Industry Monitor

The EUROCONTROL bulletin on air transport trends

Issue N°184. 03/06/2016

 European flights increased by 1.9% in April EUROCONTROL Statistics and Forecasts 1 2016 compared with April 2015 and were in line with the forecast. Preliminary data for May Other Statistics and Forecasts 2 show a 2.3% increase of flights on May 2015.  Top nine European airlines listed in this Passenger Airlines 4 bulletin recorded €0.4 billion operating losses during the first quarter of 2016, a 46% Financial Results of Airlines 7 improvement on the same period in 2015. Cargo 7  Oil prices at their highest in 2016, jumped to €42 per barrel in May from €30 per barrel in Aircraft manufacturing 8 January. EIA raised Brent forecast for 2016 from €32 per barrel predicted in April to €37 per barrel in its forecast update. Airports 8 Oil 9

Regulation 10

Economy 10

Fares 10

EUROCONTROL Statistics and Forecasts

European flights (ECAC – European Civil Aviation Conference area) increased by 1.9% in April 2016 year on year and was at the low-end of the forecast published in February 2016 (Figure 1) mainly due to fewer flights due to industrial action in Italy, Germany and France but also the closure of Brussels airport until 3 April. There were on average 167 fewer flights daily in Belgium and a 15% decrease in the state’s international arrivals and departures. This was the impact of the terrorist attacks on 22 March along with industrial action in April. Low-cost airlines, easyJet and Vueling shifted all or part of their operations from Brussels to Lille whereas Ryanair shifted part of its schedule from Brussels to Charleroi. The overall decrease of the low-cost segment in Belgium was 4.7% in April.

The shift of Easter to March 2016 (compared to April 2015) resulted in total flights being artificially inflated in April 2016. However, the effect was counterbalanced by the significant events mentioned above during the month that led the low-cost segment to slow down from an increase of 6.8% in March to an increase of 2.2% in April. On the other hand, the traditional scheduled segment may have benefited from the Easter effect as it grew 4% in April. Business aviation and all-cargo increased by 2.7% and 1% respectively. Suffering from the traffic declines from/to Egypt, Tunisia and Russia, the charter segment decreased by 25.3%.

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Figure 1: Monthly European Traffic and Forecast (based on the 7-year forecast Feb16).

As shown in Figure 2, 11 states contributed significantly to the growth of local traffic (excluding overflights) in Europe in April 2016 with UK as the top contributor with 284 extra flights per day thanks to dynamic traffic on flows from/to the busiest European states. France and Spain came next adding each circa 160 daily flights. Germany added 85 daily flights thanks to a strong internal flow which grew 5.6% on April 2015. Both the Netherlands and Canary Islands contributed to each circa 80 extra daily flights. The remaining states (Ireland, Lisbon FIR, Poland, Romania and Sweden) added together 255 daily flights to the network. Turkey which usually appeared among the top contributors has decelerated due to a weak international arrival/departure flow in April 2016.

The top three extra-European partners in average daily flights on flows in both directions in April were the United States (900 flights, up 2%), the Russian Federation (600 flights, down 17%) and the United Arab Emirates (300 flights, up 10%). Traffic flows between Europe and Egypt and Tunisia did not show signs of recovery and were down 35% and 20% respectively.

Preliminary data for May show a 2.3% increase of flights on May 2015.

Comprehensive statistics on flights are available from the STATFOR dashboard1 (EUROCONTROL, May).

Other Statistics and Forecasts

IATA reported that European scheduled passenger traffic (RPK) increased by 1.8% in April 2016 year-on-year; a weak demand resulting from the terrorist attacks in Brussels on 22 March. Capacity was up 2.4% and the total passenger load factor was 80.2% (IATA, 5 May).

ACI reported overall passenger counts at European airports to be up 5.5% in March 2016 compared with March 2015 whereas overall aircraft movements increased by 2.3%. During the first quarter of 2016 (vs. the same quarter last year), overall passenger counts at European airports were up 7.8% with overall aircraft movements up 4% (ACI, 11 May).

1 www.eurocontrol.int/statfor/sid Industry Monitor. Issue 184. 03/06/2016 Page 2 © EUROCONTROL 2016

Figure 2: Main changes to traffic on the European network in April 2016.

