Industry Monitor

The EUROCONTROL bulletin on air transport trends

Issue N°150. 28/03/13

 2.5% reduction in daily European flights in February; the quietest February since 2004. EUROCONTROL statistics and forecasts 1 Preliminary data for March show a 5.3% decrease Other statistics and forecasts 2 in traffic on March 2012. Passenger airlines 3  Updated IATA forecast expects European airlines Cargo 7 to post net profit of €630 million in 2013, up from Airports 7 €240 million in 2012. European airlines were able to offset weakness in domestic market with Environment 7 strong demand for long-haul travel to emerging Aircraft manufacturing 8 markets. Regulation 8  OECD forecast Brent oil price of €150 per barrel Oil 9 by 2020, with the potential to reaching a level of Fares 9 €210 per barrel.

 Oil prices down to €84 per barrel in March.

EUROCONTROL statistics and forecasts

Daily traffic in Europe decreased by 2.5% in February compared with the same month last year and was the quietest February since 2004 (Figure 1). The Charter segment was the only to show some growth (+3.9%) on February last year whereas the pattern of growth for all other market segments continue much as in December and January: All-Cargo (-4.3%), Low- Cost (-2.8%), Scheduled (-2.4%) and Business Aviation (-0.6%) (EUROCONTROL, March).

Based on preliminary data from airlines for delay from all causes, 37% of flights were delayed on departure in February; this remained at a stable level compared with February 2012, with a small 0.5% percentage point decrease being observed. February 2013 saw an improvement in delay all-causes. When analysing the delay reasons Reactionary delays decreased by 0.7 minutes per flight to 4.5 minutes per fight. Airline-related delays also fell by 0.5 minutes to 2.4 minutes per flight. ATFCM en-route delays also fell to 0.1 minutes per flight. (Figure 2) (EUROCONTROL, March).

Industry Monitor. Issue 150. 28/03/13 Page 1 © EUROCONTROL 2013

Figure 1: Monthly European Traffic and Forecast.

Other statistics and forecasts

ACI reported that European airports saw a decrease of 1.6% in passenger traffic in January 2013 compared to January 2012. Total aircraft movements were down by 4.8% on the same month last year, partly due to severe winter conditions throughout the month. Cargo traffic was up 1.9%, the first positive figure for the last two years, but still below 2011 levels (ACI Europe, 6 March).

IATA revised slightly upwards the global airlines net profits in 2013 to €8,3 ($10.6) billion (from €6.7 ($8.4) billion forecast published in December) thanks to strong passenger demand and signs of recovery in air cargo markets. Despite the eurozone crisis, airlines net profit in Europe in 2013 are expected to be €630 ($800) million, up from €240 ($300) million in 2012, although the forecast did not take into account the situation in Cyprus. IATA reported that for 2013 European airlines were able to offset weakness in domestic market with strong demand for long-haul travel to emerging markets. Jet fuel is expected to average €102 ($130) per barrel in 2013 (up from the previously projected €97 ($124) a barrel) (IATA, 20 March).

FAA released its forecast for 2013 – 2033. Commercial IFR flights handled by the FAA are forecast to increase to 32.8 million (+0.7%) in 2013 and to grow at an annual rate of 2% for the next 20 years to reach 48.8 million flights in 2033. This is a 4-year delay compared with last year’s forecast which predicted 48.7 million flights in 2029. The FAA expects that US airlines will experience passenger growth at an annual rate of 2.2% until 2033. In 2012, 737 million passengers flew on US airlines to reach 400 million more passengers flying 20 years from now. (FAA, 6 March).

Industry Monitor. Issue 150. 28/03/13 Page 2 © EUROCONTROL 2013

Breakdown of average delay per flight

Percentage of flights delayed on departure

Figure 2: Delay Statistics (all causes, airline-reported delay – preliminary data for February 2013).

