Industry Monitor the EUROCONTROL Bulletin on Air Transport Trends

Issue N°144. 02/10/12

Industry Monitor The EUROCONTROL bulletin on air transport trends

 European traffic decreased by 1.2% in August compared with the same month last year. EUROCONTROL statistics and forecasts 1 Preliminary data for September show a 3% Other statistics and forecasts 2 decrease in traffic on September 2011. Passenger airlines 3  Updated seven-year forecast: decline for 2012 Environment 6 still 1.5% fewer flights, but 2013 to see a flat Airports 7 growth, down to 0% from 1.5%. Aircraft Manufacturing 8  IATA expects European airlines to make $1.2 billion losses in 2012, a $0.1 billion downward Regulation 8 revision from the June forecast. Oil 9  Oil prices at €87 per barrel in September. Fares 9

EUROCONTROL statistics and forecasts

European flights decreased by 1.2% in August (see Figure 1). The charter and low-cost had the strongest increase out of the main market segments, both up 5% compared with August 2011 whereas all-cargo decreased by 6.3%, traditional scheduled was down by 3.7% and business aviation by 2.7% on 2011 levels. Preliminary data for September show a 3% decrease in traffic compared with September 2011 (EUROCONTROL, September).

Based on preliminary data from airlines for delay from all causes, 36% of flights were delayed on departure in August, resulting in a 2 percentage point decrease on August 2011. Analysis of the causes of delay shows a decrease of 1 minute per flight from reactionary delay. Airline- related delays remained at 3 minutes per flight, ATFCM en-route delays fell, down by 0.5 minutes to 0.4 minutes per flight. London Olympics 2012 (27 Jul – 12 Aug) had no major impact on delays (see Figure 2) (EUROCONTROL, September).

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Figure 1: Monthly European Traffic and Forecast.

The update of the seven-year forecast of flights movements 2012 -20181 is for 1.5% fewer flights in 2012, little changed from the February forecast. Nevertheless, very high oil prices, a weaker economic outlook and other recent events (airline failures, slower-than-expected recovery from the Arab Spring) have led to a downwards revision of the forecast over all. The growth in 2013 is now expected to be flat (down to 0% from 1.5% in the February forecast) and 2018 now finishes at 11.1 million flights, just below the figure published in February (EUROCONTROL, September).

Other statistics and forecasts

IATA reported that scheduled passenger traffic (RPK) in Europe increased by 5.6% in August 2012 compared with August 2011. Total load factors for the month stood at 84.9%. Freight traffic remained depressed and was down -1.1% on the same month last year (IATA, 28 September).

IATA published its revised profit outlook for airlines in 2012 and predicts that European airlines will lose $1.2 billion in 2012 as opposed to $1.1 billion in its June forecast, still blaming the continuing debt crisis, high fuel prices but also following a slowdown in the premium travel market. In 2013, European airlines are expected to be the only region in the red (IATA, 1 October).

ACI reported overall passenger traffic at European airports to be up just 2.2% in August 2012 compared with August 2011 whereas overall traffic movements decreased by 1.3% (ACI, 2 October).

1 The Seven-Year Forecast (Flight Movements) 2012-2018, September update is available here

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Breakdown of average delay per flight

Percentage of flights delayed on departure

Figure 2: Delay Statistics (all causes, airline-reported delay – preliminary data for August 2012).

Passenger airlines

Capacity, costs and jobs

It is reported that US Airways and American Airlines parent AMR signed a non-disclosure agreement to analyse a potential merger with the aim to rival the world’s largest; United Continental Holdings. It is further reported that British Airways signed a non-disclosure agreement with American Airlines with a view to acquire a stake in the US company (Reuters, 31 August and 2 September).

Easyjet is to launch paid-for allocated seating across its network from November onwards following successful trials on passengers’ satisfaction during the summer (easyJet, 4 September).

SAS continues to renew its aircraft fleet and signed an agreement to sell and phase out all its MD-80 aircraft. Four MD-80 will be delivered in 4Q12 with a further 19 aircraft from 2013 to 2015 (SAS, 13 September).

