Yearbook 2004 cargolux 50 years 1954-2004 Association of European Airlines Disclaimer Any views or opinions presented in this Yearbook are solely those of the AEA and do not necessarily represent those of individual member airlines. 50 years 19954-200454-2004 Association of European Airlines . Avenue Louise 350 B - 1050 Brussels Tel. +32 (0)2 639 89 89 Fax 639 89 99 E-mail [email protected] Web www.aea.be Dear reader of the AEA Yearbook, As you may see from the letterhead at Nevertheless, when we airlines are the top of the page, 2004 has been a coping, on an individual basis, with such special year for the AEA. Last upheavals in the marketplace, at an December, the world celebrated 100 industry level we badly need a stable and years since the Wright Brothers first took coherent regulatory platform on which to _________ to the air, which means that AEA has build our strategic planning. been around for half the lifetime of manned flight itself. This is where AEA comes in. In recent years, the graph of our market 2004 is also a year of major change in development has looked a bit like one of the political landscape, as regards our those pioneering flights, tossed up and main regulatory ‘partner’, the EU. On down by turbulence rather than the May 1st it experienced its biggest-ever smooth and steady climb that we have enlargement – and it is not hard to been used to. imagine the importance of air transport in integrating those new markets. As usual, part of this Yearbook describes what happened to our market in 2003. 2004 is also seeing a new European This should have been a recovery year, Parliament, and a new Commission. following the steep downturn after 9/11 These are the people who will oversee which persisted through much of 2002. the ongoing involvement of the EU in Instead, we were hit with two exceptional external aviation affairs, security, traffic-suppressing events – the Iraq War environmental issues, safety regulation, and the SARS outbreak. consumer matters – all key issues for the airlines as they strive to establish a more The result – unforeseen at the beginning sustainable economic basis on which to of the year – was that the AEA airlines, grow and to thrive. collectively, would suffer a fifth consecutive annual loss. I hope you will find all these undercurrents properly addressed in the And so on to 2004, another year which following pages. dawned with hopes of a brighter outcome – hopes which have taken a sharp knock with the skyrocketing price of jet fuel. This is not meant to be a catalogue of complaint. Our industry is dynamic and resilient and our customers remind us daily just how much they take for granted Vagn Soerensen the availability of convenient and Chief Executive Officer of Austrian affordable air transport. AEA Chairman 2004 Adria Airways, Aer Lingus, Air France, Air Malta, Alitalia, Austrian, bmi, British Airways, Cargolux, Croatia Airlines, CSA, Cyprus Airways, Finnair, Iberia, Icelandair, Jat Airways, KLM, LOT, Lufthansa, Luxair, Malev, Meridiana, Olympic Airlines, SAS, SN Brussels Airlines, Spanair, SWISS, TAP Air Portugal, Tarom, Turkish Airlines, Virgin Atlantic Airways. 50 YEARS OF SERVING EUROPEAN AIR TRANSPORT In 2004, the Association of European Since then the AEA's structure has Airlines celebrates the 50 th anniversary of evolved to reflect the realities facing the its foundation as a permanent body industry. 'Industry Affairs' divided into serving the European airline industry. Commercial and Aeropolitical (subsequently renamed Public Policy), in AEA actually traces its history further, to recognition of the growing involvement of 1952, when the Presidents of Air France, the EU in air transport matters. This KLM, Sabena and Swissair formed a joint involvement was formalised in 1986 study group, shortly afterwards expanded when air transport was confirmed as with the addition of BEA (a forerunner of being subject to the single-market British Airways) and SAS. process. Social Affairs, Infrastructure and Environment have also gained their place In February 1954, the Air Research within the AEA's structure. Bureau was established on a permanent basis, in Brussels. The name was For most of AEA's history, membership subsequently changed to the European was limited to IATA member airlines. Airlines Research Bureau and - i n 1973 This rule was relaxed in 1981 to allow - AEA. Luxair to complete the (then) full set of EU flag-carriers. Shortly after the ARB was established, the 1954 Strasbourg Conference on the AEA has had in all 38 members: three Coordination of Transport in Europe led (Balkan, Sabena, Swissair) have suffered to the foundation of the European Civil corporate failures, two (BEA and BOAC) Aviation Conference (ECAC) as an inter- merged into British Airways, and two