Research and Innovation REPORT: AIRLINES: EUROPE What you need to know August 2021 This report presents a roundup of what’s been happening to Europe’s airlines over the last month. Major network airlines Air France Improved second quarter Sales at Air France-KLM increased by 132.5% year-over-year to €2.75 billion in the second quarter of 2021. The airline group managed to halve operating losses to €752 million from €1.55 billion in 2020. With travel restrictions easing, the company reported a 477% rise in passengers to more than 7 million. The airline has reported the first signs of recovery, pushing capacity back to 47% of 2019 levels in the second quarter, although traffic was still only 24% of its pre-pandemic level. Air France-KLM is planning to operate 60-70% of its pre-pandemic capacity during the third quarter. More winter leisure destinations added Air France has announced six new routes for the winter. It will connect Paris Charles de Gaulle (CDG) with Tenerife and Rovaniemi in Finland. It will also duplicate CDG services to Berlin and Munich with flights to the German cities from Paris Orly airport. The French airline will also fly from Pointe-a-Pitre in Guadeloupe to Montreal and New York from the end of November. British Airways Extra seats added to U.S. Following a government decision to ease quarantine restrictions for travelers fully-vaccinated in the European Union and the U.S., British Airways has added thousands of seats to both markets. From August 16, services from London Heathrow to New York JFK increased from 17 to 21 per week, and those to Chicago and Los Angeles increased from seven to ten per week. From August 23, Seattle services were increased from four to seven per week, while Los Angles was upgraded further to 14 weekly flights. Additional flights have also been added to European destinations, including Berlin, Geneva and Ham burg. Parent company reduces losses British Airways’ parent company IAG, which also owns Aer Lingus, Iberia and Vueling, reported a 77% year- over-year rise in second quarter revenues. However, at €1.244 billion, the group’s sales were still 82% lower than in the same quarter of 2019. The airline group was able to reduce operating losses by 56% to €967 million, although this still compares unfavorably to 2019’s second quarter profit of €960 million. A 763% rise in traffic on an extra 369% in available seat kilometer capacity helped to lift IAG’s aggregate load factor by 23.6 percentage points to 51.8%. The airline would normally expect a figure in excess of 80% in the second quarter. Anticipating it may take until at least 2023 for passenger demand to fully recover, IAG is planning to slowly rebuild capacity, aiming for 45% of pre-pandemic levels in the third quarter. Page 1 Lufthansa Return of capacity continues Thanks to a surge in bookings that saw many destinations “sold out” in August, Lufthansa expects capacity to return to 50% of its pre-pandemic level in the third quarter of 2021, rising to 60% in the fourth. The airline is already flying 84% of its pre-pandemic routes. It’s aiming for 70% capacity in 2022. Based on feedback from corporate clients, Lufthansa is particularly optimistic about the return of transatlantic business travel from September or October. Second quarter revenue rise sharply Group sales in the second quarter of 2021 increased by 70% year-over-year to €3.2 billion ($3.8 billion), but they were still two-thirds lower than in 2019. Airline passenger revenues soared by 286% to €1.13 billion, but this was still 84% lower than in 2019. The group narrowed net losses from €1.5 billion to €756 million. Lufthansa had recorded a €226 million net profit in 2019’s second quarter. Other network airlines Aer Lingus U.K. AOC granted The U.K. subsidiary of Ireland’s Aer Lingus has been granted an air operator’s certificate (AOC). This will allow the airline to proceed with its plans for the October launch of transatlantic flights from Manchester to Barbados, with New York and Orlando services following in December, and flights to Boston in 2022. Aeroflot Domestic growth boosts results A surge in domestic demand helped Aeroflot almost achieve breakeven during the second quarter of 2021. A net loss of Rb1.4 billion (US$19 million) is much improved on the Rb26.12 billion loss recorded in the same quarter in 2020. Alitalia New airline cleared to launch As it prepares to launch operations on October 15, new Italian flag carrier Italia Trasporto Aereo (ITA) has passed an important milestone, having been granted its air operator’s certificate. Once it starts services, Alitalia will cease operations, transferring most of its assets to ITA. Finnair Strong rise in July passengers Finnair carried 213,800 passengers in July, 47% more than