Industry Monitor

The EUROCONTROL bulletin on air transport trends

Issue N°169. 30/01/2015

 European flights increased by 1.7% in 2014 compared with 2013, slightly below the baseline forecast. Preliminary data for January EUROCONTROL statistics and forecasts 1 show 0.2% fewer flights compared with January 2014. Other statistics and forecasts 2

 AEA figures for 2014: traffic (RPK) increased Passenger airlines 3 by 4.4%, an additional 11 million passengers on 2013. The average load factor was up 1.1 Aircraft manufacturing 7 percentage point to an all-time high 81%.  Oil prices continued to weaken in January and Airports 7 fell to €44 per barrel. EIA reduced Brent forecast for 2015, from €54 per barrel predicted Regulation 8 in December to €51 per barrel in its forecast update. The forecast for 2016 is for €60 per Oil 9 barrel. Fares 9

EUROCONTROL statistics and forecasts

European flights (ESRA – EUROCONTROL Statistical Reference Area) increased by 1.7% in 2014 compared with 20131, slightly below the baseline forecast published in September 2014 (Figure 1). There were significant changes in South-East Europe traffic patterns in 2014 giving country-to-country variation of 37% decline to 24% growth. The closure of Eastern Ukraine airspace since April 2014 led to re-routings impacting neighbouring countries. The closure of the Libyan airspace in August 2014 had a negative impact on Malta overflights. The re-opening of the KFOR sector in April resulted in airlines switching to more efficient routes in the Adriatic region.

Preliminary data for January 2015 show 0.2% fewer European flights compared with January 2014 because of a slow first week and declining traffic to Russia during the month.

In 2014 and for the second consecutive year, low-cost was the only market segment with continuous growth and was up 6.6% on 2013. Traditional scheduled, the largest segment, was far behind, still with a modest growth of 0.4%. The all-cargo segment recovered since July to show an overall 1% growth on 2013. The charter segment decline throughout the year accelerated in October to show a total decrease of 6%. The business aviation segment was down 0.5% on 2013.

1 The Network Manager (NM) has reported 1.8% growth in the NM area in 2014 (vs. 2013). The difference between NM and ESRA annual growth rate is mostly due to strongly-growing traffic (>10%) within the Caucasus (Georgia, Armenia and Azerbaijan) or between Russia, the Caucasus and the Middle East. Much of the remaining difference is due to Morocco, where there is also double-digit growth. Industry Monitor. Issue 169. 30/01/2015 Page 1 © EUROCONTROL 2015

Figure 1: Monthly European Traffic and Forecast.

Paris Charles De Gaulle was no longer the busiest airport in terms of flights in 2014, a position it has been holding for the last 10 years. Heathrow overtook both Charles de Gaulle and Frankfurt to regain first rank. Compared with 2013 only three of the top 10 airports saw a decrease in their departures in 2014: Paris CDG (-1.5%), Munich (-1.3%) and Frankfurt (-0.8%). Istanbul Atatürk saw the biggest increase, with 8.5% and was followed by London Gatwick (3.8%) and Rome Fiumicino (3.4%) (Figure 2) (EUROCONTROL, January)

Based on preliminary data from airlines for delays from all causes 43% of flights were delayed on departure (>= 5 minutes) in December 2014; this was an increase of 1.3 percentage points when compared with the same month in 2013. The average all-causes delay per movement in December 2014 increased from 11.9 minutes to 12.2 minutes. Further analysis of the delay reasons shows that reactionary remained stable and airline delay increased by 0.5 minutes per flight (Figure 3). Industrial action in Germany, Portugal, Belgium and Italy resulted in the cancellation of circa 3,700 flights in December. (EUROCONTROL, January).

Other statistics and forecasts

According to AEA figures for 2014, traffic (RPK) increased by 4.4%, an additional 11 million passengers on 2013. The average load factor was up 1.1 percentage point to an all-time high 81% in 2014 (AEA, 5 January).

IATA reported that European scheduled passenger traffic (RPK) was up 5.5% in November 2014 (vs. November 2013). Capacity rose by 4.6% and the total passenger load factor was 76.9% (IATA, 8 January).

ACI reported that overall passenger counts at European airports were up 5.3% in November 2014 (vs. November 2013) with overall aircraft movements up 1.7% (ACI, 8 January).

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Average Daily Rank Rank Departure Airport Growth on 2013 2013 2014 Flights in 2014

3 1 London Heathrow 648 0.2% 1 2 Paris Charles De Gaulle 646 -1.5% 2 3 Frankfurt 642 -0.8% 4 4 Amsterdam 615 3.0% 5 5 Istanbul Atatürk 588 8.5% 6 6 Munich 513 -1.3% 7 7 Madrid barajas 469 2.9% 8 8 Rome Fiumicino 428 3.4% 9 9 Barcelona 389 2.6% 11 10 London Gatwick 356 3.8% Top 10 Departure Airports' share of total departures in 2014 = 20% Source: www.eurocontrol.int/statfor/sid Figure 2: Busiest European airports in number of daily flight departures (2014 vs. 2013).

