, it is helpful to of the year but 21% lower than its of the route; capacity and market
‘Building back better’ for some review the share price perfor- June peak; the figures for Cathay share; labour costs; fuel prices;
has shown through as a belated mances of a number of airlines, Pacific were 6% lower over the geopolitical events; and issues at
refocusing of networks, with the particularly over the last year. It is extended period and 11% lower aircraft and engine manufacturers.
eminently predictable conse- important to remember that share than its August peak; for China While those who think that
quences on financial perfor- prices “look forward” and while Eastern its shares were down the industry may be about to
mance – which at times have flat- there is a debate about how perfect 25% over the period and also enter a new post-Covid “golden
tered managements. What we the future information is – and from the peak. age” will be disappointed and
have seen and will continue to where it is also important to recog- will need to adjust their
see is a very clear manifestation nise the impact of both sector and Those who think the thoughts, there is no doubt that
of how economics apply to the company sentiment – it is possible for some airlines there is still
airline industry at both a macro to see whether the share price industry may be about very considerable opportunity
and micro or company level – trend is indeed a friend or not. and upside. As with anything in
despite the misplaced belief in At the time of writing (early to enter a new post- life, not everyone can be a
some quarters that they do not. December 2023), Delta Air Lines’ winner, but in what is a cash-
As regular readers will recall, share price was up 15% com-
Covid ”golden age” intensive industry you can do
we, and they, should have little pared with the start of 2023 but will be disappointed worse than following the money,
interest in what is going on at an was 22% down on its July peak. while at the same time recognis-
industry level and be very wary of Elsewhere, United Airlines was ing that not all money is neces-
generalisations. While some events up 7% on its value at the start of sarily “smart”.
may have an effect across part or all January but 29% lower than its ANA’s shares were up 11% For many airlines the post-
of the industry, the actual impacts July peak, while American was since the start of 2023 but 12% Covid environment will be
are company-specific and often up 4% over the same period but below its peak in June. Moving remarkably similar to the pre-
depend on actions taken in the down 30% from its July peak. further south and east, Qantas pandemic environment, where
past by managements. On the other side of the Atlan- shares were 10% lower and 21% the challenge is to do better than
Taking this further, the key tic, while Lufthansa was some below its recent high in June. in the previous year by either
questions to consider are which 4% higher since January it was Of course, managements making more money or losing
airlines have emerged from the 21% below its March 2023 peak; should not have an unhealthy pre- less money. In this respect, 2024
pandemic recovery in a IAG was up 21% but 10% lower occupation with share prices, and will be the year when business
structurally stronger position, and than its peak in February 2023; strategy and its implementation returns to normal. ■

ANALYSIS VIEWPOINT
Who will acquire TAP Air Portugal?

The Portuguese flag carrier’s change of ownership could have a significant impact on European market dynamics
SHAKEEL ADAM addition to Vueling’s strong posi-

AVIADO TAP is an important
tion. It will be a long shot for IAG
PARTNERS link between Europe
to gain approval with TAP, before
and South America
even considering IAG’s relation-
ship with American Airlines and
its South America network.
Before concessions, adding TAP
would strengthen the Oneworld
T here are numerous challenges