governmental body. (British Caledonian and UTA) were taken-over by BA and Air France It recommended that participating states respectively. encourage air carriers to undertake cooperative studies aimed at promoting Apart from the six founder members, an orderly development of air transport in additions to membership have occurred Europe. Evidently, the ARB was well- as follows : 1950s - seven; 1960s - four; placed to be the industry's representative 1970s - four; 1980s - three; 1990s - in dialogue with ECAC. seven; 2000s - seven. By the time the AEA name was adopted, Evidently, there is as much demand for membership had grown to 19. There industry representation as at any other were three standing committees: time in AEA's existence. For the Research and Planning, Airline Industry Association to continue to serve its Affairs, and Technical Affairs, which was members into its second half-century, it formed when a pre-existing industry body will have to continue to adapt and (the 'Montparnasse Committee') was transform itself, to be as dynamic as the absorbed into AEA. industry it serves. 50 years 1954-2004 Association of European Airlines ASSOCIATION OF EUROPEAN AIRLINES - i ASSOCIATION OF EUROPEAN AIRLINES CONTENTS AEA – Serving the industry for 50 years i SECTION I AEA AIRLINES IN 2003 I-1 At a Glance I-2 The Global Economic Environment I-4 Flying through Currency Upheavals I-6 Traffic Trends 2003 I-7 Operating Results 2003 I-9 SECTION II OUTLOOK FOR 2004 II-1 Looking Forward ... II-2 Sustaining the Recovery II-3 Financial Outlook 2004 II-4 New Market Opportunities, in Europe and Globally II-5 SECTION III RESHAPING THE INDUSTRY III-1 Comparing Business Models – Network and No-Frills Carriers III-2 No-Frills Carrier Developments III-4 No-Frills Carriers and the Charleroi Decision III-5 Mergers and Alliances – Strengthening the Networks III-6 An End to Bilateralism ? III-7 SECTION IV REGULATION – TOO MUCH OR NOT ENOUGH ? IV-1 Security in the Aftermath of 9/11 IV-2 Does Europe at last have its Single Sky ? IV-4 Airports – A Fair Deal for Airlines and Passengers IV-5 Compensating the Passenger IV-6 The Great Gaseous Emissions Debate IV-7 SECTION V SPOTLIGHT ON THE AEA V-1 AEA Highlights V-3 Who’s Who at AEA V-5 AEA Fast Facts V-6 Airline Profiles & Review of 2003 V-7 SECTION VI KEY STATISTICS VI-1 Key Statistics - Total AEA VI-2 Key Statistics - By Carrier VI-4 What do we mean by…? VI-9 ASSOCIATION OF EUROPEAN AIRLINES I-1 2003 AT A GLANCE MONTHLY TRAFFIC MONITOR The traffic trend line started the year in 60% change in Revenue Passenger Kilometres reverse gear, as demand faltered in 50 Total Europe anticipation of the Iraq War. The North Atlantic recovery from a relatively short-duration 40 Far East / Australasia trough due to the war itself was hindered 30 Total Scheduled by the massive impact, particularly on the 20 Far East, of the SARS phenomenon. 10 0 -10 -20 -30 PASSENGER YIELDS - Total Europe Real Yields: adj. for exchange rate fluctuations and inflation -40 20 US¢ per Revenue Passenger Kilometre 2001 2002 2003 2004 Source: AEA AEA_YB_04010 19 Passenger yields tumbled, in real terms, 18 by 10.7% in 2003, a far greater drop than 17 at any other time in the long-run -3.5% per annum reduction in average prices. Several 16 effects were in play, not least of which was the network carriers’ response to 15 their no-frills competitors. 14 -10.7% CURRENCY EFFECTS: Strong Euro, Weak Dollar 13 1.4 US dollars = 1 Euro 12 1991 1993 1995 1997 1999 2001 2003 1.3 Source: AEA AEA_YB_04001 1.2 Annual average Currency fluctuations, in the shape of a 1.1 strong Euro vis-à-vis the US dollar, Euro appreciated by affected costs, revenues and market 20% against US dollar conditions. See chapter I-6 for an 1.0 analysis of how currency variations have repercussions – favourable and 0.9 otherwise – throughout the industry. 0.8 1999 2000 2001 2002 2003 2004 Source: OANDA AEA_YB_04003 I – 2 ASSOCIATION OF EUROPEAN AIRLINES -1.48Financial billion Loss (-1.42 US$ € bn) Total5.9 Scheduled bn US$ Revenue more all services Revenue (5.3 € bn) 516 Total000 Scheduled fewer PassengerPassengers numbers CRISES IN PERSPECTIVE AEA traffic and revenue loss in six months following: Event Impact on RPK loss Revenue loss millions % USD millions September 11 North Atlantic 20 463 25.5 1 289 SARS outbreak Far East 13 633 23.1 897 Source: AEA AEA_YB_04025 1.5% PassengerTotal Scheduled Traffic Passenger increase Kms 1.8%Total increased Scheduled Seat Capacity Kms on offer 2003 over 2002 ASSOCIATION OF EUROPEAN AIRLINES I–3 THE GLOBAL ECONOMIC ENVIRONMENT In 2003, world economies generally Economic growth in the US was a maintained their slow climb back from the relatively healthy 2.9%, with further depths of 2001, with a growth of 2% for the robust results projected.