a year ago. Passenger numbers on Asia Pacific routes increased by 67%, on North Atlantic routes by 100%, within Europe by 44% and within Finland by 31%. With total capacity increasing by 91% and traffic by 95%, the airline improved its load factor by one- point to 43%. SAS Capacity ramped up to meet demand SAS carried nearly 1.08 million passengers in July, up 53% year-over-year. With traffic rising 123% on 85% growth in capacity, the Scandinavian airline was able to lift its load factor by 10.2 points to 61%. Airlines – Europe | August 31, 2021 | Page 2 Noting a rise in demand for both business and leisure travel, SAS will from September expand its operations, starting to restore 160 routes and 90 destinations. In response to rising interest in short breaks, SAS will resume routes to Amsterdam, Dublin, Florence, Krakow and Prague, while there will also be more flights to southern Europe and the Canary Islands as holiday demand grows. SAS also plans to resume a number of long haul routes, including services from Copenhagen to Shanghai and Tokyo. Virgin Atlantic Caribbean schedule boosted Virgin Atlantic will start London Heathrow service to Nassau in The Bahamas from the end of November. The airline is also increasing flights from both Heathrow and Manchester to Barbados. Virgin Atlantic is responding to real demand for luxury holidays in the Caribbean. The airline will also launch flights from Edinburgh to Barbados from December 5, with services to Orlando following in April 2022. Low-cost carriers Eurowings New Prague base Lufthansa’s low-cost division Eurowings will launch flights to 11 European destinations from October 31, from a new base in Czech capital Prague. It will start flying to Athens, Barcelona, Birmingham, Bristol, Copenhagen, Fuerteventura, Malaga. Milan, Tel Aviv, Tenerife and Zagreb. Most routes will be served with two to four weekly flights, although six-times weekly service will be offered to Copenhagen and Milan. Norwegian Passengers almost double The number of passengers carried by Norwegian in July soared by 95% to 696,000. However, this figure is far below the 3.7 million the airline carried in July 2019. With traffic rising by 124% on 105% growth in capacity, Norwegian posted a seven-point rise in load factor to 74%. U.K. and Ireland expansion planned Norwegian plans to ramp up its U.K. and Ireland schedule to 142 weekly flights in its summer 2022 schedule. Gatwick will be its main base in the British Isles, with a total of 115 weekly flights across Bergen, Copenhagen, Helsinki, Oslo, Stavanger, Stockholm and Trondheim. It will also operate from Manchester to Bergen, Oslo, Stavanger and Stockholm, from Edinburgh to Copenhagen, Oslo and Stockholm, and from Dublin to Copenhagen and Oslo. Ryanair Traffic rises in July The roll-out of the EU COVID-19 Digital Certificate helped Ryanair more than double passenger numbers to 9.3 million in July, up from 4.4 million a year ago. Demand has now returned to 63% of the 14.8 million passengers carried in July 2019. The figures mark a big jump from June 2021, when Ryanair reported 5.3 million passengers. More Newcastle routes in 2022 Ryanair will add 12 new routes from Newcastle in its summer 2022 schedule including popular leisure destinations Chania, Fuerteventura, Ibiza, Lanzarote, Las Palmas, Menorca, Paphos, Tenerife and Zadar, as well as Krakow, Milan Bergamo and Riga. Airlines – Europe | August 31, 2021 | Page 3 Northern Ireland exits Ryanair network From October, Ryanair will end services from Belfast’s City and International airports, citing the U.K. government’s refusal to reduce or suspend air passenger duty (APD) tax and a lack of COVID-19 recovery incentives from the airports. As a result, Ryanair will discontinue the eight routes launched earlier this year from Belfast City and will stop flying from Belfast International to Alicante, Bergamo, Gdansk, Krakow, Malaga and Warsaw Modlin. Wizz Air Load factors close to pre-pandemic levels Wizz Air carried 3 million passengers in July, two-thirds more than the 1.8 million it carried in July 2020. From 64% in June, the airline’s load factor progressed to 79% in July, as Wizz Air’s traffic increased by 55% on 21% extra capacity. Start-ups Aurora New Russian carrier planned for August Aurora, the basis for a new Russian airline serving the eastern side of the country, has started test flights ahead of the August launch of a full initial schedule of 20 routes. The new Aurora Group will see Aurora operate in co-operation with other local carriers including Yakutia, Khabarovsk Airlines and Kamchatka Aviation Enterprise. The new unified airline is intended to improve accessibility to destinations such as Vladivostok, Khabarovsk, Yuzhno-Sakhalinsk and Petropavlovsk-Kamchatsky.