to airline consolidation in
share on South America flows
above 30%, while weakening Star
Alexandre Rotenberg/Shutterstock
Europe, including the complexity Alliance significantly.
of European travel markets, na- The Commission has indicated
tional interests, legacy legal it will be more stringent on regu-
frameworks on a national and lating mergers, starting with the
European level, and the challeng- Air Europa, ITA and SAS transac-
ing balancing act for the Europe- tions. Additionally, the Commis-
an Commission between ensur- sion may prefer Air France-KLM
ing healthy competition and a America, TAP operates only 16% change, but TAP would likely to IAG because of the bloc’s strat-
desire to support the creation of fewer flights than Iberia and 15% join the Star Alliance JV, increas- egy to support European “global
“global industrial champions”. more flights than Swiss; and ing its North American capacity champions”, potentially prefer-
Ryanair, EasyJet and Wizz Air between Europe and South leadership to 30.3% – potentially ring a Franco-Dutch group over a
have achieved a pan-European America, TAP operates 31% attracting the attention of regula- British-Spanish one.
presence. However, there remains more flights than British Air- tors on both sides of the Atlantic. With both ITA and Air Europa
no full-service pan-European airways, three times as many flights An acquisition by IAG or Air exiting SkyTeam, the alliance is
line. The hub-and-spoke network as Lufthansa and just 1% fewer France-KLM would marginally left without a Southern European
is critical because few bases in flights than Air Europa. increase the respective JV’s mar- carrier. An Air France-KLM acqui-
Europe can sustain significant ket shares on North America ser- sition of TAP brings more balance
long-haul local demand. The pandemic provided vices and reduce the Star Alli- within Europe as well as to North
The solution – for consolida- ance JVs leadership gap. America, but significantly weak-
tion in the large carrier segment – opportunities to The market between Europe ens the Star Alliance position on
has been to acquire national car- and South America is very differ- Europe-South America and takes
riers while maintaining separate acquire smaller players ent. Airlines compete without SkyTeam above 30% market
operations. anti-trust immunity joint ven- share, potentially triggering sig-
The global pandemic provided
at bargain prices tures – with the three big alli- nificant Commission concessions.
opportunities to acquire smaller ances accounting for 73% of Lufthansa Group’s acquisition
players at bargain prices with Air ASKs and 71% of seats. When of ITA strengthens its own, and
Europa, ITA Airways and SAS on The carrier ranks fourth among Air Europa and ITA change alli- the Star Alliance, position across
the road to finding new owners independent airlines on the ances, SkyTeam loses 11% ASKs, southern Europe. But Lufthansa
(pending regulatory approval). North Atlantic (first on Europe to seats and flights, Star Alliance acquiring two Southern European
South America), and is the largest gains 2.2% in ASKs, and One- carriers, while weakening another
VITAL LINK which could be acquired by a world gains almost 9% capacity European “global champion” (Air
TAP Air Portugal is next. European airline – foreign owner- to reach 27% of ASKs. France-KLM), is likely to face
TAP is critically important ship rules limit access to Air TAP is a significant player resistance from the Commission.
across Southern Europe, between Transat and Turkish Airlines, and between Europe and South Amer- The call for “maximum trans-
Europe and South America, and Icelandair is not up for sale. ica, (9% flights, 8% seats, 7% parency in the entire process"
connects Europe with key Afri- Assuming Air Europa, ITA and ASKs). Lufthansa plus TAP does from Portugal’s government, com-
can countries. The carrier ranks SAS join their new owner/inves- not change the market balance; it bined with snap elections called
12th amongst all airlines on tors’ transatlantic joint ventures, maintains Star Alliance’s third- for the spring, suggests the privati-
North and South Atlantic routes the JVs will up their share of seats place position. Air France-KLM sation process may slow down.
to/from Europe, with 3% of and ASKs between Europe and plus TAP catapults SkyTeam into This is likely good for TAP, pro-
flights and 2.5% of available seat North America from 71% to 77% the leadership market share, viding the Portuguese government
kilometres (ASKs). (on August 2023 data). while IAG plus TAP increases an opportunity to gain insights
This could suggest it does not TAP operates 1.9% of flights, Oneworld’s leadership position. from how the Commission deals
matter which airline acquires 1.5% of seats and 1.3% of ASKs With Iberia and Air Europa, with ITA and SAS. ■
TAP. However, between Europe between Europe and North IAG and Oneworld would have a
and the Americas, TAP operates America. An acquisition by strong position across Europe and Shakeel Adam is the managing
only 10% fewer flights than Lufthansa Group is a natural fit – two materially large full-service director of airline consultancy
KLM; between Europe and North alliance market shares would not carriers in Southern Europe, in Aviado Partners

ANALYSIS SUSTAINABILITY VIEWPOINT
Principles for achieving net-zero

With the industry’s licence to operate under threat, adherence to a few crucial points might make all the difference
SHASHANK 3: APPLY THE ‘POLLUTER

NIGAM PAYS’ PRINCIPLE WITH A
SIMPLIFLYING
CLEAN SKIES FUND
The widely acknowledged 'pol-
luter pays’ principle holds the
party responsible for pollution
accountable for its impacts or
prevention. In aviation, we can
hile in 1935, Imperial apply this principle through
W Airways used to take 12
days to fly from London to Aus-
two approaches.
First, by implementing carbon
tralia with multiple stops en route, taxing on airlines, we should bal-
today that journey can be done ance acknowledging aviation's
non-stop in just over 17 hours. environmental impact and ensur-
That means the benefits of ing fairness without jeopardising
mobility are now within reach for airlines' viability.
Rich Higgins/Shutterstock
more people than ever, who, Second, we should explore
Aviation’s share of
thanks to air travel, can do every- contributions from those who fly
global emissions is
thing from taking up new the most. The International
only set to rise
employment, to embracing study Council on Clean Transportation
opportunities abroad, visiting has proposed a frequent flyer
friends and family, to broadening flying is magical. It is one of the Expansion should only occur if it levy, which, if adopted industry-
their horizons by experiencing most remarkable human endeav- aligns with sustainability goals. wide, could cover a substantial
different cultures. Simply put, ours. It has made the world a Airline net-zero roadmaps 80% of decarbonisation costs.
aviation is a social, cultural and smaller place. We must preserve must encompass an overall I would like to propose
economic good. the magic of flying for future gen- reduction in the airline's carbon reframing this principle. Instead
Yet the industry faces the big- erations. How can we do that? footprint, avoiding reliance of labelling it as a ‘tax' or ‘levy',
gest threat to its future – environ- In its sustainable flight path, solely on per-passenger or per- we envision it as a 'clean skies
mental sustainability. To under- aviation must be led from within seat figures, which can be mis- fund'. This could be a small
stand the challenge, I recently by the insiders – the airlines and leading. What if every new air- surcharge on flight tickets,
interviewed Dutch climate activ- manufacturers – and innovate craft order at the next air show is akin to fuel surcharges in
ist Hiske Arts for my book and with the outsiders: the technol- also tied to equivalent amounts of response to oil price fluctua-
podcast, Sustainability In The Air. ogy firms. In writing our new SAF offtakes to compensate for tions. The funds raised would be
I asked her why activists are so book, Sustainability In The Air, the additional emissions? transparently invested in green
angry with airlines and she shared my co-author and I conducted technologies or pooled into a
a few startling statistics, which I over 300 hours of interviews with 2: COMBINE INCENTIVES sustainability fund.
have now verified as facts. top aviation and technology exec- AND MANDATES Notably, flights operated by
According to the latest projec- utives working on decarbonising Recognising the industry's finan- aircraft featuring new technolo-
tions, the number of aircraft in the industry. cial constraints, it is clear that the gies would be exempt from this
the air will rise from 29,000 today Based on all our conversations, $4 trillion decarbonisation bill charge, creating an additional
to over 42,000 in 2050. Because we have put together eight cru- cannot be solely paid by the incentive for developing greener
most of these aircraft will be cial principles that we believe the industry itself. The participation alternatives.
using today’s technology, they industry needs to follow if it of both the private sector and
will be burning fossil fuels or, at intends to reach net-zero. governments is crucial.
best, sustainable aviation fuel Incentives like the Inflation
(SAF). At the same time, other 1: TIE GROWTH TO Reduction Act in the USA should
industries, like cars, are decar- SUSTAINABILITY run in tandem with mandates
bonising faster due to the availa- While climate activists call for that drive the industry away from
bility of electric alternatives. Air- de-growth, it is not the answer. reliance on fossil fuels. This way,
planes do not have such luxury. The goal should be to ensure that we combine the "carrot" of
The result? While aviation the benefits of air travel continue incentives and the "stick" of man-
accounts for just over 2% of for future generations, reaching dates and create a powerful
global carbon emissions today, its even more people, particularly in mechanism for change. Mandates
contribution could rise to over regions where international alone make little sense if there is
22% by 2050. That is a 10-fold travel remains a novelty. no viable path to meet them.
increase. This may bring the Yet, it is important to acknowl- Hence, this balanced approach
industry's social licence to oper- edge the imperative to decouple paves the way for practical and
Activists call for de-growth
ate into question in 2050. Yet, growth from emissions. tangible progress.

