Issue N°132. 31/08/11

Industry Monitor The EUROCONTROL bulletin transport trends

 European flights increased by 1.7% on July 2010, EUROCONTROL statistics and forecasts 1 faster than forecast. Other statistics and forecasts 2  IATA reported that scheduled passenger traffic Passenger 3 in Europe was up 8.9% in June 2011 compared to Aircraft manufacturing 6 the same period last year. Financial results of airlines 7  First 787 Dreamliner to enter scheduled Environment 8 service will be delivered to All Nippon Airlines Fares 8 (ANA) on 26 September. Regulation 9  Oil prices in August up to $111/barrel. Oil 10

EUROCONTROL statistics and forecasts

European flights increased by 1.7% in July. The actual growth is just above the central forecast range for July 2011 (Figure 1). The charter segment recovered to just 5% below July 2010 volumes while low-cost grew by 1.6% and traditional scheduled by 3.1%. Preliminary data for August show growth at 1.6%, which is within the forecast range.

Based on preliminary data for delay from all causes, 46% of flights were delayed on departure in July, this was a 6 percentage point decrease and at a level similar to the record low seen in 2009. -related delays were a main contributor to primary departure delay. Although this proportion saw a 13 percentage point increase in share of delay minutes compared to July 2010, its contribution to the average delay per flight remained stable as the main change was a reduction in the amount of ATM disruption. (Figure 2).

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Figure 1: European Traffic.

Other statistics and forecasts

IATA reported that scheduled passenger traffic in Europe was up 8.9% in June 2011 compared to the same period last year. The weak euro is supporting a strong inbound travel trend and business travel associated with growing exports. Load factors for the region stood at 80.6%, the second highest among regions (IATA, 28 July).

IATA reported a growth of 9.4% in premium passenger traffic in Europe for the first half of 2011 compared to the same period last year. Growth across the North Atlantic and on Europe-Far East markets continue to expand and were up 11.1% and 12.1% respectively. The organization predicted further growth in demand during the second half of the year, although at a slower pace than in the first half (IATA, 16 August).

ACI reported overall passenger traffic at European airports to be up 6.8% in June 2011 compared to June 2010 whereas overall aircraft movements increased by 1.5%. Barcelona (Group 1 airport with over 25 million passengers), Istanbul Sabiha Gökçen (Group 2, between 10 and 25 million passengers) and Venice (Group 3, between 5 and 10 million passengers) saw the biggest traffic increases at 23%, 26.9% and 39.5%, respectively (ACI, 5 August).

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Percentage of flights delayed on departure

Primary delay distribution for July 2011 (Primary Delay = 57% (Reactionary Delay = 43%)

Figure 2: Delay Statistics (all causes delay – preliminary data for July 2011).

Passenger airlines

Air France presented more details of its new offer from Marseille with 13 new direct flights as from 2 October in the context of its “provincial bases project” to compete with low-cost airlines (IM 124). The aim is to reduce unit costs by 15% and manageable costs by 30% by having pilots operating on medium-haul routes based in the provinces as well as at its hub in Paris, with the use of a single aircraft type (A320) with departures earlier in the morning and return flights later in the evening as well as turnaround times reduced by 5 minutes at stations. This strategy will be extended in spring 2012 to Bordeaux, Nice and Toulouse ( KLM, 11 July).

Ryanair to open its 45th base at Manchester from 30th October initially with two-based 737- 800 aircraft and 17 routes and growing to four aircraft and 26 routes by summer 2012 (Ryanair, 12 July).

British Airways plans to recruit around 800 new pilots by 2016 thereby increasing by 25% its current strength of 3,200 pilots. With aircraft such as the A380 and Boeing 787 due to come into service, BA expects a reshuffling of pilots who want to fly its new fleets, leaving gaps in fleets of the company’s existing types (, 11 August). airberlin launched its “Shape & Size” program; a wide-ranging cost-reduction plan that will cut eight aircraft, reduce capacity by more than 1 million seats in the second half of 2011, cancel unprofitable routes and withdraw from some regional airports (airberlin, 18 August).

