Industry Monitor

The EUROCONTROL bulletin on air transport trends

Issue N°161. 31/03/2014

European traffic increased by 2.2% in February. EUROCONTROL statistics and forecasts 1 Preliminary data for March shows a 2.4% increase on March 2013. Other statistics and forecasts 3 Passenger airlines 3 New seven-year forecast (2014-2020) is for 11.2 million flights movements in Europe in 2020, Cargo 6 19% more than in 2013. Widely-differing growth Financial results of airlines 7 rates across the Member States. Airports 7 Updated IATA forecast expects European Oil 8 airlines to post profit of €2.3 billion in 2014. Regulation 8 Oil prices decreased €1.5 per barrel in March to Fares 9 €78.

Published financial results for 2013 revealed operating profits for the main airlines.

EUROCONTROL statistics and forecasts

European traffic increased by 2.2% (ESRA - EUROCONTROL Statistical Reference Area) in February compared with the same month a year ago and was in line with the baseline forecast issued in February. (Figure 1). As in January, Turkey was the main contributor to the network in February adding circa 250 daily flights (excluding overflights), followed by UK, Canary Islands and Ukraine. Canary Islands growth in particular boosted traffic on the South- West axis. Ukraine growth accelerated and it ended adding 66 daily flights. France and Egypt remained at the other end of the scale and together saw circa 140 fewer flights.

Low-cost traffic continued to increase in February and was up 7.1% compared with the same month a year ago. Charter traffic switched from a 1.1% increase in January to a 2.5% decrease in February whereas All-Cargo saw 13 fewer daily flights and was down 1.5% on February 2013 (EUROCONTROL, March).

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Figure 1: Monthly European Traffic and Forecast (based on February 2014 update).

Based on preliminary data from airlines for delay from all causes, 29% of flights were delayed on departure in February. This was a decrease of 7 percentage points when compared to the same month in 2013, where high weather delays were recorded. The average all causes delay per movement in February 2014 decreased from 9.4 minutes to 7.2 minutes. Further analysis of the delay reasons shows that Reactionary delay fell by 1 minute per flight. Airline and Weather delays also decreased, these by 0.2 and 0.7 minute respectively. ATFCM en- route delay as reported by airlines fell to 0.1 minute per flight. (Figure 2). (EUROCONTROL, March).

The new EUROCONTROL Seven-Year Forecast of Flight Movements and Service Units 2014 – 2020 is for 11.2 million IFR flights (± 0.9 million) in the EUROCONTROL Statistical Reference Area (ESRA) in 2020, 19% more than in 2013. Since the previous forecast was finalised in September, the economic outlook in Europe appears to have slightly improved in the first years, but not consistently and some States continue to look fragile. If slight growth is expected for this summer, specific local events have changed the forecasts locally in 2014. At European level, the traffic forecasts remain mostly unchanged: a moderate growth of 1.2% (±1.2 pp) for 2014 and more steady growth of 2.7% (±1 pp) for 2015. Within the overall average expected flight growth of 2.6%/year (low 1.1% to 3.6% high) in ESRA during RP2 (2014-2019), widely-differing rates of growth across the Member States continue to be observed, driven by different patterns of economic growth, tourism demand and changes in route-choice (for example due to Syria). The forecast reflects these variations. (EUROCONTROL, March).

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Breakdown of all-causes delay per flight Percentage of flights delayed on departure

Figure 2: Delay Statistics (all causes, airline-reported delay – preliminary data for February 2014).

Other statistics and forecasts

IATA published its revised profit outlook for airlines in 2014 and forecasts that European airlines will post profit of €2.3 billion in 2014 which is slightly down from its December 2013 forecast, however doubling profit posted in 2013. Global airlines cut their 2014 industry profit by 5% to €13.4 billion compared with the previous forecast, the main driver being higher crude oil prices (IATA, 12 March).

IATA reported that scheduled passenger traffic (RPK) in Europe increased by 6.7% in January 2014 compared with the same period a year ago. Capacity was up 6.1% and the total passenger load factor was 76% (IATA, 5 March).

ACI reported overall passenger counts at European airports to be up 4.6% in January 2014 compared with January 2013 with overall aircraft movements increasing by 2.9% on January last year. 80% of the airports saw an increase in passenger traffic in January, the best performance in more than two years (ACI, 7 March).