4: FOCUS ON GLOBAL the tens of thousands of aircraft fly-
EQUITY, INCLUDING THE ing today. Emphasising the adop-
‘GLOBAL SOUTH’ tion of alternative fuels, such as
While much focus has been on those by Air Company, that yield
aviation decarbonisation efforts maximum life-cycle CO2 reduc-
in the so-called Global North, tion is imperative where possible.
particularly in Europe and North In the long term, our vision is
America, it is essential to recog- for electric and hydrogen-
nise that India is the world's larg- powered aircraft to be developed
est aviation growth market. and utilised to their full potential.
As a result, industry-wide As highlighted by Val Miftakhov,
decarbonisation means involving chief executive of ZeroAvia, and
a wider range of countries than is Paul Eremenko, chief executive of
United Airlines
currently the case. Universal Hydrogen, their use
One promising avenue is the ushers in a future of true zero avia-
development of SAF feedstocks United Airlines Ventures’ fund unites resources to purchase SAF tion, where there is next to no cli-
indigenous to the Global South. mate impact, steering us towards a
For instance, the United Arab inclusive and practical approach to Independent third-party verifi- more eco-friendly era of air travel.
Emirates and Etihad Airways aviation decarbonisation. cation, such as through the Science
have shown support for produc- Based Targets initiative (SBTi), THE ALTERNATIVE: THE
ing SAF from the resource- 5: ENSURE AVIATION DOES should be encouraged to ensure EROSION OF AVIATION’S
efficient Salicornia plant. NOT TAKE MORE THAN ITS accountability. Our book discusses SOCIAL LICENCE
Green hydrogen production FAIR SHARE how JetBlue Airways and KLM What happens if we don’t acceler-
also presents significant opportu- One of the environmentalists' big- adhere to the SBTi principles, offer- ate the pace of decarbonisation? If
nities, as it can be used both in gest concerns is the resource ing a model to build credibility. we fail to take decisive steps, oth-
e-fuels and as a direct aircraft fuel intensity of aviation decarbonisa- ers will take charge. Policymakers
source. Both the UAE and India tion solutions. This includes the 7: ENCOURAGE INDUSTRY will implement flight restrictions,
are actively aiming to become demand for land to cultivate fuel CO-OPERATION AND responding to public demands for
green hydrogen hubs, with India crops for SAF and the renewable KNOWLEDGE SHARING action against climate change's
targeting production of 5 million resources required for e-fuels. The SkyTeam alliance of airlines increasing impact.
metric tonnes per annum by 2030. Since aviation is just one of strongly emphasises sharing In such a future, air travel will
many industries striving for net- knowledge and fostering collabo- be perceived as a social ill, akin
zero, it must be conscious not to ration for sustainability. It has to alcohol or tobacco consump-
Expansion should only take more than its fair share. now led The Sustainable Flight tion, by segments of the public.
occur if it aligns with As a result, investments should Challenge for two years, inviting I was born in Delhi, grew up in
prioritise SAF pathways that con- its airline members to try out Singapore, and lived everywhere
sustainability goals sume less energy and resources. multiple sustainability initiatives from Kampala to Whistler to
Additionally, exploring more effi- in a friendly competition. Doha. I now live in London. I
cient approaches to green hydro- Another instance of co- have worked for most of my
Accelerating initiatives like gen development, such as utilis- operation can be seen in JetBlue career with over 100 airlines. I
these requires the support of West- ing next-generation electrolysers, and Hawaiian Airlines joining know the magic of flying. At the
ern investors and capital. The is important. the United Airlines Ventures Sus- same time, I also understand the
global nature of greenhouse gases By making thoughtful choices in tainable Flight Fund. This initia- dilemma aviation faces in balanc-
makes it evident that progress in sustainable solutions, the aviation tive allows organisations in the ing growth with sustainability,
the Global South benefits every- sector can participate in the global travel and aerospace sectors to given the industry’s increasing
one, regardless of geographical push for net zero without undue unite their resources in investing contribution to global warming.
location. Embracing these opportu- strain on valuable resources. in and purchasing SAF. My deepest desire is to pre-
nities will pave the way for a more The enormity of aviation's serve the magic of flying for
6: TRANSPARENCY, impact on climate change future generations. That can only
ACCOUNTABILITY AND demands a unified effort; no sin- be done through immediate and
TARGETS gle player can tackle it alone. By strong action on multiple fronts. I
The airline industry has been pooling resources and know- hope my new book inspires
accused of making ambitious sus- how, the industry can transcend future generations to work with
tainability claims that were either isolated islands of effort. Collec- airlines on a sustainable path or
delayed or quietly shelved. This tive power is the key to paving build companies to catalyse this
has resulted in an erosion of trust. the way for a greener and more journey. The time to act is now. ■
Airlines must prioritise practi- sustainable future for aviation.
cality and feasibility in their net- As the aviation industry grapples
zero roadmaps to regain that 8: THE EVENTUAL GOAL with mounting environmental
trust. Transparency is critical,
Sybille Reuter/Shutterstock
SHOULD BE TRUE ZERO, concerns, Shashank Nigam’s

