Airline Capacity Continue to Climb Like an A340 Slowly But Surely US Capacity Races Ahead of TSA Checkpoints Volume.

Airline Capacity Continue to Climb Like an A340…Slowly But Surely
           US Capacity Races Ahead of TSA Checkpoints Volume.

Another one million additional seats added back week-on-week, carry on at
this rate and capacity will be back to pre-pandemic levels by this time next
year; if only it was that simple. Whilst the recent pattern of capacity growth is
positive, new spikes of COVID in Eastern Europe and particularly Lower
South America continue to cause concern whilst Japan’s airlines have
announced capacity cuts of over 30% for April across their domestic
networks.
Against that backdrop it is not surprising that an additional nine million seats
have been removed for the rest of this month compared to last week and
some 20 million in April; clearly no joke for network planners at the
beginning of April then. Capacity for May has seen a slight reduction against
last week’s plans, but most airlines are now looking at no more than six weeks
forward which is probably around five weeks more than any of us!
Chart 1 – Scheduled Airline Capacity by Month

Source: OAG

Most geographic regions have in recent weeks reported steady growth week-
on-week with North America leading the way; in the last month, capacity has
increased by 20% with nearly all of that additional capacity operating on
domestic services. TSA Checkpoint numbers for last week were running at
around 55% of their 2019 weekly levels whilst capacity was running at 63%
of the 2019 level; that would suggest that capacity is running slightly ahead
of demand but as we know it’s challenging to balance the two variables at
the moment.

Most worrying is the large reduction in capacity in Lower South America; a
15% reduction and the loss of some 293,000 seats week-on-week represents
a large cut in capacity and nearly all of that capacity has been lost in the
Brazilian market. Gol have reduced capacity by over 30% week-on-week
dropping over 150,000 seats and LATAM (-73,266 seats) and Azul (-65,731)
have followed with both Gol and Azul carrying those capacity cuts forward
into April.
Table 1– Scheduled Airline Capacity by Region

Source: OAG

Chinese capacity is nearly back to pre-COVID levels with less than a 4%
differential to January 2020 levels; with international capacity remaining at
less than 1% of all seats and fewer than 150,000 seats a week compared to
over 2.1 million seats a week in January last year. We know that
Chinese domestic services are not as profitable as international operations
and with the price of fuel now some 73% higher than it was this time last year
you would like to think that China’s airlines would be very keen to start flying
internationally sooner rather than later; let’s hope that is the case.
Japan’s current capacity growth is a bit like their cherry blossom season;
enjoy it whilst you can because it will disappear very quickly! We have already
been advised of large capacity cuts in the April domestic schedules of all of
the major carriers; all of which were filed on the same day, probably a
coincidence more than coordination but you never know. We expect an
announcement very shortly that overseas visitors to the Summer 2020 or
2021 Olympics will not be allowed, and if domestic capacity remains cut,
precisely who will watch the games?

Finally, welcome back Vietnam! The return of some 117,000 seats week on
week and 12% growth is impressive but unfortunately does not result in
moving up the top country market; the country remains in tenth position.
Australia’s additional 4% capacity keeps them just ahead of Vietnam with all
four of the country’s major airlines adding some capacity week-on-week.
Table 2- Scheduled Capacity, Top 20 Country Markets

Source: OAG

There are no significant changes in the top ten airlines this week. American
must have built a trophy cabinet in their DFW Headquarters as they hold on
to the number one position for the fifth consecutive week. Southwest Airlines
adding some 390,000 extra seats this week moves them above the three
million mark and putting them within touching distance of Delta Air Lines for
second place in the top ten.
In total some 652 airlines have filed capacity for this week compared to 715
that were operating in January 2020, a loss of 63 carriers or some 9% of all
scheduled operators. Many of the losses are amongst the smaller regional
carriers and some of those may restart services when local lockdowns ease
but many of those services were also essential lifeline operations to local
communities and need to return if at all possible.

Canada is a great example of airline churn with some 33 scheduled airlines
operating last January and just 26 this week, a fifth of the airlines domiciled
carriers stopping operations in the last year; including some relatively large
carriers such as Porter Airlines and of course the now Air Canada owned Air
Transat operation. Eleven of the airlines still operating have less than ten
flights a day scheduled this week hardly enough to maintain commercial
operations and highlighting the challenges in just one market.
Table 3- Scheduled Capacity, Top 10 Airlines

Source: OAG

The recent steady if not earth-shattering increases in global capacity are very
welcome and reflect as much optimism rather than confidence in
the recovery process through the next few months. There remain far too
many variables for anyone to be really confident about the shape of a
recovery, but vaccine passports and other initiatives are all helping to build
some momentum. However, some localised outbreaks of COVID-19 are
never good for the nerves!
And although not a huge concern at the moment the increasing price of jet
fuel will begin to become an issue in the coming weeks. Airlines have had
enough to contend with in the last year; they certainly don’t need any more
fuel added to the fire!
Stay safe everyone.