Passenger airlines

Following a meeting with the pilots’ syndicate, Air France has confirmed plans to reduce a further 1100 flight deck and cabin crew positions via voluntary redundancies, part of the restructuring plan that is currently going on. The process should be finished by March 2015. The airline reportedly signed an agreement with pilots’ union SNPL regarding low-cost Transavia France operations as follows: Transavia fleet to be expanded beyond the cap of 14 aircraft; Four A320 aircraft to be leased from air France; 10 Air France pilots to be seconded to Transavia. Transavia will be launching 17 new routes in summer 2014 (IM160). (Les Echos, 6 and 7 March)

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Note: IAG monthly pro-forma including Vueling in the baseline. Figure 3: Main carriers’ traffic statistics.

The Irish low-cost Ryanair has lost the appeal to the UK Competition Appeal Tribunal concerning the UK Competition Commission decision of August 2013 ruling that Ryanair must sell most of its stake in Aer Lingus (Reuters, 7 March).

The Slovenian national carrier, Adria Airways is reported to take delivery of two new CRJ- 900ERs in April and June. The new jets will replace an existing fleet of three CRJ-200s. The replacement is part of a strategy to operate larger aircraft with fewer frequencies (ch-aviation, bombardier 25 March).

The delivery of four new Boeing 787 Dreamliners to the low-cost carrier Norwegian Air is expected to be delayed. The aircraft were due to be delivered this spring but the finding of wing cracks by Boeing might cause a few weeks’ delay, according to the airline (Reuters, 10 March).

The flag carrier Cyprus Airways is reported to be in the process of selling one of its two landing slots at Heathrow airport to the Lebanese carrier Middle East Airlines for €6.3 million (CyprusMail, 13 March).

Thomas Cook has announced that despite significant market disruption Thomas Cook winter trading has been satisfactory. The company reported that, with the exception of Egypt, bookings for the summer were up 2% comparing to last year (the Telegraph, 28 March).

The start-up Greenland Express is in the process of acquiring operational permits from both Denmark and Iceland (ch-aviation, 17 March 2014).

The new Slovak carrier Go2sky is reported to add two Boeing 737 to its fleet during 2014 (flightglobal, 11 March).

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Note: IAG monthly pro-forma including Vueling in the baseline.

Figure 4: Main carrier load factors.

Routes, Alliances, Codeshares

IGavion France plans to launch international routes in summer from Dole to Rome Fiumicino, Girona, Palma and Venice using its Saab 340A aircraft operated by Skytaxi (IGavion, March).

Greek start-up Ellinair launched operations in February from Thessaloniki to Kiev and from end of May, the airline will start seasonal flights from Thessaloniki and Corfu to six destinations in Russia and in Ukraine along with Riga and Chisinau (Ellinair, March). airberlin, part of Oneworld alliance and Air France-KLM, part of SkyTeam are reportedly in talks to enter into a codeshare agreement in summer 2014 (Reuters, 4 March).

Start-up Fly Romania reportedly plans to launch scheduled services on two domestic routes from Bucharest to Timisoara and Tulcea and on international routes to Verona, Genoa, Bergamo, Barcelona and Frankfurt Hahn. The Romanian carrier is also reported to have won a Bissau-Guinean government tender to operate the route Lisbon-Bissau via their parent Ten Airways (routesonline, 5 and 21 March). airBaltic, Latvia’s national carrier, and Etihad Airways have expanded their codeshare agreement by including six new European destinations: Amsterdam, Brussels, Frankfurt, Munich and Zurich. After government approvals, the new codeshares will increase the number of weekly connecting return flights between Riga and Abu Dhabi to 37 (airBaltic, 24 March).

A strategy partnership between Air Serbia and Etihad Airways has been approved by the Serbian government. The United Arab Emirates’ (UAE) airline is now the shareholder of 49% of Air Serbia (inSerbia, 25 March).

Atlasjet UA, the new Ukrainian subsidiary of Atlasjet Airlines, has been reported to have issued its operational plans to serve, from its hub of Kiev Borispol the airports of Antalya, Baku and other Ukrainian and Russian destinations. The operations are to be launched the 1st of May but due to the current political instability, actions might be delayed or cancelled (ch-aviation, 25 March).

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Despite the recent file for insolvency (IM160) Carpatair announced a twice weekly flight from Rome Fiumicino to Lublin, Poland, with the aim of attracting religious travellers (Carpatair, 10 March).

The low-cost airline Wizzair announced the opening of a new base in Riga in June 2014, coinciding with the delivery of a new A320 aircraft. The airline will operate four new routes from the new base: Barcelona, Doncaster Sheffield, Paris Beauvais and Dortmund (Wizzair, 20 March).