with sustainability programmes NOT NET ZERO new book, Sustainability In The
clearly outlining how airlines In the medium term, SAF needs to Air, proposes a comprehensive
plan to achieve their goals and be the primary decarbonisation roadmap for a sustainable future
the timelines they set. solution, given that it works with www.sustainabilityintheair.com

ANALYSIS DATA
Global third-quarter results snapshot

Earnings from the northern hemisphere peak season in 2023 show most carriers continuing to record revenues
above 2019 levels, albeit with early signs of softness against 2022 as the post-Covid bounce fades. Many carriers
still have ground to make up on pre-Covid capacity – a situation exacerbated by widespread capacity constraints
Air Arabia Air Canada

2SHUDWLQJSUR¿W 1HWSUR¿W Revenue Passengers Fleet 2SHUDWLQJSUR¿W 1HWSUR¿W Revenue RPKs ASKs Fleet
(AED m) (AED m) (AED m) (m) (C$ m) (C$ m) (C$ m) (m) (m)
Q3 2019 410 471 1,438 2.58 58 Q3 2019 956 636 5,530 44,988 52,234 399
Q3 2020 -59 -44 294 0.25 57 Q3 2020 -785 -685 757 4,051 9,574 351
Q3 2021 138 209 804 0.98 58 Q3 2021 -364 -640 2,103 12,738 17,889 337
Q3 2022 340 416 1,606 2.42 68 Q3 2022 644 -508 5,322 35,595 41,138 344
Q3 2023 363 522 1,630 2.69 72 Q3 2023 1,415 1,250 6,344 40,559 45,158 354
Air China Air France-KLM

1HWSUR¿W Revenue RPKs ASKs Fleet Operating 1HWSUR¿W Revenue RPKs ASKs Fleet
(CNY m) (CNY m) (m) (m) SUR¿W ¼P ¼P ¼P (m) (m)
Q3 2019 3,623 37,764 60,780 74,075 680 Q3 2019 900 642 7,696 81,434 90,323 552
Q3 2020 -671 18,808 31,045 42,189 702 Q3 2020 -1,046 -1,464 2,524 17,621 38,109 551
Q3 2021 -3,536 19,793 25,381 37,576 734 Q3 2021 130 -192 4,567 41,378 61,924 537
Q3 2022 -8,668 18,135 20,924 31,686 752 Q3 2022 1,024 466 8,112 70,645 79,937 530
Q3 2023 4,242 45,864 64,630 85,669 899* Q3 2023 1,342 946 8,660 76,025 84,754 545
6KDQGRQJ$LUOLQHVÀHHWRIDURXQGDLUFUDIWFRQVROLGDWHGLQWRJURXSÀHHWGXULQJ+
Alaska Airlines American Airlines