Based on data from airlines for delays from all causes, the average delay per flight in April 2016 decreased to 8.7 minutes from 9.7 minutes in April 2015. Further analysis of the delay reasons shows that reactionary and Airline delay respectively decreased by 0.4 and 0.2 percentage points (Figure 3). Due to ATC staffing issues, ATFM delays were generated in Brussels, Liege and Charleroi airports. Staffing issues at London Stansted, London Luton and London Gatwick airports generated ATFM delay during several days in April. ATC industrial actions in Italy and France generated airport ATFM delay and En-route ATFM delay. The industrial action of ground personnel in Germany resulted in approximately 1,300 flights not operating at several German airports. Seasonal weather (fog, strong winds, thunderstorms) impacted operations particularly at London/Heathrow, Istanbul/Sabiha Gökçen, Frankfurt, Zürich and Amsterdam/Schiphol airports.

Operational data received directly from airlines by CODA describing delays from all causes in 2015 illustrated a worsening delay situation for the network compared to 2014. Despite stable levels of airline delay, ATFM en-route and ATFM airport operations delay increased. Analysis of the delay reasons shows that reactionary delays contributed the most to the average with 4.6 minutes per flight. Airline-related delays were stable at 3 minutes per flight in 2015, illustrating that this delay cause reached an optimum level given the favourable fuel price and consistent arrival punctuality over the previous 5 years. ATFCM airport delay ranked third with 0.8 minutes per flight following a year with increases in airport-related delays, mainly in Istanbul and Rome.

The full report is available here: All-Causes Delay and Cancellations to Air Transport in Europe – Annual 2015 (EUROCONTROL, May).

Traffic Statistics: April Update

Figure 4 and Figure 5 compare April 2016 figures with April 2015 figures for the European carriers. In addition to the number of passengers (PAX), passenger capacity is measured in available seat kilometres (ASK), traffic is measured in revenue passenger kilometres (RPK) and load factor as a percentage (%).

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

Figure 3: Delay statistics (all-causes, airline-reported delay – preliminary data for April 2016).

Passenger Airlines

Capacity, costs and jobs

Ryanair has opened a European Training Centre at Stansted to support recruitment of 1,000 pilots, cabin crew and engineers in 2016. The carrier plans to add 14 new aircraft across its 13 UK airports and grow the number of passenger in UK from 36 million to 41 million passengers by the end of 2016 (Ryanair, 16 May).

SWISS will be the first airline in the world to operate the new Bombardier C Series when it receives its first CS100 aircraft at the end of June for its maiden commercial flight from Zurich to Paris CDG on 15 July. European destinations currently served with the Avro RJ100 aircraft will gradually be replaced with Bombardier C Series aircraft in 2016. Parent Lufthansa placed a firm order for 30 C Series aircraft in 2015 (Swiss, 21 April).

Start-up Fly One, Moldova started charter operations from Chisinau to Antalya, Heraklion and Rhodes in April and plans to launch scheduled services from Chisinau to three Russian destinations (Moscow, St Petersburg, Voronezh) and six European destinations, (Barcelona, Verona, Dublin, London Stansted, Lisbon, Palma) with two Airbus A320 aircraft from June onwards (Fly One, May).

Air Serbia has taken delivery of its first Airbus A330-200 aircraft from parent Etihad Airways to launch its first long-haul flight from Belgrade to New York JFK, effective 23 June. Air Serbia operates a fleet of 10 A320 family aircraft and 6 ATR 72s aircraft for its regional operations (Etihad, 12 May).

Lithuanian Small Planet Airlines has secured a German Air Operator’s Certificate and signed agreements with tour operators TUI and Thomas Cook to operate charter flights from two German bases, Bremen and Paderborn during the summer season, using two Airbus A320 aircraft. TUI destinations include Rhodes, Heraklion, Kos, Menorca and Burgas whereas flights for Thomas Cook concern mostly Mallorca (Small Planet Airlines, 12 May).

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Figure 4: Main carriers’ traffic statistics.

Qatar Airways has increased its stake in IAG Group to 15% from an initial 10% stake acquired in January 2015. This will enable the Gulf carrier to have access to IAG’s trans- Atlantic network and leading positions at hubs in London and Madrid (Qatar Airways, 18 May).

Lufthansa Group’s subsidiary, Austrian Airlines will reportedly be forced to cancel circa 150 flights in June due to pilot shortage. The airline is disposing of its fleet of Fokker 70/100 aircraft for a fleet of 17 Embraer E195 aircraft; a fleet renewal programme requiring pilot retraining (ATW, 23 May).

Low-cost Norwegian continues to expand its long-haul fleet with the lease of two new B787-9 Dreamliners to be delivered in spring 2018. The carrier currently operates 10 B787 aircraft and will operate 42 B787 Dreamliners by 2020 (Norwegian, 24 May).

Amsterdam-based start-up, Instantair launches unlimited flights between Amsterdam, London, Paris and Frankfurt. The model is based on a monthly fee membership giving access to unlimited daily morning and evening flights on six to 18-seat turboprop aircraft flying to business terminals and private airports (Instantair, May).

