CAPA Airline Leader Summit 2023 Full Report

DALLAS – The CAPA - Centre for Aviation hosted its Airline Leader Summit 2023 where aviation leaders and airline delegates came together in Budapest to talk about the future of aviation in a post-pandemic world. Airways attended the event held on 16-17 March 2023.

Budapest Airport (BUD) CEO Chris Dinsdale opened the event with BUD’s milestones, his life in Budapest, and interesting stories from his different jobs in the airport. The CEO will step down from his position in the summer of 2023 to lead a Canadian airport in his home country.

The CAPA event saw airline heads share their thoughts on how to improve their carriers, what post-COVID statistics looked like, and how they recovered from the pandemic, among many more interesting topics. We'll begin with the current state of the industry.

CAPA Outlook: State of the Industry

CAPA’s Chief Financial Analyst, Jonathan Wober talked about 15 numbers in 15 minutes. 

The first one was aircraft in service. Compared to pre-COVID numbers, jets are flying again at 101%. There’s a 5% decrease for full-service carriers compared to February 2019, however, low-cost carriers are at 109% compared to pre-pandemic stats. Regional operations are at 89%, cargo, and charter services increased by 110%. 

Regarding seating capacity, compared to 2019, seats are 97% allocated on commercial flights. In Africa and Latin America, capacity increased by four percent, and in the Middle East and North America, 2% less, however, in Europe and Asia Pacific, it decreased by 11%. This is an average of 97% seat capacity compared to pre-pandemic numbers. 

Next up is traffic volume. Passenger flights are at 84%, and cargo operations are at 89% compared to four years ago. This means that, by the beginning of 2024, the aviation industry will fully recover.

It's just really nice to see the recovery of commercial aviation. By these statistics, we can say, we're almost fully recovered from the situation caused by the COVID pandemic.

Jonathan Wober, Chief Financial Analyst, CAPA

The fifth item was the European Union (EU) airfare inflation, which is at 18.4%. The numbers are pretty similar in the UK; however, the inflation there is a percentage up at 19.4%.

After the inflation, the analyst discussed Boeing and Airbus deliveries. According to the manufacturers’ statistics, they have lost 10 years, mostly due to the pandemic. This is a significant loss both in profit and in delivery numbers too.

What about fuel price? In 2022 and 2023, aviation fuel costs are at c30% of revenue. The last time revenue was over 30% was in Q4 of 2013-Q2 2014.

Mr. Wober also mentioned the profit wiped out by the pandemic. He stated that 81% of the global airlines’ profit was wiped out during 2020-2022, which means a loss of US$137bn. The industry is slowly recovering in 2023 at a rate of 0.4% (US$4.6bn).

Due to various aspects of the fallout of the pandemic, we'll discuss the number of airlines operating globally. According to CAPA's and OAG’s databases, in March 2010, 697 airlines operated globally. In May 2020, only 536 airlines operated, so more than 150 airlines went bankrupt due to the pandemic. It was a significant loss. However, as of March 2023, 712 airlines are operating globally.

This means the recovery of air travel, new airlines, and new possibilities post-pandemic for future airline leaders. They’ll know how full-service and low-cost carriers work, their successful business models, and how to keep up with inflation, higher ground handling, and fuel prices.

The 11th and 12th numbers were the Intra-Europe airline group seat share percentages from July 2023 vs July 2019. At 72% it is an increase of five percent when compared to 2019 when it was at 67%.

The 13th item on Mr. Wober's talk was the Intra-North America seat shares, which ad little change at 94%.

Lastly, the speaker reminded the attendees that we had 27 years to achieve International Civil Aviation Organization's (ICAO) Long-Term Aspirational Goal (LTAG) to net zero CO2 emissions.

CAPA Think Tank: Aviation Leaders' Opportunities for the Future

The next presentation of day one was hosted by WestJet's (WS) Board Member, Alex Cruz. He invited Abdelhamid Addou, Royal Air Maroc's (AT) CEO, Angus Clarke, Air France-KLM Group's CCO, and Samer Majali, Royal Jordanian's (RJ) Board Chairman & Designate CEO. They were talking about the post-COVID challenges, what are the main problems they're facing with.