2SHUDWLQJSUR¿W 1HWSUR¿W Revenue RPKs ASKs Fleet 2SHUDWLQJSUR¿W 1HWSUR¿W Revenue RPKs ASKs Fleet
($ m) ($ m) ($ m) (m) (m) ($ m) ($ m) ($ m) (m) (m)
Q3 2019 422 322 2,389 24,182 28,194 332 Q3 2019 808 425 11,911 104,405 122,020 1,552
Q3 2020 -571 -431 701 6,143 12,667 311 Q3 2020 -2,871 -2,399 3,173 29,162 49,516 1,381
Q3 2021 258 194 1,953 18,656 23,221 304 Q3 2021 595 169 8,969 77,360 98,349 1,414
Q3 2022 62 40 2,828 22,761 26,311 326 Q3 2022 930 483 13,462 94,145 110,348 1,461
Q3 2023 211 139 2,839 25,296 29,905 303 Q3 2023 -223 -545 13,482 99,073 117,941 1,499
$1$ ¿VFDO4 &HEX3DFL¿F

2SHUDWLQJSUR¿W 1HWSUR¿W Revenue RPKs ASKs Fleet 2SHUDWLQJSUR¿W 1HWSUR¿W Revenue Passengers ASKs Fleet
(yen bn) (yen bn) (yen bn) (m) (m) (EBIT, PHP m) (PHP m) (PHP m) (m) (m)
Q3 2019 63 45 555 27,894 36,209 300 Q3 2019 873 -375 18,921 5,470 7,278 72
Q3 2020 -122 -80 170 4,523 12,442 297 Q3 2020 -6,738 -5,544 2,007 210 412 75
Q3 2021 -51 -48 232 6,206 15,111 279 Q3 2021 -6,154 -8,200 3,245 913 976 73
Q3 2022 33 19 440 16,709 24,472 276 Q3 2022 -3,040 -2,545 16,852 4,147 5,089 77
Q3 2023 86 63 542 23,807 30,970 277 Q3 2023 2,388 1,275 23,345 5,264 7,174 79
Copa Airlines Delta Air Lines

(US$ m) (US$ m) (US$ m) (m) (m) ($ m) ($ m) ($ m) (m) (m)
Q3 2019 133 104 708 8,797 10,272 103 Q3 2019 2,071 1,495 12,560 107,604 121,895 1,353
Q3 2020 -107 -118 32 92 153 74 Q3 2020 -6,386 -5,379 3,062 18,580 45,528 1,133
Q3 2021 59 8 445 5,609 7,075 87 Q3 2021 2,205 1,212 9,154 69,294 87,038 1,140
Q3 2023 144 116 809 8,864 10,210 95 Q3 2022 1,456 695 13,975 88,170 101,400 1,242
Q3 2023 205 187 868 10,041 11,441 103 Q3 2023 1,984 1,108 15,488 103,151 117,846 1,264
Note: In row headers, Q3 refers to July-September period and H1 the January-June period, regardless of how each airline refers to period

7/7 7/7 7/12 10/12
Asia-Pacific Asia-Pacific Americas Americas carriers
carriers reported a carriers increased carriers reported a increased revenue
net profit in Q3 revenue YoY in Q3 net profit in Q3 YoY in Q3
Frontier Airlines Gol

($ m) ($ m) ($ m) (m) (m) (R$ m) (R$ m) (R$ m) (m) (m)
Q3 2019 109 87 669 10,308 12,010 93 Q3 2019 613 -171 3,710 11,114 13,406 115
Q3 2020 -81 -51 245 4,009 6,415 102 Q3 2020 -760 -1,696 975 3,164 3,992 126
Q3 2021 43 23 630 9,345 12,078 112 Q3 2021 -753 -2,527 1,915 5,932 7,280 129
Q3 2022 56 31 906 10,678 12,939 115 Q3 2022 41 -1,549 4,010 8,361 10,283 145
Q3 2023 -54 -32 883 12,480 15,606 134 Q3 2023 825 -1,300 4,665 9,050 10,813 141
IAG ,QGL*R ¿VFDO4

2SHUDWLQJSUR¿W 1HWSUR¿W Revenue RPKs ASKs Fleet 3UR¿WEHIRUHWD[ 3UR¿WDIWHUWD[ Revenue RPKs ASKs Fleet
(€ m) (€ m) (€ m) (m) (m) (INR m) (INR m) (INR m) (m) (m)
Q3 2019 1,425 1,008 7,310 80,929 92,318 601 Q3 2019 -10,318 -10,633 85,398 20,200 24,200 245
Q3 2020 -1,300 -1,761 1,239 9,673 19,769 542 Q3 2020 -11,948 -11,986 30,292 5,800 8,900 282
Q3 2021 -452 -574 2,709 27,716 40,082 533 Q3 2021 -14,357 -14,364 57,987 11,200 15,800 279
Q3 2022 1,218 853 7,329 65,078 74,834 552 Q3 2022 -15,833 -15,802 128,523 21,900 27,700 279
Q3 2023 1,745 1,230 8,646 78,494 88,259 573 Q3 2023 1,891 1,889 155,029 29,400 35,300 334
-DSDQ$LUOLQHV ¿VFDO4 Korean Air

(%,7\HQEQ \HQEQ \HQEQ (m) (m) .5:EQ .5:EQ .5:EQ (m) (m)
Q3 2019 60 39 404 18,748 23,545 233 Q3 2019 132 -186 3,224 21,714 26,162 169
Q3 2020 -93 -68 118 3,132 7,875 238 Q3 2020 8 -386 1,550 1,921 6,015 164
Q3 2021 -69 -47 158 4,022 11,335 229 Q3 2021 439 134 2,227 2,573 6,050 156
Q3 2022 28 17 350 13,466 19,968 226 Q3 2022 839 431 3,668 10,319 12,886 155
Q3 2023 60 39 439 18,556 23,295 224 Q3 2023 520 425 3,864 18,551 21,764 156
JetBlue Airways LATAM Airlines Group

