Opinion: London market

What does the future hold for the London Air market.

London has always been a constrained market, yet fragmented by the fact it has 6 ‘major’ entry points. Heathrow, Gatwick, Stansted, Luton, City And Southend have all been vying for their share of the lucrative market. But is all this about to change?

As well know, covid has turned the aviation industry into a spin, and London has been no exception. Where Gatwick was previously the second busiest airport, this has recently been pushed down to 4th behind Stansted and Luton (even further then 4th if we look at the U.K. as a whole). So, what does the big picture look like?

Heathrow

Heathrow has managed to retain the top spot, but even they are operating 2 out of 4 terminals. One attribute that has played in Heathrow’s favour is the fact that many London services have migrated to Heathrow. BA shorthaul has decamped from Gatwick, Virgin have consolidated its London flying to Heathrow and carriers such as Vistara seized the opportunity to open flights to the UKs premier hub. This all suggests that the status of Heathrow is unlikely to change, however, another situation may arise once Heathrow becomes full again. We will put a pin in that thought, and come back to it at the end.

Gatwick

I feel this is one airport that has suffered greatly. As mentioned, British Airways has not operated any short haul operation since the lockdown, and while it looks to be bookable from November, will that actually happen? Virgin has completely shut its LGW operation, including hangars and lounges. It has stated publicly it may return if demand dictatates, but realistically, that is unlikely to happen as eventually, they will be forced to relinquish their slots.
Emirates will only operate 1 daily indefinitely, down from 3 daily. Cathay keep pushing back their start date, Rwandair and China Airlines have decamped to Heathrow While Norwegian have effectively shut down for the time being.
There could be hope on the horizon, as Wizz and Ryanair have expressed interest in a substantial base, which in turn will spur Easyjet into competing, and that will return the passenger volume. It could however, mean that long haul traffic would find it difficult to return, slot wise.

Stansted

Stansted has fared well, given its prevalence of Ryanair, who restarted quickly, and cargo, which has kept the coffers ticking over to a degree. It hasn’t had completely plain sailing however. Easyjet announced, and subsequently shut its base at Stansted, with the loss of an 8 aircraft operation. SAS announced it would not proceed with its Copenhagen flights while Emirates has continually pushed back its resumption date. That combined with Jet2 taking a more cautious approach to capacity allocation means that if it were not for Ryanair, passenger demand could have been very flat. But thanks to Ryanair and Jet2, Stansted should tick along quite nicely. 

Luton

Luton has fared particularly well passenger wise, owing to wizzair. The airline has taken a rather different approach to the pandemic, which was to add capacity and routes at an impressive, if not confusing rate. While other carriers cut back, while other carriers attempted to conserve cash flow, Wizz seemed to throw caution to the wind. This meant that for August, Luton was 56% down versus the 85-99% that most other U.K. airports experienced. Will that luck continue however, as one wonders if the Wizz expansion could be short lived, especially if they get a big foothold in Gatwick. It’s a situation that LTN management will be looking over their shoulder to.

City

London City is an airport with a niche. It’s high yielding, predominantly business traffic that serves a very particular catchment and offers a bespoke service for that market. The issue with covid, is that market has been wiped out, and it’s unlikely to return in numbers any time soon.
The big issue LCY then have is that it is unlikely to be able to compete on leisure with the ‘big airports’. The airport simply isn’t set up to deal with the demands of a leisure passenger, as firstly they are a type of passenger that will arrive earlier for a flight, and secondly that means they demand such facilities such as eateries, shops and lounges.
Then we go on to aircraft type. The fact LCY has such a unique runway means that it has smaller aircraft serving the airport, and therefore unable to offer the volume to bring in the attractive leisure fares. Therefore, this is an airport that could suffer greatly going foreword. And given its location, is this airport even required in the future? That’s another debate entirely.

Southend

You have to feel for Southend. Its been a bit of a roller-coaster, being the plucky little upstart, gaining carriers like EasyJet early on, then flybe and Ryanair, with even wizz having a dabble in the market. And now, it's pretty much lost it all. Wizz serve just one route, Ryanair have put their base in the 'at risk' category, Flybe are now just a reference in the history books, while EasyJet have pulled their base entirely. 

SEN still has a niche carrier in Wideroe, but even they have applied for slots at several London airports, so, one wonders how committed they are. With currently ample London capacity, along with its location, I personally think Southend and City fall in the biggest 'at risk' category. Will Southend have history repeat, given its had this boom and bust situation before? 

Is the UK market about to be flipped on its head due to this London shift? 

So, the question I pose is a legitimate one. 

Air travel will grow again. There is no doubt about that. How it grows, that's the question. 

Will business travel rebound? Is VFR the new money making ticket? Will leisure be king? 

One things that is for certain, once air travel does rebound, carriers may find that the choice they had before is now somewhat limited. 

Heathrow will be full, with no 3rd runway in sight. Gatwick will now be full, and a battleground for wizz/easyJet and Ryanair for South London supremacy, long haul and legacy carriers have rarely had an appetite for Stansted, while Luton is hardly set up for long haul or legacy flights. City really isn't set up for market diversification and Southend has a small set up set on the LCC market too. 

This means one thing for me personally, and that is the regions could see their time to step up. 

Many of the long haul carriers also have a presence at Manchester, including a Virgin base. This means it could be easier to add to what is already there. IAG could decide that's the expansion point to keep Virgin in check too. There have already been suggestions that IAG airline, Aer Lingus are looking at UK long haul, with MAN a front runner. 

Manchester also boasts good domestic connectivity, a new larger transfer facility to cater for transfers as well as a large catchment. It could be a big beneficiary. It also has a large legacy carrier base, again setting it up for future growth. 

Birmingham could be seen as attractive due to the HS2 line and easy access to London, and having a lot of flights from the likes or Air France, Lufthansa and KLM, while Edinburgh could also be in with a shot due to its large inbound leisure potential (however a 2nd independence vote and the implications around that could yet throw another curveball there.)

Bristol has traditionally had a reasonably wealthy catchment, Glasgow a decent outbound leisure while Cardiff is a regional capital with success in the likes of Qatar Airways and Vueling. 

One thing is for sure, thanks to covid, I don't think UK aviation will quite be the same again. What are your thoughts on the future of the London Market? Let me know! 

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