Lufthansa’s German domestic and European services outside Frankfurt and Munich hubs will be merged with Germanwings to create Germanwings GmbH, a budget airline to cut cost in Europe, effective January 2013. The new company will be based in Cologne and operate the Germanwings aircraft and the Lufthansa Direct Services fleet along with the aircraft of Eurowings GmbH for a total of 90 aircraft covering direct services in Germany and Europe (Lufthansa, 19 September).

Germanwings confirmed to move its base from Berlin Schönefeld to Berlin Tegel from 28 October, to cancel routes to Maastricht and Munich and to base one A319-100 aircraft in Tegel (instead of 2 currently) (Germanwings, September).

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Figure 3: Main carriers’ traffic statistics.

Within the framework of its cost-cutting Transform 2015 plan, Air France is to

 revamp its first and business class cabins on its long-haul network. The significant investment will be used to redesign La Première and Business cabins on board the airline’s B777 aircraft from 2014 onwards (Air France, 18 September).

 launch a French regional hub in April 2013, regrouping operations of Brit Air, Regional and Airlinair into a new brand. The French regional hub will operate 86 aircraft (instead of 93 at present) (Air France, 30 August).

Latvia’s Ministry of Transport seeks a new investor for state-owned Air Baltic and invites submission of non-binding expression of interest to participate in the flag carrier’s share capital up to 50% (Latvia Ministry of Transport, September).

Romanian Transport Ministry is reportedly to enter into negotiations with investors to take over 20% of state-owned Tarom (Mediafax Romania, 21 September).

Flag-carrier Belavia (Belarus) took delivery of its first Embraer E135 jet with a second aircraft to be delivered in 2013. Belarus’ fleet consists of 23 aircraft, mostly of the B737 series (Embraer, 14 September).

Tui Travel said it remained on track to meet its full year expectations thanks to strong trading over the summer high season which saw sales up 6% in Northern Europe, up 5% in Central Europe and 2% in Western Europe (Tui Travel plc, 27 September).

State-owned TAP Portugal is to be privatized by end 2012 under the terms of EU/International Monetary Fund bailout agreement. Avianca, Etihad and an unidentified Asian carrier have reportedly submitted non-binding bids, after IAG and Lufthansa withdrew their interest in acquiring the airline (Jornal de Negócios, 27 September).

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Figure 4: Main carriers’ load factors.

Routes, Alliances, Codeshares

New bmi regional, sold to Sector Aviation by IAG this year, is to open routes from Aberdeen to Bristol and from Manchester to Antwerp, effective 29 October (bmi regional, September).

Virgin Atlantic is to start short-haul flights in the UK from March 2013 with a service Heathrow – Manchester using some of its existing take-off and landing slots, but the airline will also expand its short-haul routes from Heathrow to Edinburgh and Aberdeen, pending the European Commission’s approval to operate the twelve slot pairs that British Airways is required to surrender following its takeover of BMI earlier this year (Virgin Atlantic, September).

Ryanair will add 2,000 extra flights on 300 routes over the Christmas period thanks to record advance bookings since the airline launched its 2012/2013 Winter schedule (Ryanair, 20 September).

Aer Lingus and Air Canada signed an interline agreement as a preamble to a code-share agreement to be signed in 2013. The new arrangement allows customers to purchase single tickets on connecting services with the two airlines (Air Canada, 21 September).

Air France-KLM released their winter schedule 2012-2013 with capacity down by 0.5% on medium-haul network and down 0.1% on long-haul network compared with winter 2011-2012. Air France also reduced capacity at its provincial bases (Marseille, Toulouse and Nice) for the winter season (Air France KLM, 1 October).

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Figure 5: Carbon prices.

Failures

UK’s third largest low-cost airline, Bmibaby ceased operations on 9 September after IAG’s failure to find a buyer for the company (IM141). It is reported that Monarch will be taking over a number of Bmibaby’s routes (IAG, 5 September).

Catania-based low-cost Windjet ceased operations on 13 August but could reportedly be rescued thanks to Sicilian regional government fundings (ANSA, September).

