RDC, Aviation Economics and the World of Air Transport


2013 was another year of growth in the world of aviation. Peter Hind, the MD of RDC Aviation, reviews some of the highlights for the industry – and for our business.

Airbus narrowly won the battle of the manufacturers, securing more orders than Boeing – 1,603 versus 1,531. Global seat capacity ended the year up 2.2% to 4.2bn. By our calculations, this equates to a global air travel market of around 3.4bn passengers. Asia and Middle East were the engine-rooms of growth increasing at 8.4% and 6.2% respectively; North, Central and South America all declined; and Europe remained flat. Global CO2 output grew to 674mt, up 2.6%, but with RTKs (revenue tonne kilometres) growing at a faster rate, the IATA efficiency target of -1.5% CO2/RTK is on track. The average price of fuel for the year was US$2.92 per USG, 4.4% below 2012. It peaked at $3.22, with a low of $2.73.

Our advisory team worked on transactions totalling EUR29bn in the year, beating all previous records - a fantastic job. Particular thanks here to Gareth Kitching, who has made an outstanding contribution to our success.

At year end, the capstats.com database of flight frequency/capacity contained 11.2m lines of data and we have collected over 2.5m fare data points. routepro.net has 3,900 aircraft/airline combinations in its database; airportcharges.com contains documents and databased charges for over 2,000 airports. Product usage grew by 28%. RDC and Aviation Economics welcomed seven new staff members during the year and lost none, of which we are very proud.

This is how the year unfolded...

January

The year gets off to a bad start as the FAA grounds the global fleet of B787 following a series of reported problems with the fuel and the battery systems. This is the first major compulsory grounding since the DC-10 fleet was banned from operating in US airspace back in 1979.

Global seat capacity grew by a modest 0.4% versus January 2012 although with some stark regional variations. Europe and North / Central America saw a fall in available seats by 5%, while Asia and the Middle East increased by a similar amount. There was a modest increase in the cost of Jet A1 to $3.09/gallon.

Closer to home, RDC welcomed Ben Burge to the consultancy team as maternity cover for Jo Hunt. Ben joins from British Airways, where he was responsible for Middle East and Africa network planning. Peter Hind spends a week off-site, teaching Sustainable Aviation as a guest lecturer on the Air Transport Management MSc course at City University, London.

The transaction advisory team found out their client had been unsuccessful in its efforts to buy Stansted Airport, despite putting a strong bid together. Manchester Airports Group later emerge as the successful bidder, paying a reported £1.5bn for the airport.

February

A quiet month for major stories in the world of aviation, but not at RDC. Director Iain Smith welcomes a new addition to his family, becoming a father for the first time. Chris Haynes moves house to be closer to the office – we all admire his commitment. Nick Harper joins the advisory team following a 15 year career at Manchester Airports Group, while the support team is working on a major push to increase data coverage for airportcharges.com, adding 50 new airports to the database. This is not as easy as it sounds – a charges document can take up to 18 hours to break-down into a format from which accurate calculations can be made and so we leave them sitting in a dark corner, puzzling over how to interpret the most awkward of documents and wish that winter would come to an end.

Global seat capacity falls by 1.8% versus last year with every region experiencing a decline except Asia and the Middle East. Fuel increases to $3.22/gallon which turns out to be the peak for the year.

March

Big news in the world of aircraft orders and it’s a great month for Airbus as they secure a massive order from Lion Air for 234 of the A320 family. Turkish Airlines also selects the European manufacturer for narrow-body aircraft, adding 82 A320s. Both airlines opt for a combination of the current and NEO variants.

Back at base, we are delighted to welcome Dr Tom Warsop into the product development team. Tom joins from Postcode Anywhere, where he was a junior developer. Apparently in his spare time, he is building a robotic arm that can solve the Rubik’s Cube, which scares and impresses us in equal measures.

Not to be outdone by Iain, Jo Hunt welcomes baby George to her family – and in doing so plants the name of our future king in the minds of Wills and Kate (or so she tells us)

April

The official start of summer, or at least the scheduling summer season – kicks off with a sharp decrease in the cost of Jet A1, down 13% on the same time last year. Good news for the un-hedged carriers as we enter the period of more intensive fuel burn. Hot on the heels of the Airbus deal, Turkish places another order, this time for 70 Boeing 737MAX and on the same theme there’s a rare occasion at British Airways’ parent IAG, where the board approves the conversion of 18 787 options into firm orders.