($ m) ($ m) ($ m) (m) (m) (US$ m) (US$ m) (US$ m) (m) (m)
Q3 2019 247 187 2,086 22,418 26,226 253 Q3 2019 269 86 2,665 31,683 37,882 335
Q3 2020 -516 -393 492 4,740 11,113 263 Q3 2020 -565 -573 513 3,577 5,395 317
Q3 2021 186 130 1,972 20,781 26,020 276 Q3 2021 -479 -694 1,314 14,142 18,823 302
Q3 2022 139 57 2,562 22,471 26,099 286 Q3 2022 96 -263 2,587 25,426 30,674 301
Q3 2023 -156 -153 2,353 23,781 27,941 283 Q3 2023 409 267 3,056 30,141 35,322 321
/XIWKDQVD*URXS Norwegian
(EBIT, € m) (€ m) (€ m) (m) (m) (NOK m) (NOK m) (NOK m) (m) (m)
Q3 2019 1,220 1,154 10,108 86,017 99,597 n/a Q3 2019 2,970 1,670 14,404 25,968 28,482 161
Q3 2020 -2,389 -1,967 2,660 11,833 22,333 n/a Q3 2020 -2,813 -980 1,288 1,034 1,705 140
Q3 2021 -9 -72 5,207 34,341 49,883 723 Q3 2021 -296 169 1,927 2,861 3,915 51
Q3 2022 1,118 809 9,537 66,927 77,690 709 Q3 2022 1,032 910 7,116 7,934 8,938 69
Q3 2023 1,441 1,192 10,275 75,615 87,686 714 Q3 2023 2,170 2,050 8,776 9,133 10,446 85
Note: In row headers, Q3 refers to July-September period and H1 the January-June period, regardless of how each airline refers to period

ANALYSIS DATA
8/8 7/8 23/28 25/28

European European Total carriers Total carriers
carriers reported a carriers increased reported a net increased revenue
net profit in Q3 revenue YoY in Q3 profit in Q3 YoY in Q3
Pegasus 5\DQDLU ¿VFDO4

2SHUDWLQJSUR¿W 1HWSUR¿W Revenue Passengers ASKs Fleet 2SHUDWLQJSUR¿W 1HWSUR¿W Revenue Passengers Fleet
(€ m) (€ m) (€ m) (m) (m) (€ m) (€ m) (€ m) (m)
Q3 2019 234 183 647 8.8 12,700 83 Q3 2019 1,013 910 3,078 43.8 475
Q3 2020 11 27 181 4.28 6,600 87 Q3 2020 11 -226 1,528 16.6 470
Q3 2021 102 56 450 7.24 11,600 91 Q3 2021 254 225 1,784 31 467
Q3 2022 417 278 1,000 8.48 14,800 95 Q3 2022 1,419 1,200 4,015 49.6 517
Q3 2023 340 253 962 9.67 17,500 105 Q3 2023 1,705 1,515 4,926 55 563
6LQJDSRUH$LUOLQHV ¿VFDO4 Southwest Airlines

(S$ m) (S$ m) (S$ m) (m) (m) ($ m) ($ m) ($ m) (m) (m)
Q3 2019 213 95 4,222 38,499 44,934 207 Q3 2019 819 659 5,639 52,930 63,374 752
Q3 2020 -826 -2,344 784 641 3,394 222 Q3 2020 -1,411 -1,157 1,793 19,132 42,590 734
Q3 2021 -345 -438 1,532 2,663 15,277 178 Q3 2021 733 446 4,679 50,348 62,372 737
Q3 2022 678 557 4,488 27,776 32,075 193 Q3 2022 395 277 6,220 53,968 63,202 742
Q3 2023 799 707 4,683 35,807 40,421 202 Q3 2023 117 193 6,525 57,331 71,083 817
Turkish Airlines United Airlines

(US$ m) (US$ m) (US$ m) (m) (m) ($ m) ($ m) ($ m) (m) (m)
Q3 2019 675 655 3,999 43,373 51,858 344 Q3 2019 1,473 1,024 11,380 104,010 120,823 1,348
Q3 2020 75 -132 1,528 10,775 15,962 360 Q3 2020 -1,615 -1,841 2,489 17,080 35,747 1,319
Q3 2021 722 735 3,405 29,997 41,970 372 Q3 2021 1,037 473 7,750 66,033 86,721 1,338
Q3 2022 1,586 1,515 6,068 51,770 60,300 390 Q3 2022 1,458 942 12,877 95,091 108,945 1,320
Q3 2023 2,135 1,920 6,321 55,831 65,191 435 Q3 2023 1,739 1,137 14,484 108,938 126,089 1,335
:L]]$LU ¿VFDO4 Volaris