Passenger airlines

Capacity, costs and jobs

Air Méditerranée reportedly filed for commercial court protection while it is in negotiation with potential investors with a view to continue operations and sustain its workforce. Air Méditerranée went into a restructuring plan in 2011 and created Hermes Airlines, its Greek subsidiary. The airline operates scheduled flights throughout Western Europe, the Mediterranean, North and West Africa (le Journal de l’Aviation, January). Lufthansa has completed the transfer to its low-cost subsidiary Germanwings of 115 domestic and European routes not operating from Lufthansa’s Frankfurt and Munich hubs (Lufthansa, 8 January). Air Europa placed an order for 14 B787-9 Dreamliners aircraft bringing to 22 the number of B787 aircraft currently on order as part of its move to an all-Boeing long-haul fleet (Boeing, 15 January). Germania and Swiss start-up Holiday Jet are reportedly planning to launch operations to 13 leisure routes from Zurich to Antalya, Dalaman, Djerba, Sharm el Sheikh, Hurgada, Larnaca, Heraklion, Kerkyra, Kos, Mykonos, Rhodes, Santorina and Zakinthos, effective March (ATW, 15 January). Alitalia has unveiled its new business strategy following the completion of Etihad Airways’ equity investments. The airline will introduce a three-hub strategy as follows: 1. Milan Malpensa to increase long-haul services to Abu Dhabi, Shanghai and Tokyo; 2. Milan Linate to increase connectivity with partner airline hubs; 3. Rome Fiumicino to increase long-haul flights and expand short- and medium-haul services with seven new routes. In addition, Alitalia is in the process of relocating 14 A320s aircraft to airberlin, and looking into options with Etihad Airways to acquire additional wide-body aircraft for its own operations (Alitalia, 20 January).

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

Figure 3: Delay statistics (all-causes, airline-reported delay – preliminary data for December 2014).

Ryanair is reportedly planning to launch service from secondary airport Lelystad to complement planned operations from primary airport Schiphol with a view to operate business routes from the latter and tourist routes from Lelystad. Netherlands’ largest general aviation airport, Lelystad (IM166) is under work to allow for the operations of A320 and B737 aircraft (Het Financieele Dagblad, 14 January). It is reported that the Board of Aer Lingus would agree on the financial terms of IAG’s subsidiary, British Airways to buy the Irish carrier although the Irish government (which owns a 25% stake in Aer Lingus) is considering the offer in terms of its effects on competition, connectivity and jobs. IAG’s takeover would include Aer Lingus 23 pairs of take-off and landing slots at Heathrow. Ryanair which has a 29.8% stake in Aer Lingus has a power of veto and already rejected two IAG bids in 2014, but the 3rd bid is above the €2.40 per share which Ryanair paid for its stake (Irish Government & BBC, 27 January). The Portuguese government has set conditions for TAP privatization whereby the state will keep a 34% minority stake while 61% will go to a strategic investor and the remaining 5% will go to TAP employees. The government and TAP unions also agreed that there will be no redundancies for 30 months or as long as the state has a stake in the carrier after its privatization (Lusa news Agency, 16 January).

Air France has confirmed its intention to propose circa 800 voluntary departure plans to ground staff and cabin crew. These measures relate to the full execution of Transform 2015 and an immediate adaptation to the Air France-KLM Group’s competitive environment. (Air France, 22 January).

Routes, Alliances, Codeshares

Following the grounding of Cyprus Airways in January, Aegean Airlines will boost its operations from Cyprus and operate with four A320 aircraft from its Larnaca base and increase to 14 the number of direct connections to Cyprus. The airline will launch flights from Larnaca to London Heathrow, Paris, Munich, Rome and Milan along with a direct Athens-Paphos route and direct flights to Heraklion, Mykonos, Rhodes and Santorini. As a result of EU-Israel open skies Agreement, Aegean Airlines will also launch flights from Larnaca to Tel-Aviv (Aegean Airlines, 13 January).

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Figure 4: Main carriers’ traffic statistics.

Low-cost Blue Air will expand its operations in Cyprus setting up a base in Larnaca following the bankruptcy of Cyprus Airways and increasing frequencies to Athens and Thessaloniki. The airline also plans other destinations from its Cyprus base (Blue Air, January).

Brussels Airlines has enhanced its partnership with Thomas Cook as it will operate 824 charter flights for the latter in 2015, an increase of 26% on last year (Brussels Airlines, 8 January).

Lufthansa and UK bmi regional will reportedly expand their codeshare agreement as the latter will begin services from Lufthansa’s Munich hub to Berne, Bristol, Liège and Rotterdam and base three Embraer aircraft at Munich, effective 29 March (ch-aviation, 8 January).

Ryanair will launch five new routes from Rome Fiumicino to Bari, Brindisi, Comiso, Marseille and Seville with the start of its summer schedule; these destinations are currently served from Rome Ciampino. The carrier will base seven B737-800 aircraft at Ciampino and two B737-800 aircraft at Fiumicino (Ryanair, January).