Passenger airlines

Capacity, costs and jobs

Iberia pilots, flight and ground crews went on strike from 4-8 March to protest against job cuts as part of the company’s viability plan (IM149). This five-day strike action led to 1,284 flight cancellations (Iberia: 431; Iberia Express: 100; Air Nostrum: 434 and Vueling: 319 flights cancelled). IAG agreed with Iberia unions on a proposal to save 666 jobs, reducing job losses from 3,807 to 3,141 and to increase payouts for the redundancies. As a result, further strikes scheduled for 18-22 March were called off (Iberia, 13 March).

Virgin Atlantic launched its sub brand Little Red to operate domestic flights from Heathrow to Manchester, Edinburgh and Aberdeen, effective 31 March. Little Red will challenge British Airways’ monopoly of domestic flights from Heathrow since IAG acquired bmi last year (Virgin Atlantic, 1 March).

Czech government reportedly confirmed the sale of a 44% stake in struggling flag-carrier Czech Airlines to Korean Air. The government has been trying to privatise the airline since 2009 following financial losses from a failed expansion plan. Last September, EU gave approval for €100 million in state-aid granted to Czech Airlines (Financial Times, 13 March).

German start-up, Rostock Airways is to launch operations in August from Rostock Laage to Frankfurt, Copenhagen, and Munich with a fleet of three Dash 8-400s. The new airline will replace Lufthansa on the Rostock – Frankfurt route (Rostock Airways Manager’s interview, 7 March).

Thomas Cook Group reportedly targets €414 million revenue by 2015 by further cutting costs and focusing on selling holidays online (Financial Time, 13 March).

Industry Monitor. Issue 150. 28/03/13 Page 3 © EUROCONTROL 2013

Turkish Airlines signed a firm order for 82 A320 family aircraft (25 A321, 4 A320neo and 53 A321neo) with options for 35 additional A321neo to be delivered by 2015. This order is the largest ever placed by a Turkish carrier. Turkish Airlines already operates 75 A320 family aircraft. The new order will enable the carrier to expand its short- and medium-haul routes from its Istanbul hub (Turkish Airlines & Airbus, 15 March).

Airbus announced it has signed a record order with low-cost Lion Air (Indonesia) for 234 A320 family aircraft of which 109 A320neo, 65 A321neo and 60A320ceo. First deliveries are scheduled in 2014. Lion Air is banned from flying within EU27 and the US for non-compliant safety standards (Airbus, 18 March).

Ryanair signed an agreement with Boeing to buy 175 new Next Generation 737-800 aircraft. This order will enable the carrier to expand its fleet to over 400 aircraft and will take its traffic to 100 million passengers in 2019. Deliveries are scheduled between the end of 2014 and 2018 (Ryanair, 19 March).

SWISS announced a commitment for six B777-300ERs to start replacing its fleet of fifteen A340s from 2016 onwards (Boeing, 14 March).

Tarom reportedly planned to cut its workforce by 10% to 2,030 staff over the next two years, mainly through a voluntary departure programme. This cost-cutting measure is part of the airline’s new marketing strategy to return to profitability in 2015 (World Aeronautical Press Agency, 22 March).

Wizz Air is to move all of its 5 routes to Bucharest, Cluj-Napoca, Timisoara, Targu-Mures and Sofia from Forli to Bologna airport, effective 31 March. Wizz Air was the only airline at Forli since Ryanair moved its operations to Bologna in October 2008 and Windjet (now ceased operations) moved to Rimini. Forli airport operator, SEAF was put in liquidation last year, but no new operator could be found (Wizz Air, 20 March).

Struggling Estonian Air is reportedly to submit by 18 April, a restructuring plan to its government in order to secure an additional state-aid loan of €37 million and to obtain approval from the European Commission. The airline decided to change its business model from a traditional growth-oriented carrier to a regional point-to-point airline and to concentrate on 10 core destinations in Europe. In 2012 Estonian Air posted operational losses of €35.8 million (The Baltic Times, 20 March & Estonian Air, 21 March).