Wizz Air unveiled its planned fleet development which will more than double by 2024 to reach 152 aircraft from 67 aircraft in 2016. The low-cost carrier expects to increase its capacity at a rate of 15% per year until 2024. In 2015 Wizz Air placed a firm order for 110 Airbus A321neo aircraft and options for 90 additional A321neo aircraft (Wizz Air, 25 May).

In its growth strategy review, Finnair confirmed its objective to phase-out its Airbus A340- 300 fleet by the end of 2017 and replace it with a fleet of 19 Airbus A350-900XWB aircraft by 2023 (Finnair, 12 May).

Failures

Belgian regional VLM Airlines seeks to avoid bankruptcy and has reportedly asked for creditor protection for a six-month period to implement its restructuring programme to break even by the end of 2016 and return to profit by mid-2017 (De Standaard, 13 May).

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Figure 5: Main carriers’ load factors.

Routes, Alliances, Codeshares

Air France-KLM’s subsidiary, Transavia has launched its first German internal flight from its Munich base to Berlin. The low-cost airline will also launch services from Munich to the Canary Islands (Tenerife, Fuerteventura, Gran Canaria) and to Tel Aviv with the start of its winter flight schedule 2016 and aims at operating 19 destinations from Munich with four based aircraft (Transavia, 2 & 23 May).

Ryanair will operate flights from Luxembourg to London Stansted and Porto, effective in September and will also launch services from London Stansted to Hamburg, Timisoara and Toulouse with the start of its winter schedule (Ryanair, 19 May).

Low-cost Norwegian will open a base in Palma de Mallorca in June thereby bringing to seven the number of its bases in Spain and will operate 11 services including domestic flights from Palma to Barcelona and Madrid (Norwegian, May).

Low-cost Schiphol-based Transavia and Delta Air Lines started a codeshare agreement whereby Delta code will be placed on Transavia service to Greece, Portugal, Spain and Morocco, a total of 10 routes from Amsterdam (Delta Air Lines, 17 May).

Transavia France started three new routes from its base at Lyon to Lisbon, Agadir and Valencia in addition to Faro and Rhodes routes launched in April. In total Air France-KLM’s low-cost subsidiary launched 13 new destinations from its three French bases in summer 2016 (six routes from Paris Orly to Dubrovnik, Edinburgh, London Luton, Rhodes, Split, Vienna and two routes from Nantes to Faro and Algiers) (Air France-KLM, April & May). airberlin and Czech Airlines have signed a codeshare agreement whereby the latter will place its code on all flights from Berlin, Dusseldorf and Hamburg to Keflavik whereas airberlin will place its code on flights from Prague to Dusseldorf, Frankfurt and Hamburg and from Prague to Ostrava (Czech Rep.) and Kosice (Slovak Rep.) (airberlin, 11 May).

Japan Airlines (JAL) is planning to include Iberia in its joint venture with British Airways and Finnair for flights between Europe and Japan. The new joint business is pending approval from Japanese regulators. Iberia has announced it will launch a non-stop flight between Madrid and Tokyo Narita from 18 October onwards (Iberia & JAL, 20 May).

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Figure 6: Operating Profits of Airlines in 2016Q1.

Financial Results of Airlines

Top nine European airlines listed in this bulletin recorded €0.4 billion operating losses during the first quarter of 2016, a 46% improvement on the same period in 2015.

Figure 6 compares the first quarter of 2016 financial results with the first quarter of 2015 for nine of the top ten European airlines (based on 2015 traffic shares – Alitalia results were not available at the time of publication). During the January-March 2015 period which is traditionally loss-making for airlines, IAG Group and Ryanair posted profit in operating results. Five airlines mentioned in this bulletin posted losses in operating results but reduced their losses compared to 1Q2015.

Turkish Airlines which posted €15 million profit in 1Q2015 swung to €195 million losses in 1Q2016 owing to weak demand resulting from the political unrest in the Middle-East and terrorist attacks in Turkey. The airline’s load factor was down to 74% for the quarter from 77% in 2015.

Terrorist attacks perpetrated in Egypt, Paris and Brussels over the last six months impacted easyJet’s passenger revenue which posted €31 million losses from €9 million profit during the same period last year (source: Company reports).

Cargo

Fedex has formally completed the acquisition of its rival TNT Express, a deal which will significantly increase its European market share (Fedex & TNT, 18 May).

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Figure 7: Brent and kerosene prices.

Aircraft manufacturing

In its 10-year market forecast (2016-2025), Bombardier estimates business jet deliveries to decline by 10% in 2016 then grow smoothly between 2017 and 2025 when emerging markets (Latin America, China and Russia) are expected to return to growth within the next two years. Europe will remain the second largest market for business aviation with 1,530 deliveries (18% of deliveries) out of a total of 8,300 business jet deliveries from 2016 to 2025 (Bombardier, 24 May).