XL Airways will start operations from Lille to 17 holiday destinations in summer 2015 (XL Airways, January).

Wizz Air will launch five new routes from its Skopje base to Friedrischshafen, Oslo-Torp, Barcelona, Hamburg Lübeck and Nuremberg with the addition of a third A320 aircraft. The airline also plans to operate from Macedonia’s second airport, Ohrid to Basel Mulhouse (Wizz Air, 22 January).

Wizz Air will open a base in Kosice, Slovakia and operate to Doncaster Sheffield and Milan Bergamo with on A320 aircraft, effective 14 September (Wizz Air, 28 January).

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Figure 5: Main carriers’ load factors.

Failures

Cyprus Airways suspended operations on 9 January after its restructuring plan submitted in October 2013 was denied by the European Commission and declared illegal state-aid. The airline has been receiving money from Cypriot government since 2007. Cyprus Government issued a tender to start a procedure for a new investor to establish a new private company with the name and logo of Cyprus Airways. Aegean Airlines and Ryanair, among others, made a non-binding bid last September to buy the loss-making airline (Cyprus Airways, 9 January & Cyprus Chamber, 18 January).

Serbia’s Aviogenex is to cease operations if it fails to secure a strategic partner by the end of the year. Aviogenex was once former Yugoslavia’s busiest charter airline (EX-YU aviation news, 13 January).

Hamburg Airways ceased operations last December after its Air Operator Certificate has been suspended. The airline has now reportedly begun insolvency proceedings and is in talk with potential investors. The airline operated charter flights to holiday destinations in the Mediterranean (ch-aviation, January).

Traffic statistics: December update

Figure 4 and Figure 5 compare December 2014 figures with December 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).

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Figure 6: Brent and kerosene prices.

Aircraft manufacturing

Airbus reported net commercial orders for 1,456 aircraft and delivered 629 aircraft of which 490 A320s aircraft, 108 A330s aircraft, 30 A380s aircraft and its first A350 aircraft to Qatar Airways(Airbus, 3 January).

Boeing reported 1,432 net commercial orders in 2014 and delivered 723 aircraft of which 485 B737s aircraft, 19 B747s aircraft, 6 B767 aircraft, 99 B777s aircraft and 114 B787s Dreamliner aircraft (Boeing, 6 January).

Embraer reported 149 net commercial orders in 2014 and delivered 92 commercial aviation aircraft, up 2.2% on last year deliveries (Embraer, 13 January).

ATR reported 160 net orders and delivered 83 aircraft, 12% more than in 2013 (ATR, 21 January).

Airports

Gothenburg City airport which closed for repair work last November will not re-open for passenger traffic. Ryanair, Wizzair and Gotlandsflyg temporarily re-routed their flights last November to Gothenburg’s main airport, Landvetter. None of the three airlines confirmed that they will continue operating at Landvetter in the long-term (Svedavia, 14 January).

Paris CDG posted record numbers of 64 million passengers in 2014, an increase of 2.8% on 2013 whereas aircraft movements were down 1.5%. The French airports group (ADP) recorded a passenger growth of 2.6% on 2013 (ADP, 13 January).

Frankfurt reported 60 million passengers in 2014, an increase of 2.6% compared with last year with aircraft movements down 0.8% on 2013. Fraport airports (Fraport Group, 15 January).

Figure 7: Deflated ticket prices in Europe.

Heathrow handled 73 million passengers in 2014, an increase of 1.4% on 2013 whereas aircraft movements were up 0.2% (Heathrow, 12 January).

TAV airports reported 57 million passengers at Istanbul Atatürk, an increase of 11% compared with 2013 whereas aircraft movements were up 9% (TAV, January).

Schiphol reported 55 million passengers at Amsterdam in 2014, an increase of 4.6% on the previous year. Aircraft movements were up 3% on 2013 (Schiphol, 5 January).

West Sussex County Council reportedly reversed its decision in July 2013 to support expansion of Gatwick following the high level of opposition that has been raised locally over the environmental impact and infrastructure implications of a second runway at Gatwick (BBC, 19 January).

Regulation

EU works on a new draft law for the collection of Passenger Name Records (PNR) in the aftermath of terrorist attacks. Information on travellers flying between European cities could be exchanged between government security services in the EU and passport and identity checks could be reintroduced within the EU’s passport-free travel zone (EUROPA, 26 January).

Oil

Oil prices continued to weaken in January and fell to €44 per barrel. Converted indices for Kerosene and Brent are shown in Figure 6.

In its short-term energy outlook (January 2015), EIA now forecasts Brent crude oil price to average €51 per barrel in 2015. This is 12% lower than forecast in December. EIA expects Brent prices to increase from a monthly average of €43 per barrel in January and February to reach an average of €60 per barrel during the fourth quarter. The forecast for 2016 is €65 per barrel (EIA, 13 January).

Fares

Deflated ticket prices in Europe increased by 3.9% in December year-on-year, based on preliminary values. This is above the trend (12-month trailing average) shown in Figure 7 (Eurostat, 16 January).

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