Traffic statistics: August update

Figure 3 and Figure 4 compare August 2012 figures with August 2011 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).

Environment

EC and Australia are to link their emission trading systems, starting with an interim link from July 2015 enabling Australian businesses to use EU allowances to help meet liabilities under the Australian emission trading scheme, until a full link is establised by July 2018 (Europa, 28 August).

The price of carbon contracts for 2015 was stable at around 9€/tonne in recent weeks (Figure 5).

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Figure 6. Brent and kerosene prices.

Airports

Overall passenger traffic at European airports increased by 2.3% during the first half of 2012 compared with the same period in 2011 whereas aircraft movements decreased by 1.6% (ACI, August).

The main European airports posted their financial results for the first half of 2012 (in million €):

1H12 Growth on 1H11 Operating result Aéroports de Paris €464 -0.2% EBITDA Fraport €366 +2.0% EBITDA BAA €696 +8.8% EBITDA (adjusted) Schiphol €264 +2.2% EBITDA TAV €129 +23% EBITDA (adjusted)

Passenger traffic at UK airports dipped during July and August partly because tourists deferred their holidays until after the end of the Olympics; traffic was down 4% in July and down 2% in August on the same months last year (BAA, 11 September).

The opening of Berlin Brandenburg Airport is now shifted from 17 March 2013 (IM141) to 27 October 2013, for the winter schedule 2013/2014 to finalise action plans and construction works regarding fire safety installations (BER, 7 September).

UK Prime Minister reportedly confirmed that a consultation process will be launched for a third runway at Heathrow although the government’s position remained unchanged about expansion at the airport (Department for Transport, 7 September).

Aircraft Manufacturing

In its Global Market Forecast (GMF), Airbus foresees a demand for 28,200 aircraft between 2012 and 2031 (27,850 between 2011 and 2030) of which 21% are for Europe. The manufacturer predicts that European passenger airlines will see 4.1% annual growth in RPK (4.2% in 2011). The aircraft deliveries are as follows: (compared with GMF 2011)

- Single-Aisles: 19,520 (+353 aircraft) of which 4,342 are for Europe; - Twin-Aisles: 6,970 (+60 aircraft) of which 1,174 are for Europe; - Very Large Aircraft: 1,710 (+30 aircraft) of which 323 aircraft for Europe.

Airbus’ forecast is in line with the forecast published by Boeing (IM143) and differs only in its assessment of Very Large Aircraft (VLA) demand; Boeing predicts 790 VLA aircraft between 2012-2031 (Airbus, 4 September).

Regulation

Civil Aviation Authorities in Russia and Italy reportedly amended their bilateral agreement (IM138) to allow Blue Panorama to operate on the Rome – Moscow route where only Alitalia could fly in the past (Air Transport World, 20 September).

As part of the UK-Ireland FAB initiative, both countries have planned simulations in October and November of a new airspace structure aiming at increasing the region’s network by 5%, lower fuel cost and CO2 emissions to eventually demonstrate that the revised airspace is at least as safe as the airspace it replaces (Irish Aviation Authority, 3 September).

EC approved restructuring aid for state-owned carrier Czech Airlines concluding that a significant capacity reduction, efficient cost and revenues management along with the sale of assets should ensure the airline’s long-term viability (EUROPA, 19 September).

Oil

Oil prices remain at €87 per barrel in September. Converted indices for Kerosene and Brent are shown in Figure 6.

(Correction IM143: We reported a price of $90 in August that should have read €90. We apologise for any inconvenience.)

Fares

Deflated ticket prices in Europe increased by 1.5% in August year-on-year, based on preliminary values (EUROSTAT, 28 September).

This document is published by EUROCONTROL for information purposes. It may be copied in whole or in part, provided that EUROCONTROL is mentioned as the source and it is not used for commercial purposes (i.e. for financial gain). The information in this document may not be modified without prior written permission from EUROCONTROL.

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

The EUROCONTROL Statistics and Forecast Service (STATFOR) Industr is ISOy Monitor. 9001:2008 Issue certified. 144. 02/ 10/12 Page 9 © EUROCONTROL 2012