After a slow first quarter, global seat capacity rises by 1.7% in April. Having fallen 4% in Q1, capacity to/from Europe stabilises this month whilst, once again, Asia and the Middle East growth rates are accelerating.

Our advisory team attends the kick-off of a major privatisation project in Japan and in doing so has an opportunity to witness the fantastic 'Ninja Flyer' safety briefing on board StarFlyer. We particularly enjoy the ‘no smoking’ bit at 1m 15s.

May

The trend in seat capacity and fuel prices continues with the former increasing and the latter falling – a rare event in recent years. Singapore Airlines places an order for 60 A350 and B787s – it seems that there’s not much to choose between these two airframes. Airlines are showing a marked preference for twin-jets over four-engines, which doesn’t bode well for the A380 and B747-800 programmes. As we approach air show season, it’s going to be interesting to see which of the big-birds comes out on top.

The European Routes event is in Budapest this month and we have a strong team heading over to represent the business and support some of our airport clients in their meetings. In news of slightly greater proportions, our advisory team is in celebratory mood as client Limak and its consortium wins the tender to build and operate the new Istanbul Airport, for an eye-watering US$29 billion.

Flybe executes one of the strangest transactions of the year, selling 25 pairs of slots at Gatwick to easyJet for £20m. Our analysis suggests that recent increases in charges at London’s second airport are having a disproportionate impact on airlines flying smaller aircraft, but given the congestion at all of London’s airports it seems an odd move to pull out of the market altogether. But what do we know?

June

The Paris Air Show celebrates its 50th anniversary this month, with the usual exhibition of commercial and military hardware on show. Highlights are the flying displays of the wide-body competitors including the first British Airways A380 being put through its paces. More importantly, visitors get to see the first maiden public outing of the A350 XWB. For those of you who like a good-looking aircraft, this is the one – a beautiful looking airframe and impressively quiet in flight. There are various videos of the fly past online but we thought this shows the best of the display.

During the show, Ryanair provides the customary big order, confirming its intention to remain an all-Boeing operator with the purchase of 175 737-800s. Interesting that they opted for current generation equipment rather than the MAX. Surely it isn’t anything to do with the last remaining production slots for the current series 737 being offered at a bargain price?

In local news, Ian Robins makes his first move onto the property ladder.

July

Not to be outdone in the European low-cost carrier race, easyJet again commits to Airbus, with an order for 135 A320s. The order is split between current and NEO versions. There are yet more problems for Boeing as an Ethiopian Airlines 787 bursts into flames 8 hours after being parked on a remote stand at Heathrow, closing the airport.

Huge news for us, although it fails to make the FT - RDC and Aviation Economics officially join forces, following a three months’ of negotiations. Both companies will operate as separate entities for the remainder of 2013, retaining brand identities and offices in Nottingham and London. This is a great opportunity for both of us to develop a global business and, importantly, gives significantly expanded credentials and experience in the aviation sector.

On a personal level our congratulations go to analyst Niels van Alten, who officially graduates from Amsterdam University of Applied Sciences as a Bachelor in Aviation Engineering.

August

This is a landmark month for the product and support teams, after months of hard work. On 28th August we officially release our new airport charges product to a select group of test users. Originally launched back in 2005, airportcharges.com aimed to provide an online library service for airlines to locate official ‘conditions of use documents’ but the site had grown to include more functionality than we could ever have envisaged. Back in 2012, we decided it needed a complete, bottom up re-write so that we could start offering the most detailed calculations on the market – in addition to the popular library and summary charge functions. The site goes live with detailed charges for more than 1,500 airports. Richard Leigh's expertise in the structure of airport charging regimes builds on our global specialism in this field.

In other news, Vueling ordered 60 A320s – not quite on the same scale as easyJet and Ryanair, but a statement of intent from IAG to keep its low-cost arm expanding. We wonder if BA ever regrets selling Go to easyJet all those years back?

September

More hot news from the development team who have been meticulously accumulating European fares data for their latest secret project. If only we knew what it was? The boffins tell us they are now collecting around 300,000 data points a month and will have something to show off in the forthcoming months.

Staying on the theme of RDC, our Online Product Manager Adam Kendall completes the Nottingham half marathon in an impressive 1h 41 and raises money for the Alzheimer’s Society in the process. Jen Turner and her team win the Horseball National League 2, although we are unsure whether this sport actually exists.

Ryanair strike a long-term fee deal with MAG, the new owner of Stansted Airport, which will see the Irish carrier “grow traffic by 50%” over a ten-year period at the London airport.

