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Global Airline Capacity Dramatically Down as Airlines Consider the A380's Future

International airline seat capacity this week (30 March to 5 April) fell to just 23% of the level available in the first week of April last year. That’s according to data from travel analytics company ForwardKeys. Just 10 million seats were still in service worldwide, mainly to facilitate essential travel, compared with 44.2 million a year ago.

In the first quarter of the year, airline seat capacity was -9.4% down compared with Q1 2019 (482 million seats compared with 532 million in Q1 2019). At the start of January, capacity was slightly up on last year, noted the analyst. However, this started to fall during the last week of January when the Chinese government announced restrictions on outbound travel. From then until the middle of March, air capacity fell substantially and even more sharply to the end of the month.

The top ten airlines still operating in the first week of April are: KLM with 800,000 seats still in service; Qatar Airways with nearly 500,000 seats in service and Ryanair with 400,000. They are followed in descending order by Delta, Air France, American, British Airways, Wizz Air, Cathay Pacific and Jeju Air.

ForwardKeys VP Insights Olivier Ponti said: “Governments have closed entire countries; and in response, the airline industry has cut services to the bone. It is likely that when we get to the other side of the pandemic, things won’t return to the vibrant market conditions we had at the start of the year, anywhere near as easily as some people imagine. By then, it is possible that a number of airlines will have gone bust; consumers will have lost confidence in flying and uneconomic discounts will be necessary to attract demand back.”

by Dermot Davitt

Source: ©The Moodie Davitt Report

Grounding The A380?

James Asquith considers the future of the Airbus A380

With over 40 major airlines around the world grounding their entire fleets and many others suspending more than 90% of flights, the last few weeks has seen several airlines retire larger widebody aircraft earlier than planned. Last week the Dutch national airline KLM retired their last Boeing 747 jumbo jets early and Virgin Atlantic has already brought forward the retirement of their Airbus A340-600 aircraft.

One of the most popular passenger planes over recent years has been the Airbus A380 double-decker super jumbo. However, Airbus announced in 2019 that production of the world’s largest passenger plane ever built is due to end in 2021. A weak backlog of orders has meant that the A380 program simply did not have the customers or demand from airlines to warrant continuing production.

Before the onset of the coronavirus outbreak, air travel demand was set to continue to increase globally, led by substantial increases in demand from China and India particularly. Airbus hoped that more airlines would order the A380 to not only consolidate routes with high demand but also to alleviate pressure on congested airports around the world. The aircraft can carry up to 853 passengers in an all-economy layout, but most airlines have opted for a three-cabin configuration of around 525 passengers on average. This is about 100-150 more passengers than the next largest jets, the Boeing 747-8 and the 777-300. However, with the exception of Emirates, who ordered over 100 a380s, the superjumbo did not sell anywhere near as well as Airbus was hoping, which led to the program being scrapped. The main concern for airlines was that operating flights with over 500 seats was too great a risk. Granted, when the A380 was completely full the aircraft generated huge profits, however, if seats were not sold on flights, the aircraft quickly sustained heavy losses. Most airlines preferred to operate increased frequencies on smaller aircraft that allowed more flexibility and less potential downside risk to operating flights with empty seats.

In March, The International Air Transport Association warned that airlines may lose $113 billion in sales in 2020 due to COVID-19. With increased groundings and lack of clarity on the aviation market since this statement, that number is set to increase. Therefore, the future of the A380 in the short term looks bleak. Many airlines are currently requesting government support and fighting for survival, and when international routes do start opening up again, it is highly likely that some of the weaker airlines that operate the A380 will be in no rush to re-introduce the aircraft to service. Emirates currently operates 115 of the type, and the aircraft is the mainstay of the airlines fleet. Although some A380s may now be retired early by Emirates if passenger demand doesn't robustly bounce back, the airline is certain to continue to operate the aircraft.

British Airways will also very likely continue to operate the A380 on major routes from London. These would include high demand routes such as Hong Kong, Singapore and Los Angeles. The UK airline could also potentially consolidate flights onto larger aircraft for high-frequency routes such as London Heathrow to New York JFK, which sees as many as 12 flights per day. Currently, many of these flights are operated on less fuel-efficient and older Boeing 747 and 777 aircraft which the carrier could also retire early. With British Airways’ largest long-haul domestic competitor, Virgin Atlantic, struggling financially, I would also expect there to be few concerns with British Airways filling seats on their superjumbos. The only other obvious candidate to continue operating the A380 is the Australian carrier Qantas. Although the airline has asked the Australian government for financial support, it is unlikely that the A380 would be removed from the prize “kangaroo route” that links Sydney and London, or other lucrative U.S. West Coast routes such as San Francisco and Los Angeles.

Three additional airlines that will still likely operate the A380 are Singapore Airlines, Etihad and Qatar Airways. The reason being is that these aircraft showcase these carriers highest quality product and all three airlines receive government backing. They would have the ability to fly the A380 again through a period of weaker demand. All three of the aforementioned airlines have either on-board bars or lavish first class suites on their aircraft. Operating the A380 is as much of a marketing tool as is it a profitability tool for Singapore Airlines, Etihad and Qatar.

However, some obvious candidates could be set to retire their A380s early, or at the very least ground the aircraft for the foreseeable future. Air France was already in the process of scraoping its oldest examples before the coronavirus outbreak spread across the world. Similarly, Malaysia Airlines attempted to sell its six aircraft in 2018, but after no buyers were found the struggling airline has mostly been operating the superjumbo on Hajj pilgrimage flights.

It would come as little surprise to see both Air France and Malaysia Airlines grounding their A380s when international flights resume, and Korean Air, Thai Airways, Lufthansa and Asiana are also likely contenders to ground the jet for the foreseeable future. The aircraft makes up a small part of these airlines fleets with Asiana and Thai operating just six of the double-decker plane and Lufthansa operating 14 aircraft. China Southern is the only other operator, and although the airline has struggled for several years to fill the aircraft on routes away from the U.S. West coast, the Chinese airline would likely be able to utilise the aircraft on domestic routes in China for the foreseeable future.

Therefore, it could well be that nearly half the current Airbus A380 operators may not fully re-introduce their aircraft when global travel resumes.

© James Asquith/Forbes

Graphics © ForwardKeys

All images © Kevan James

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