So the purpose of the Think Tank is to highlight the successes from the past year, how did they recover from the pandemic situation, and how are they dealing with airfare inflation and higher fuel, and ground handling fees. The second most important purpose is to look into the future and identify opportunities to resolve issues faced by the entire aviation ecosystem.

Airlines in Transition: The Post-COVID Period and the Changes that Matter Most

Michael Bell, KornFerry's Senior Client Partner had an hour-long chat with Sun Country Airlines (SY) President and CFO, Dave Davis, Air Serbia (JU) CEO, Jiri Marek, Lynx Air (Y8) CEO and President, Merren McArthur and Finnair (AY) SVP of Strategy and Fleet, Christine Rovelli.

COVID changed the operations of airlines and airports. This was the time the summit discussed the lessons the pandemic taught them. The flexibility of response, speed in adapting to rapidly changing situations, strong internal and external communication, and embracing new ways of doing business all emerged as key differentiators for airlines.

However, the new situation they're facing now is the war between Russia and Ukraine.

Due to the war between Russia and Ukraine, we have to fly a longer, different route toward the East. However, our partnership with Qatar Airways is key to flying to further destinations. Moreover, by investing in the new Airbus A350-900s, we can fly longer routes with fewer CO2 emissions than we have with the Airbus A330s.

Christine Rovelli, SVP of Strategy and Fleet, Finnair

Sustainability Masterclass: A Guideline for Activities to Help Limit Industry Footprints

The 55 minutes long talk show was held by David Wills, Executive Director of Envest Global. He invited IAG's Group Head of Sustainability, Jonathon Counsell, SAS Scandinavian Airlines (SK) Head of Sustainability, Ann-Sofie Hörlin, and W6's Chief Corporate and ESG Officer, Yvonne Moynihan.

It's clear that the industry faces significant challenges in its transition to more sustainable alternatives. Today, we have an excellent panel of industry leaders who will share their insights on how the industry can make short-term strides, support its environmental credibility, and communicate its sustainability efforts to the public.

David Wills, Executive Director of Envest Global

There were three main questions during the session. The first one was: Where does the aviation industry turn to to make short-term strides?

At IAG, we believe that improving operational efficiency is a key way to make short-term strides toward sustainability. We are focusing on measures such as reducing fuel consumption and optimizing flight paths. For example, we have introduced a program to taxi aircraft with one engine, which can significantly reduce fuel consumption and emissions. These measures not only reduce emissions in the short term but also provide cost savings for the airlines.

Jonathon Counsell, Group Head of Sustainability, IAG

Ann-Sofie Hörlin, SK' Head of Sustainability agrees with Jonathon, adding that SAS is focusing on improving operational efficiency. This means reducing the weight of aircraft with lighter seats, optimizing flight plans, and investing in sustainable airplanes with fuel-efficient engines.

On the ground, they're using ground power units instead of aircraft APUs to save operational costs and commit to sustainability. Ground power units at several airports are using renewable energy sources.

KLM (KL) keeps investing in the development of sustainable aviation fuel (SAF). SAF has the potential to reduce carbon footprint by 80%. While they are currently costly and scarce, they believe that the production and use of SAFs will increase over time, making them a viable alternative to fossil fuels. This will lead to KLM's improved operating efficiency project.

Yvonne Moynihan said that at W6, they're investing in SAF just like KL.

The second question: how can the transition support the industry’s environmental credibility?

At SAS, we believe that transparency and communication are key to supporting the industry's environmental credibility. We are committed to transparency and communication. We have set ambitious targets to reduce our carbon emissions, and we report regularly on our progress towards these targets. We also believe in engaging with our customers and stakeholders on sustainability issues, which helps to build trust and support for our efforts.

Ann-Sofie Hörlin, Head of Sustainability, SAS

KLM, W6, and IAG's representatives agreed with Ann-Sofie, and they're following the same commitments. W6 keeps investing in a sustainable aircraft fleet, while KL supports the development of sustainable fuel. As well as airport infrastructure, like building renewable energy sources for the GPUs.

