About Lufthansa Consulting Asia-Pacific Region

Energy Transition for Sustainability and Transit Development in Central Asia is the leading aviation event in the region, a platform that brings together top management and international experts from the aviation industry.

It allows representatives of government agencies, international organizations, academia, airlines, airports, jet fuel suppliers and sustainable alternative aviation fuel (SAF) producers, as well as other aviation market participants, to discuss the industry's priorities in terms of jet fuel supply and agree on further joint actions to increasing efficiency and productivity for sustainable development and transit potential of Central Asia, taking into account today's trends.

Meet Permanent Representative CIS Askhat Torshin at the 1st Kazakhstan Aviation Talks !

A very experienced team of Lufthansa Consulting experts will attend Asia Connect: MRO conference and exhibition from 17 - 18 May 2023 in Istanbul, Turkey. The speech "A380 reactivation – MRO challenges and insights” of Associate Partner and Head of Solution Group Maintenance and Engineering, Axel Schauenburg, is one of the key topics of the conference agenda. In addition, the company’s Head of Market CIS and Baltic States, Stanislav Solomko, as well as Permanent Representative CIS, Askhat Torshin, and Business Analyst Vanessa Schäfer will take part in this event and will be ready to share their expertise and discuss vital issues on site with the industry professionals. 

Axel’s presentation provides an overview of the current A380 market dynamics and recent developments in the worldwide A380 fleets. Looking at the reactivation plans of some airlines, it discusses a range of technical challenges airlines face in the course of returning the aircraft to service, complemented by a few deep-dive MRO examples of airlines’ efforts. It eventually provides an outlook on the future of the A380 in the worldwide fleets.

This technically oriented Asia Connect: MRO event gives the opportunity to find out insights about the latest trends in aircraft maintenance, repair and overhaul market development. Exhibitors and delegates will have excellent opportunities to share their capabilities and innovations, as well as to build new business relations in the Central Asia region.

Asia Connect: MRO website

On 4 April 2023, Lufthansa Consulting, with the support of the Civil Aviation Administration of Kazakhstan, held a seminar on "Airport Master Plan Development" in Astana, Kazakhstan.

As of March 1, 2023, master planning for international airports has become mandatory in Kazakhstan.

The seminar was aimed at airport operators in Kazakhstan and focused on the new requirements for airport development plans in the country in accordance with international standards and Lufthansa Consulting's recommended approach to airport master planning.

Through interactive discussions and knowledge sharing with industry experts, seminar participants learned about the latest trends in airport planning and design and gained insight into how to create a comprehensive airport master plan that meets international standards.

The seminar provided participants with an opportunity to acquire new skills and knowledge for developing airport master plans that promote sustainable development of Kazakhstan's aviation industry and meet international standards.

On 20 March, Lufthansa Consulting once again conducted a guest lecture at Cranfield University. In continuation of an annual tradition, the aviation experts have been invited to deliver their "Introduction to Network and Fleet Planning" to Masters students of Cranfield University's M.Sc. course in Air Transport Management.

The lecture covered numerous topics of high relevance to the students. Our Associate Partner Arvind Chandrasekhar, Senior Consultant Wasiq Khurshid and Consultant Ainesh Advani discussed with the students how network planning works within an airline organization, about data sources, passenger demand forecasting, route economics and the steps that go into developing a business case for a route. In addition, the class brought the topic to life through a detailed case study for a new intercontinental route between Asia-Pacific and Europe. With some excellent, probing questions from the class and a robust exchange of ideas, everybody thoroughly enjoyed the session.

“We greatly value our longstanding relationship with Cranfield University and thank Professor Gary Doy for inviting us to speak to his class. It’s always a pleasure to engage with future leaders of our industry,” said Arvind Chandrasekhar after the lecture session.

The postgraduate university has world-class expertise in its sector-leading specialist areas, particularly also in the field of aviation.

The Good News

China has revoked its stringent quarantine for inbound travelers starting January 8, 2023. This is good news for international travelers to and from China. Recent long waiting times at US and European embassies and consulates in China shows the desire of Chinese people to travel abroad has been re-ignited by the relaxing of travel restrictions. Moreover, as the pandemic subsides significantly, it is time for many overseas Chinese and business people to visit China again.
 

What is the impact on the aviation industry?

According to the World Tourism Organization, the number of international tourists arriving in China dropped by over 100 million passengers from 2019 to 2022. If the number of Chinese travelers comes back to its pre-pandemic levels, the aviation industry will need to prepare for millions of Chinese air travelers to re-enter the market. Just as the scheduled flights of the domestic market almost returned to their pre-pandemic level during the Chinese New Year, we estimate that similar demand for international air travel will return with the “Chinese Speed”.  However, are airlines and aircraft manufacturers ready for this?

To start with, due to the cost and environmental concerns, major carriers in the world have replaced or are in the process of replacing their four-engine long-haul aircraft such as Boeing 747 and Airbus A380 with two-engine aircraft such as Boeing 787, Airbus A350 or A330. A typical example is that British Airways phased out its thirty-two Boeing 747-400 aircraft between 2019 and 2021. To compensate for the loss of capacity, British Airways introduced a mix of Airbus A350, Boeing 777 and 787 during the same period, according to its annual reports. However, the Boeing 747-400 typically has more than 420 seats and the Boeing 787-10 and the Airbus A350-900 usually have 60 to 80 fewer seats. Even if British Airways replaced the Boeing 747-400 fleet with the same amount of Boeing 787 or Airbus A350, the reduction of seat capacity in long-haul operations would be significant.

Secondly, how much “spare capacity” do the airlines have? During the pandemic, many airlines stored their wide-body aircraft. But can these parked aircraft come back into service once the demand is there? From our research over the five “old generation” aircraft types with high inactivity ratios, most of the Boeing 747-400, 767-300 ER and 777-200ER fleets appear to have reached the edge of their economic life. Even if they can serve one or more seasons, they will reach the end of their useful life in the foreseeable future.

The inactive Airbus A330-200 fleet seems to be in a better position with a much lower average fleet age. The re-activation of A380 requires much more careful calculation. The airlines have to decide whether they just need to cover the operation for this summer or will integrate these aircraft into their fleet for long term operations. These four-engine aircraft are much more expensive to operate compared with their two-engine rivals and riskier to hold in a turbulent market.

The final option is to buy new aircraft. As per Airbus’ website the number of deliveries of A330 and A350 dropped from 53 to 32 and from 112 to 62 respectively between 2019 and 2022. Boeing showed an even gloomier picture on their website with the total delivery of its 777 and 787 dropping by over 70% between 2019 and 2022. On one hand, such a delivery drop was driven by the sharp drop in demand due to the pandemic. The expected increased demand will lead to an increase in the production rate. On the other hand, the drop in long-haul aircraft demand was profound and lasted too long. It will be a big challenge for the aircraft manufacturers and their suppliers to dramatically recover or even exceed their previous delivery rate.

In summary, we estimate that the return of travelers to and from China will boost the profitability of the aviation industry due to the strong market demand. The recent purchase of 72 787-9 Dreamliners by new Saudi Arabian Carrier Riyadh Air may further strengthen the competition for new aircraft production slots. With the tight supply of new long-haul aircraft, airlines need to start their procurement process early and evaluate their options carefully when they acquire the capacity.

Read the article with more graphics here!​​​​​​​

Lufthansa Consulting with its dedicated aircraft acquisition advisory team and cooperation partners supports its clients in managing their complete aircraft procurement process, evaluating different options and negotiating with OEMs and lessors to achieve the most value-add solutions.

Authors: Haihong Xu, Senior Consultant, and Vincent Hütte, Associate Partner