Operating 1HWSUR¿W Revenue Passengers Fleet 2SHUDWLQJSUR¿W 1HWSUR¿W Revenue RPKs ASKs Fleet
SUR¿W ¼P (€ m) (€ m) (m) (US$ m) (US$ m) (US$ m) (m) (m)
Q3 2019 320 286 980 11.7 119 Q3 2019 87 36 484 8,787 10,205 80
Q3 2020 -139 -88 380 5.8 132 Q3 2020 -99 -97 210 5,626 7,665 84
Q3 2021 57 -7 681 9.5 144 Q3 2021 156 76 640 10,543 12,339 94
Q3 2022 221 68 1,385 14.3 168 Q3 2022 35 40 769 12,886 15,055 113
Q3 2023 443 340 1,816 17.7 187 Q3 2023 39 -39 848 14,072 16,296 125
Source for data on p46-48: FlightGlobal analysis of earnings reports. Data for each period also available to FlightGlobal Premium
subscribers. Notes for data on p46-48: Results are at a group level. Unless otherwise stated, Q1 = January-March, Q2 = April-June,
Q3 = July-September, Q4 = October-December, H1 = January-June and H2 = July-December, regardless of how each airline refers
to the period. RPKs = revenue passenger kilometres. ASKs = available seat kilometres. Unless stated, fleet data covers operating and
stored aircraft at the end of the earnings period.

ANALYSIS DATA
Industry performance indicators

The latest global data for several important airline market indicators, including traffic and
capacity across passenger and cargo markets, share-price developments, and 12-month
fuel-price trends. Subscribers to FlightGlobal Premium can view a monthly version of this
data, which includes further metrics such as in-service fleet size and share prices for the
world’s largest operators. Visit FlightGlobal.com/Subscribe for more information
Global air passenger market, year-on-year* Global air cargo market, year-on-year*
demand and capacity trends, to October 2023 demand and capacity trends, to October 2023
20 20
10
0
% change year on year

% change year on year
0
-20
-10
-40
-20
-60
-30
-80 -40
-100 -50
Oct-19 Oct-20 Oct-21 Oct-22 Oct-23 Oct-19 Oct-20 Oct-21 Oct-22 Oct-23
Source: IATA Source: IATA

Notes: RPK = revenue passenger kilometres ASK = available seat kilometres Notes: Notes: CTK = cargo tonne kilometres ACTK = available cargo tonne kilometres
*Data for 2021, 2022 and 2023 compared with 2019 *2021 data compared with 2019. 2022 and 2023 data back to year-on-year comparison
RPK ASK CTK ACTK
Global passenger market: October 2023 snapshot Global air cargo market: October 2023 snapshot
Load factor Load factor
World share RPK ASK change Load factor World share CTK ACTK change Load factor
Africa 2.1% -1.3% -2.4% 0.7pp 70.7% Africa 2.0% 2.9% 9.8% -2.8pp 41.6%
$VLD3DFL¿F 22.1% -9.8% -10.6% 0.7pp 82.1% $VLD3DFL¿F 32.4% 7.6% 30.0% -9.8pp 47.2%
Europe 30.7% -2.1% -1.8% -0.3pp 85.6% Europe 21.8% 1.0% 7.0% -3.2pp 53.0%
Latin America 6.4% 6.7% 2.6% 3.2pp 84.8% Latin America 2.7% 4.0% 8.3% -1.5pp 35.4%
Middle East 9.8% 6.6% -2.8% 7.1pp 80.6% Middle East 13.0% 10.9% 15.0% -1.7pp 46.0%
North America 28.9% 6.2% 6.4% -0.2pp 83.6% North America 28.1% -1.8% 2.4% -1.7pp 39.2%
Total market -1.8% -3.0% 1.0pp 83.1% Total Market 3.8% 13.1% -4.0pp 45.2%
Source: IATA Note: Changes versus October 2019 Source: IATA Note: Changes versus October 2022
Indexed five-year share price trend at world's Five-year weekly jet fuel price
largest airline groups ($/gal)
20 5
10
4
0
3
-10
-20 2
-30
1
-40
-50 0
Nov-18 Nov-19 Nov-20 Nov-21 Nov-22 Nov-23 Nov-18 Nov-19 Nov-20 Nov-21 Nov-22 Nov-23
Source: FlightGlobal analysis of Yahoo Finance data Source: US Energy Information Administration
Notes: Basket of 18 airline groups covering North America, Europe and Asia-Pacific. Notes: US Gulf Coast kerosene jet fuel spot price FOB. Data to w/e 24 November 2023
Closing share prices w/c 26 November 2018 = 0. Data covers weekly closing prices to w/c 27 November 2023