The last question: What are the best strategies to make the public aware of the scale of the problem faced and the steps that the industry is making in its journey to sustainability?

At Wizz Air, we're proud to have Europe's youngest and most fuel-efficient fleet. Our commitment to the environment is an important step in European aviation. We are going to replace our old A320s and A321s with A321neos and later on, A321 XLRs to start longer flights. The new Airbus aircraft consumption is significantly less than the older ones in our fleet. We're on the way to achieving carbon neutrality by 2050.

Yvonne Moynihan, Chief Corporate and ESG Officer, Wizz Air

Wizz Air's short-term project is to improve efficiency. The first step is fleet renewal. They are going to replace the old A320ceos and A321ceos with A321neos. At the moment, A320neos aren't planned to be bought. SAF and carbon removal is the solution to emission reduction, which is their medium-term project. Lastly, the long-term project is zero-emission technologies and hydrogen, which means another fleet renewal with hydrogen-powered aircraft and air traffic management modernization.

SAS has a social and an environmental side to its sustainability strategy. The social side contains supporting society, creating sustainable innovation and they are supporting health and well-being services. On the environmental side, they're going to decarbonize the company by 2050. The other driving force in sustainable aviation which is on the environmental side is resource efficiency.

KLM has three main aspects of sustainable flying. The first one is creating technological advancements, i.e. exploring the future of flying, innovating core airline processes, and strengthening their technological foundation. The second aspect is the transformation to a net-positive company, which means the reduction of negative impacts, driving the industry change, and ensuring responsible fundamentals.

The third is to run a great airline for KL's customers and people. This means developing alternative revenue growth initiatives, managing their economics, increasing the viability of their business model, and engaging their people.

China Reopens – Prospects for the Recovery of the World’s Largest Outbound Market

After three years of being closed off to international travel due to its ‘zero COVID’ policy, China is set to fully open its borders to the world in 2023. This is great news for the international travel industry, as China was the world’s most valuable outbound tourism market in 2019, according to the World Tourism Organization.

Director of JLS Consulting, John Strickland invited Thai Airways (TG) Advisor to CEO, Otto Gergye, Versilia Group Holding's Non-Executive Chairman, Tony Davis, Air China's (CA) Vice President and General Manager in North America, Zhihang Chi, and Air Serbia's (JU) General Manager Commercial and Strategy, Bosko Rupic to have a chat about the recovery of Chinese flights.

The big question was: how quickly can China’s domestic airlines and foreign carriers restore their networks and return capacity in the market?

The speakers coincided that it would likely take some time for airlines to ramp up their schedules and restore their routes, but the demand was there and they could expect a rapid recovery once all travel restrictions were lifted.

The return of major international travel to and from China will depend on several factors, including the speed of the vaccine rollout and the global COVID-19 situation. The Chinese government has been proactive in its vaccination efforts, with over 1 billion doses administered as of December 2022, but concerns remain over new variants and the effectiveness of current vaccines against them.

Thailand had been one of the most popular destinations for Chinese tourists prior to the pandemic, and the Thai government was actively working to restore travel links with China.

Otto Gergye, Advisor to CEO, Thai Airways

Zhihang Chi highlighted the importance of collaboration between airlines and government authorities in order to ensure a smooth and safe return to international travel.

In conclusion, the return of major international travel to and from China is set to be one of the biggest developments in the travel industry in 2023. While there are challenges and uncertainties ahead, the prospects for a rapid recovery are strong, and the travel industry is well-positioned to capitalize on this once-in-a-generation opportunity.

Airline Leader Interview: Robert Carey - Wizz Air

John Strickland invited Robert Carey, Wizz Air's President for an interview on the second day of the CAPA Summit in Budapest.

Robert has spoken about W6's ultra-low-cost carrier business model, how is it successful and why is it popular in the world. Robert said he came to Budapest on a regular Wizz Air flight between London Luton (LTN) and Budapest (BUD), to commit to the environment.