Following the recent instability in Ukraine, Wizzair Ukraine has announced cuts on the fares and changes on the frequencies and availabilities of certain routes, namely the temporarily suspension of five routes from Donetsk. The airline has plans to open seven new routes from Lvov, in the west of the county, by the end of April (Wizzair, 19 March).

A continued transfer of direct flights to Germanwings, especially the routes that do not operate from Lufthansa’s main hubs of Frankfurt and Munich are part of the recently published Lufthansa’s 2014 summer schedule. Additional Mediterranean destinations and four new long-haul flights are the other main highlights of the new schedule (Lufthansa, 20 March).

The Chinese airline Hainan Airlines is expected to take delivery in 2014 of 28 new aircraft, including four Boeing 787 and three Airbus A330. This increase on the fleet will serve the new routes the airline is opening this year from China to Brussels, Berlin and Moscow. A recently signed agreement with its French subsidiary, Aigle Azur, will also allow the airline to open a code share service to Paris Orly (Reuters, 19 March).

The Danish charter airline Jet Time has granted its Finish Air Operators Certificate (AOC) which will allow Jet Time Finland to start operating flights from this country. The airline is now awaiting permission from the Turkish authorities to open its Antalya-Helsinki route (ch- aviation, 20 March).

The low-cost carrier Ryanair released its London Stansted winter schedule for 2014/2015 with 8 new routes and increased flights on others. The new routes announced are Athens, Basel, Bordeaux, Bucharest, Perpignan, Prague, Rabat and Skelleftea (Ryanair, 19 March).

Cargo

International Airlines Group (IAG) presented its 2013 financial results, reporting a 11.8% drop in cargo revenues in 2013 compared to the previous year. In terms of freight volumes the group reports a slight improvement. However, the weak cargo outlook still remains which, according to the group, might be linked to the imbalance of supply and demand in the market (IAG, 5 March).

Lufthansa Cargo has agreed with Boeing on postponing a decision on whether to convert its first of five options for Boeing 777F freighters, due to the unstable market conditions (Reuters, 25 March).

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Figure 5: Airline Financial Results.

Traffic statistics: February update

Figure 3 and Figure 4 compare February 2014 figures with February 2013 figures. In addition to the number of passengers (PAX), passenger capacity is measured in available seat kilometres (ASK) and traffic is measured in revenue passenger kilometres (RPK).

Financial results of airlines

Some of the main airlines have posted their financial results for 2013 (Figure 5). All the airlines are presenting operating profits, including some important recoveries, namely the IAG group, Air-France/KLM and the SAS Group (Company reports, March).

Airports

The opening of Berlin Brandenburg (BER) airport is reportedly set to open no sooner than 2016, five years behind schedule (DW, 25 February).

After a 6% fall in 2013, the net profit of Fraport, the operator of Frankfurt airport, is expected to slightly rise in 2014. Traffic growth forecasts however are still cautious (Fraport, 7 March).

A call for an expression of interest was issued by the Slovenian government as part of the process of selling a 75.5% stake of Aerodrom Ljubljana, the operator of the main Slovenian airport (Slovenian Times, 20 March).

Figure 6: Brent and kerosene prices.

Oil

Oil prices decreased €1.5 to €78 per barrel in March. Converted indices for Kerosene and Brent are shown in Figure 6.

Regulation

A new European Commission regulation (139/2014) concerning airport safety rules became applicable. The new rules comprise common standards for safe design, operation and maintenance in over 700 EU and EEA airports (European Commission, 6 of March).

It is reported that the Swiss Federal Office of Civil Aviation, Switzerland’s civil aviation regulator, is opening an investigation to study Darwin’s relationship with Etihad Airways, which is currently a 33% shareholder of the Swiss regional airline (ch-aviation, 26 March).

In 2015, passengers flying on long-haul flights from the UK will have a common tax rate, after a reform on the number of Air Passenger Duty (APD) destination bands that aims at reducing the cost of travel to long distance destinations (BBC News, 19 March).

Figure 7: Deflated ticket prices in Europe (source: Eurostat).

Fares

Deflated ticket prices in Europe increased by 0.5% in February year-on-year, based on preliminary values. This is below the trend (12-month trailing average) shown in Figure 7 (Eurostat, 17 March).

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STATFOR, the EUROCONTROL Statistics and Forecast Service [email protected] www.eurocontrol.int/statfor

The EUROCONTROL Statistics and Forecast Service (STATFOR) is ISO 9001:2008 certified. Industry Monitor. Issue 161. 31/03/2014 Page 10 © EUROCONTROL 2014