Lufthansa cancelled circa 700 flights on 21 March mostly to German and European destinations due to a warning strike ahead of pay talks scheduled for mid-April. Labour union, Verdi demands a pay increase of 5.2% for 33,000 Lufthansa ground workers in Germany along with a commitment by Lufthansa to safeguard jobs (ver.di, 21 March).

Industry Monitor. Issue 150. 28/03/13 Page 4 © EUROCONTROL 2013

Figure 3: Main carriers’ traffic statistics.

Routes, Alliances, Codeshares

Ryanair claimed it had planned to grow its traffic at Stansted by 5% from April, but now said to reduce it by 9%, cutting 43 routes and reducing weekly operations by over 170 flights. This decision came after Standsted’s new owner; Manchester Airport Group said it will increase landing charges by 6% from April 2013 (Ryanair, 28 February).

Air Europa took over 4 domestic routes from bankrupt Orbest (IM149) and operates services from Tenerife Sur to Alicante, Vigo and Zaragoza and from Lanzarote to Zaragoza (Air Europe,March).

Condor Airlines (part of Thomas Cook Group) is reportedly to resume long-haul flights from Munich after six years of interruption. The carrier will base 2 of its 12 Boeing 767-300ERs in Munich and fly to Cancun, Santa Clara, Varadero, Mauritius, Mombasa, Montego Bay and Punta Cana during the 2013-14 winter season (ATW, 4 March).

Finnair is to join the transatlantic joint venture established by American Airlines, British Airways and Iberia in the course of 2013. The expanded joint venture will then operate circa 102 flights between Europe and North America (Finnair, 7 March).

Westjet, based in Calgary and Air France signed a code-share agreement enabling the latter to offer its customers 15 new Canadian routes flown by Westjet (Air France, 7 March). airberlin revised its network strategy for 2013 and strengthened its Berlin and Düsseldorf hubs, increasing frequencies by 45% to 11,000 flights per week from Berlin and by 35% to 4,050 flights per week from Düsseldorf during the summer. The airline is also to increase by 12% to 402 flights per week its services from Germany, Austria and Switzerland to Mallorca (airberlin, 5 March).

Germania is looking to expand in the German charter market and to benefit from the failure of XL Airways Germany (ceased operations in March 2013) and Sky Airlines Germany (suspended operations in December 2012). The carrier released its winter schedule 2013/14 and announced flights from Bremen to Canary Islands and Madeira (Germania, 1 March).

Industry Monitor. Issue 150. 28/03/13 Page 5 © EUROCONTROL 2013

Figure 4: Main carriers’ load factors.

easyJet launched Gatwick – Moscow Domodedovo services on 18 March and Manchester – Moscow Domodedovo on 28 March. The UK carrier was accepted by the Russian aviation authorities following the sale of bmi British Midland by Lufthansa to IAG last year. The bilateral agreement between UK and Russia provides for maximum 2 airlines to fly between London and Moscow and British Airways is one of these. The two Russian airlines are Aeroflot and Transaero (easyJet, 18 March).

Air Astana and Turkish Airlines signed a letter of intent for a wide-ranging cooperation, including a code-share agreement on routes operated by both carriers between Kazakhstan and Turkey (Air Astana, 7 March).

EuroLOT is to operate former airberlin seasonal routes when launching German domestic routes from Cologne to Heringsdorf and from Dortmund to Heringsdorf from 4 May to 26 October. EuroLOT will also take over all Polish domestic flights from parent LOT on a wet- lease basis, effective 31 March (EuroLOT, March).

Lufthansa started restructuring its European operations by transferring to Germanwings six routes from Hamburg to Dubrovnik, Nice, Nuremberg, Palma de Mallorca, Stuttgart and Vienna for the summer schedule. Germanwings should eventually take over all intra- European routes that are not routed through Lufthansa’s hubs in Frankfurt and Munich (Lufthansa, 6 March).

Failures

XL Airways Germany which filed for bankruptcy in December 2012 (IM147) will not resume services, failing to find new investors (XL Airways Germany, 1 March).