October

As autumn starts, we look back at a summer scheduling season that saw capacity increase by 2.2% over the same period last year. The underlying positive news for the global industry, during the time where carriers typically make their money, hides stark differences in regional performances. The North American market, which was the largest global bloc until being overtaken by Asia in 2012, declined by 3%, while available seat capacity in Asia grew by 8.3%.

October also sees a landmark order from Japan Airlines as it places a first ever order with Airbus – 31 A350s and options for 25 more. We wonder if the grounding of JAL 787s might have had anything to do with this? While on a project in Tokyo, one of our consultants observes almost every type of Boeing ever made in the JAL colours at Haneda Airport and a quick look through our fleet list shows they are currently operating B737-400, 800; 747-400; 767-200, 300, 300ER; 777-200, 200ER, 300, 300ER; 787-800 and if you want to be picky, a handful of MD90-30s.

A couple of notable moves for Etihad this month away from the airframe market as it doubles its stake in Virgin Australia to 19.9% and announces intention to acquire 49% of Air Serbia. The last time we saw an airline embark upon a sweep-up of minority stakes in other airlines was Swissair back in the ‘90s. We can only assume that Etihad knows something that Swissair didn’t...

The Global Routes conference takes place out in Las Vegas, an extraordinary place for an airline networking event. There are several volunteers to join the RDC exhibition team, and it is no surprise when the MD decides it’s time he attended one of these conferences.

November

The final months of the year are always busy for us and there is no shortage of news this month. Nobody appears to notice that it’s a year since Airbus delivered its final ever A340 – all eyes are on the Dubai air show, and as expected the major Gulf carriers are warming up their chequebooks again. The pre-show gossip is all about the A380 programme and the worrying lack of new orders, but this is blown away almost immediately as Emirates puts in an order for 50 more, taking their inventory to just short of half of the current production and order-book. Then it’s a short hop over to the Boeing chalet, where they snap up 150 more 777x.

Local rival Etihad is also looking for equipment to fuel its expansion drive and places its largest ever order, securing 25 B777-8x, 30 B787s and 50 A350s – plus 36 of the A320NEO. The airline also gains regulatory approval for a 24% stake in Jet Airways and takes a 33% holding in Darwin, which will be re-branded Etihad Regional. Back at the air show, the local low cost carrier FlyDubai places an order for 86 B737MAX – and this is all on the first day of the show. Seat capacity from the Middle East is only up 10% this month but once these aircraft join the local fleets, we expect to see strong double-digit growth for several years.

The Air France board decide to politely decline the opportunity to invest in Alitalia, which isn’t big news in the scheme of things – the Italian flag carrier has lost a combined EUR2.96bn (net) since 2004 if our analysis is correct. Sensing an opportunity to muscle in, Vueling announces an eight aircraft base at Rome FCO, followed swiftly by Ryanair which announces the addition of six aircraft to the airport.

And lastly, spare a thought for Adam and Jen who are due to attend the world’s largest tech conference, Dreamforce, in San Francisco. Keen to fly on the new BA A380 they route to San Fran via LAX, where the 380 operates one of the three daily services. However, their plan backfires badly as they misconnect in both directions – and instead of the 380 have to make-do with one of BAs very tired 744s. Unlucky.

December

Massive news at the global level as regulators finally approve the American / US Airways merger, creating a third US powerhouse carrier along with United and Delta. The new airline will operate a fleet of 1,278 aircraft and we are happy not to be working in Ops there. Congratulations also to our client Odebrecht who, along with Singapore Changi, won the concession to operate Galeao airport in Rio de Janeiro for 25 years at a cost of US$8.3bn.

Consultancy Analyst Nick added a son, Thomas, to his family and became our third new-parent of the year. Jo returned to work from maternity leave, coming back to head up our airport and route development consultancy business. RDC and Arup signed a Memorandum of Understanding to work together on transaction advisory projects, furthering a co-operation we’ve had for over a decade.

The year ended with Mark’s ukulele band, Moselele, leading this rousing (?) rendition of The Pogues in his home-town.

Our Christmas party featured a flight simulator, mini golf, table tennis tournament and the customary eating and drinking. Adam was the runaway winner of mini golf and flying, while Phil scooped the table tennis, beating Alvin in a hotly contested final. Tim won the losers plate competition, beating the MD. Was this a wise move? Only time will tell.

That was our take on 2013. A challenging year for the industry, an exciting year for us. We look forward to 2014 with renewed enthusiasm! Peter Hind