In his opinion, business jets and first-, business class seats are useless. W6 aircraft only have economy class seats with reduced weight Recaro seats. There are 239 seats in their A321neos, while they have 186 seats inside the carrier's A320neos.

The average age of our fleet is 4.6 years, we'll have more than 500 aircraft by 2030. We have point-to-point flights instead of a hub system. Our flights don't have direct train alternatives below 4 hours and our seats are more than 90% occupied.

Robert Carey, President, Wizz Air

The carrier's A321neo aircraft has 25% less fuel burn, 25% less CO2 emission, 16% improvement in route lengths, 43% lower noise, and 20% lower unit costs - compared to the A320ceo. In addition, since 2022, Wizz Air has been using a paperless flight deck to continue towards zero emission.

I asked Robert's opinion about investing in widebody aircraft. He said they won't go for heavies, just the narrowbody, A321neos. For a ULCC, A321XLR is the best way to fly longer flights while keeping environment friendly. However, W6 operates an A330-200 Freighter for the Foreign Affairs and Trade Ministry of Hungary.

CAPA Think Tank: The re-ordering of aviation – LCCs to the fore

The last Think Tank of the event discussed low-cost carriers, where CAPA's Chief Financial Analyst, Jonathan Wober invited Play Airlines (OG) CEO, Birgir Jónsson, Norse Atlantic Airways (N0) CEO, Bjorn Tore Larsen, and Lynx Air (Y9) CEO and President, Merren McArthur.

COVID-19 presented an unparalleled growth opportunity for low-cost carriers. Many of the markets where LCCs excel - such as short-haul and leisure-focused travel – were the first to recover, while traditionally strong markets for network airlines - including long-haul intercontinental and business travel – are still yet to recover fully. 

In Europe, low-cost traffic has nearly fully recovered, while full-service carriers are still down by 20%. Ryanair is now Europe’s largest single airline brand by most metrics – seats or departures – and LCCs are now four of the 10 largest single airline brands within the EU.

With a recession in the EU looming and concerns around COVID-19 lingering, traveler preference for short-haul persists.

Airport Leaders Panel: Working Together for the Future of Aviation

Toward the end of the event, Tony Griffin, ASM's SVP of Airport Strategy and Marketing invited Budapest Airport's CCO, Kam Jandu, together with Amit Rikhy, Chief Revenue Officer at JFK New Terminal One, Vivian Cheung, CCO of Airport Authority Hong Kong, and Ahmet Orçun Songur, Director Operations and Revenues at YDA Dalaman Airport (DLM).

Air travel recovered rapidly during 2022, although a full return of air traffic and restoration of Europe’s network connectivity to pre-pandemic levels still isn’t expected until late 2023 or even early 2024.

While the rebuilding continues, airports face a range of pressing issues that will shape not only the recovery this year but the long-term prospects for Europe’s air travel sector.

The most important questions raised on this session were:

• Shortfalls are prominent in areas such as skilled manpower and ATC/airspace capacity, while a future runway capacity shortage looms. As demand recovers, what are the priorities to avoid a repeat of 2022’s operational issues? Further, how does Europe address identified shortfalls to ensure there is capacity to support growth?
• What is the role of airports in helping to build leadership in aviation sustainability? How are commitments such as Net Zero growth and the EU’s ‘Fit for 55’ proposals met without harming air connectivity or sector competitiveness?
• With trends in Europe towards the use of rail in short-haul travel, the rise of e-commerce, and future mobility using new technologies, airports have an opportunity to transform into intermodal hubs offering seamless connectivity between forms of transport.  What policy and infrastructure approaches need to be adopted to ensure European airports provide the best possible solution in terms of connectivity, and environmental and economic performance?

We'll leave these questions open for our readers to comment on our social media channels. Stay tuned to upcoming interviews from the CAPA summit, including W6's training manager on the airline's Hungary pilot and cabin crew training center, and KLM’s Vice President on the airline's business model.

Featured image: CAPA