Augsburg Airways’ wet-lease contracts with Lufthansa and Swiss will end in September and it is reportedly announced that the airline will cease operations by 31 October and transfer back to Lufthansa and Swiss its fleet of 8 Dash 8-400 aircraft and to Lufthansa CityLine its five EMB 195 (Augsburger Allgemeine, 21 March).

Industry Monitor. Issue 150. 28/03/13 Page 6 © EUROCONTROL 2013

Figure 5: Carbon prices.

Cargo

TNT announced its cost efficiency program called ‘Deliver!’ which aims to improve profit between 2013 and 2015. The program will affect 4,000 jobs throughout the company. European Commission blocked TNT takeover by UPS in January (IM149) (TNT Express, 25 March).

Traffic statistics: February update

Figure 3 and Figure 4 compare February 2013 figures with February 2012 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).

Airports

Manchester Airport Group completed the acquisition of Stansted Airport, previously owned by Heathrow Airport Holdings (IM148) (Manchester Airport Group, 28 February).

Environment

The price of carbon contracts for 2016 was down to €4.4/tonne in recent weeks (Figure 5).

ACI Europe published an update on its Airport Carbon Accreditation programme launched in June 2009 in Europe aiming at reducing carbon emissions from airport operations. Four years later, 71 European airports are now accredited at one of the four levels of certification (Mapping, Reduction, Optimisation, Neutrality). London City, Malaga, Palma de Mallorca, Tallinn and Tirana are the latest airports to receive first time accreditations. Since 2011 when the Airport Accreditation Programme has expanded to the Asia-Pacific region where six airports have become accredited (ACI Europe, 13 March).

Figure 6: Brent and kerosene prices.

Aircraft manufacturing

Airbus Commercial Aircraft segment profits before interest and tax (EBIT) reached €1,125 million in 2012, a 111% increase on 2011. For 2013, Airbus targets between 600 and 610 commercial aircraft deliveries (vs. 570 in 2012) (EADS, 28 February).

Boeing Commercial Aircraft segment revenue reached €38.5 billion in 2012, a 36% increase on 2011 (Boeing, 31 January).

Embraer reported €476 million EBIT in 2012, an increase of 92% compared with 2011. The manufacturer targets between 195 and 215 deliveries in 2013 although business jet deliveries should exceed commercial jets ones. Compared with 2012, Embraer expects to deliver circa 120 executive jets (vs. 99 in 2012) and circa 95 commercial jets (vs. 106 in 2012) (Embraer, 12 March).

Bombardier reported €541 million EBIT in 2012, 42% decrease compared with last fiscal year. In 2013, Bombardier expects to deliver approximately 190 business jets (vs 180 in 2012) and 55 commercial aircraft (as in 2012) (Bombardier, 21 February).

Regulation

EC is investigating whether Cyprus government granted €104 million illegal state aid to its national airline, Cyprus Airways. The inquiry is targeting the government’s stake increase to 94% from 69% in the airline and an emergency loan of €73 million granted in December last year. Cyprus Airways reported €56 million losses for 2012 (EUROPA, 6 March).

Oil

Latest analysis by OECD economists forecasts Brent oil price at €150 ($190) a barrel by 2020, with the potential to reaching a level of €210 ($270) a barrel. This figure is higher than a forecast by the International Energy Agency that predicts Brent oil price to only reach €95 ($120) by 2020. The OECD analysis looks at continued rising demand from emerging economies and concludes that of the factors in expected rising demand is that compared with developed countries which have cut their energy intensity over time, oil demand in developing countries has matched rising income over the past 20 years (OECD Economics Dpt WP n°1031, 8 March).

Oil prices down to €84 per barrel in March. Converted indices for Kerosene and Brent are shown in Figure 6.

Fares

Deflated ticket prices in Europe increased by 2.2% in February year-on-year, based on preliminary values (Eurostat, 15 March).

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) is ISO 9001:2008 certified. Industry Monitor. Issue 150. 28/03/13 Page 9 © EUROCONTROL 2013