ANALYSIS DATA
LEWIS HARPER LONDON
T he global industry exceeded

the overall 2019 benchmark
index score for the second quar-
6.0%
ter in a row, as the strong reve- ZW (IGIQFIV
nue run continued in the third
quarter of this year.
The overall score of 102 (2019 =
100) marked a rise of one point
from the 30 June 2023 score of 101.
The latest score is an increase of 48
from the first index, which covered
the second quarter of 2020.
Global airline
Amid only slight movements
industry size on
from the previous index, the lat-
est data reflects post-Covid ‘nor-
malisation’, which means most of
102
2019 = 100
(+1)*
30 September 2023
the ‘low-hanging fruits’ during
the pandemic recovery – which 'LERKI JVSQ .YRI
sometimes caused metrics to 2' ! RSGLERKI
rocket quarter-over-quarter, par-
ticularly as global travel markets
reopened – have been exhausted.
The revenue score of 116 was a
rise of one point from the second
quarter and continued to outpace
passenger numbers, which, at 95,
still trail 2019 levels.
The workforce score was up
98 (+1)* 100 (+2)*
2019 = 100 2019 = 100

one point at 98, while fleet size Fleet size on
rose by two points to achieve par- Workforce size on
ity with 2019. 30 September 2023 30 September 2023
At the index’s lowest points in Number of
the Covid-19 crisis, workforce
and fleet bottomed out at 81 and airline employees
95 respectively, compared with a
revenue low of 20 and a lowest
passenger-number score of 10.
Using data from 14 of the larg-
est airline groups that release
quarterly or half-yearly results –
covering the Americas, Asia-
116 (+1)* 95 (NC)*
2019 = 100 2019 = 100
Pacific and Europe – the index
considers four metrics: size of
Third-quarter 2023 Third-quarter 2023
workforce by employee number, operating revenue passenger numbers
size of fleet, and revenue and pas-
senger numbers at the end of the
most recent reporting period. ■
Notes: Data from reporting for the

three-month period to 30 Sep- Airline Business Index trend
tember 2023 (or nearest half-year 3ZIVEPP
period), taken from public
records. Workforce and fleet sizes
;SVOJSVGI
compared with end-2019 levels.
Revenue and passenger number *PIIX

metrics compared with data from
the equivalent period in 2019. 6IZIRYI
Basket of 14 airlines based on the
4EWWIRKIVW
largest that report quarterly or
half-yearly results from Flight-
Global’s World Airline Rankings. 2SXI -RHI\

Overall score is an average of the

GSQTMPIH

four individual metrics. WMRGI 5


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FlightGlobal.com/airlines December 2023 | Airline Business | 3

Is the gain worth the pain?

4 | Airline Business | December 2023 ﬂightglobal.com/airlines

Catching up on key industry news

6 | Airline Business | December 2023 FlightGlobal.com/airlines

FlightGlobal.com/airlines December 2023 | Airline Business | 7

GRAHAM DUNN GENEVA

Airlines focus on marginal gains

onﬁrmation from IATA that

months ago. in the US and to a lessor degree in

Passenger trafﬁc development moves out of recovery position

8 | Airline Business | December 2023 FlightGlobal.com/airlines

parts for aircraft both in service -12

load factors and yields high. 2022 2023 2024 (forecast)

region we are not seeing any source of risk.” performance.” ■

FlightGlobal.com/airlines December 2023 | Airline Business | 9

PILAR WOLFSTELLER LAS VEGAS

Mixed fortunes among US airlines

n the US aviation market, It was expecting 10 aircraft to

10 | Airline Business | December 2023 FlightGlobal.com/airlines

PILAR WOLFSTELLER LAS VEGAS

Alaska decision has Paciﬁc purpose

ith JetBlue Airways’ pro- and ﬂeets, to the tune of synergies

FlightGlobal.com/airlines December 2023 | Airline Business | 11

HOWARD HARDEE CHICO

Tie-up creates third way in Canada

f Canadian carriers Air Transat of 29 De Havilland Canada Dash

14 | Airline Business | December 2023 FlightGlobal.com/airlines

GRAHAM DUNN & PILAR WOLFSTELLER CANCUN

Proﬁts elusive despite Latin growth

W hile it is hardly unusual to

16 | Airline Business | December 2023 FlightGlobal.com/airlines

PILAR WOLFSTELLER CANCUN

ALTA’s smaller players get creative

s small Caribbean and Cen- There is a limit to what we can do

FlightGlobal.com/airlines December 2023 | Airline Business | 17

GRAHAM DUNN LONDON

Icelandic carriers limit seismic hit

celandic carriers have enjoyed “Going forward, there is some

executive Bogi Nils Bogason says:

18 | Airline Business | December 2023 FlightGlobal.com/airlines

GRAHAM DUNN GENEVA

Schiphol noises off after Dutch turn

ATA director general Willie While saying the industry has

FlightGlobal.com/airlines December 2023 | Airline Business | 19

GRAHAM DUNN & LEWIS HARPER LONDON

Hurdles rising for M&A ambitions

onsolidation is very much in

Air France-KLM foresees SAS joining transatlantic joint venture

20 | Airline Business | December 2023 FlightGlobal.com/airlines

FlightGlobal.com/airlines December 2023 | Airline Business | 21

Bertomeu backs “We are the two big independ-

Carriers plot US-style future demic meant that airlines around

22 | Airline Business | December 2023 FlightGlobal.com/airlines

LEWIS HARPER LONDON

Finnair chief’s leadership learnings

W hen Finnair chief execu-

$1$ ¿VFDO4 &HEX3DFL¿F

IAG ,QGL*R ¿VFDO4

-DSDQ$LUOLQHV ¿VFDO4 Korean Air

Pegasus 5\DQDLU ¿VFDO4

6LQJDSRUH$LUOLQHV ¿VFDO4 Southwest Airlines