Airbus reported net commercial orders for 10 aircraft during 1Q2016 compared with 102 aircraft during the same quarter last year and delivered 125 aircraft (vs. 134 aircraft during 1Q2015) of which 103 A320s aircraft, 13 A330s aircraft, 4 A350 aircraft and 5 A380s aircraft (Airbus Group, 26 April).

Boeing recorded 122 net commercial orders during 1Q2016 (vs. 110 aircraft during 1Q2015) and delivered 176 aircraft (vs 184 aircraft during 1Q2015) (Boeing, 27 April).

Embraer delivered 21 commercial aircraft during 1Q2016 of which 19 E175s aircraft and 2 E190s aircraft (Embraer, 29 April).

American Airlines received on 17 May the first Airbus A321 aircraft from the Airbus U.S. Manufacturing Facility in Alabama. Airbus opened its U.S. plant in September 2015 for assembly of A319, A320 and A321 aircraft family and plans to deliver four aircraft per month by the end of 2017 (Airbus, 17 May).

Airports

Oslo Rygge airport reportedly announced it will cease operations as from 1 November. The airport’s main customer (circa 60% of traffic at the airport), Ryanair had threatened to close its base at Rygge should the Air Passenger Duty be enforced, which is the case since 1 June (norwaytoday, 24 May).

Figure 8: Ticket Prices in Europe.

Passenger traffic and aircraft movements during the first quarter of 2016 at top five European airports (based on the number of flight departures) compared with the same period a year ago were as follows (growth on 1Q2015):

Passenger traffic Aircraft movements 1. London Heathrow 16.8 million (+ 2.6%) 112K (+0.6%) 2. Paris CDG 14.3 million (+ 1.3%) 107K (+0.2%) 3. Frankfurt 12.9 million (+ 3.3%) 106K (+1.0%) 4. Istanbul Atatürk 13.8 million (+ 5.8%) 107K (+6.7%) 5. Amsterdam Schiphol 13.0 million (+12.4%) 103K (+5.9%) (source: airport reports).

Heathrow reported revenue up 3.2% to €840 million for the first quarter of 2016 compared with the same period a year ago (Heathrow, 21 April 2016).

Aeroports de Paris (Groupe ADP) reported consolidating revenue growing by 1.8% to €680 million during the first quarter of 2016 compared with 2015 (Groupe ADP, 2 May).

Fraport reported revenue decreasing by 0.6% to €570 million (due to changes to the scope of consolidation; when adjusted for the changes, the Group revenue increased by 2.6%) during the first quarter of 2016 compared with the same quarter in 2015 (Fraport Group, 4 May).

Oil

Oil prices were at their highest in 2016 and jumped to €42 per barrel in May from €30 per barrel in January. Converted indices for Kerosene and Brent are shown in Figure 7.

In its May short-term energy outlook, EIA forecast Brent crude oil price to average €37 ($41) per barrel in 2016 and €46 ($51) per barrel in 2017, an increase of €5 ($6) and €9 ($10) per barrel respectively, compared with April’s forecast (EIA, 10 May).

Regulation

The Norwegian government implemented the Air Passenger Tax as from 1June. A tax of €9 will be levied on departing passengers for both domestic and international flights. Based on a study by IATA, the tax risks reducing the overall demand for air transport by 5%, which equals roughly 1.2 million passengers per year (Norway Ministry of Finance, 13 May).

The European Aviation Safety Agency (EASA) has established a task force to assess the risk of collision between drones and commercial aircraft. The task force will review all relevant incidents collected by the European member states and analyse existing studies on the impact between drones and aircraft and study the vulnerabilities of aircraft (windshields, engines and airframes) (EASA, 4 May).

Economy

In its Spring 2016 European Economic Forecast, European Commission estimations in the Euro area were as follows (vs. Winter 2016 Forecast):

2016 2017 GDP: 1.6% ( 1.7%) 1.8% ( 1.9%) Unemployment: 10.3% (10.5%) 9.9% (10.2%) Inflation: 0.2%.( 0.5%) 1.4% ( 1.5%)

(EUROPA, 3 May).

Fares

Ticket prices in Europe decreased by 4% in April year-on-year, based on preliminary values. This is below the trend (12-month trailing average) shown in Figure 8 and reflects seasonal pricing linked to Easter (Eurostat, 18 May).

Note: to eliminate the influence of inflation on euro figures, the ticket price is deflated with a price index. The STATFOR deflated ticket prices are estimated in 2015 constant euros.

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