Thomas Cook Group has launched a "fundamental strategic and operational review" of its UK business as it continues to be hit by the country’s economic situation which had squeezed consumer spending and affected purchases of foreign holidays. The company also said its French business has been hit by the unsettled political situation in North Africa, with an impact on business to Tunisia, Egypt and Morocco. However, its central Europe, northern Europe and German airlines businesses are all continuing to perform well (Thomas Cook Group plc, 12 July).

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Air Malta is negotiating with unions on measures including a voluntary redundancy scheme designed to cut around 500 staff from its current total of 1,250. As well as reductions in its workforce, is targeting cost reductions of €30 million and increases in revenues of the same size (Air Malta, 5 August).

Five months after it announced a financial survival plan, Cyprus Airways issued another profit warning informing investors that the loss for the first half of 2011 was expected to be slightly higher compared with that of the same period of 2010. This was attributed to the continuing financial crisis and to the further significant increase in fuel prices (Cyprus Airways, 4 July).

The Serbian government called its latest tender to sell national carrier JAT Airways. The most recent attempt failed in 2008, when the government launched a similar process, aiming to sell a 51% stake price at €51 million. JAT Airways made a loss of €16.5 million in 2010 and borrowed heavily to finance its operations. already signalled its interest in JAT without putting forward any offer (Serbian Government, 1 August).

Lufthansa Group carriers are to introduce a charge for payments made by credit card (Swiss, 3 August).

Air Southwest decided to cease all its service by the end of September as a consequence of the announced closure of Plymouth City airport by the end of 2011 (Air Southwest, 14 July).

Routes, Alliances, Codeshares, Intermodality

Flybe Nordic, the new carrier jointly owned by and 's acquisition of Finnish Commuter Airlines, will operate 24 regional routes in the 2011-12 winter schedule, including all former Finnish Commuter Airline (Finncomm) routes plus nine new routes, thereby strengthening its position in the Nordic countries and the Baltic area when it begins operations on 30th October. Flybe owns 60% of Flybe Nordic and Finnair 40% (Finnair Plc, 24 August).

Meridiana Fly acquired Air and will maintain a strategic orientation on and consolidate its position in the main Italian markets, offering both scheduled and charter flights (Meridiana, 18 July).

Turkish Airlines to increase its capacity on international routes, including Donetsk (4-weekly), Kiev (12-weekly), Odessa (12-weekly), Washington DC (6-weekly) and Los Angeles (5- weekly) (Turkish Airlines, 25 August).

Aegean Airlines and SAS entered into a allowing to offer Copenhagen, Oslo and Stockholm as new destinations in its international network, while SAS can now offer via a transfer in Athens, onward connections to Chania, Heraklion, Kos, Larnaca and Rhodes (Aegean, 11 July). easyJet will serve eight European destinations from its new base at London Southend Airport when it opens in April 2012. The carrier will launch flights to Amsterdam, Alicante, Barcelona, Belfast, Faro, Ibiza, Malaga and Majorca. The airline announced in June that it would base three Airbus A319s at Southend from April 2012 (IM131) (easyJet, 26 July).

Ukraine International Airlines (UIA) and signed a partnership agreement and now operate thrice daily flights from Kiev to Moscow Domodedovo (UIA, 20 July).

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Figure 3: Main carriers’ traffic statistics.

airberlin and started operating codeshare flights within Europe. airberlin will place its code on Iberia flights to Madrid from Berlin Tegel, Düsseldorf, Frankfurt, Munich, Zurich and Geneva. In return, Iberia will get access to the airberlin domestic route network and connections to Scandinavia via the hub in Berlin (airberlin, 8 July). airberlin and S7 the largest domestic Russian airline have extended their codeshare agreement to include 47 joint routes. The carriers operate codeshare flights from Berlin via Moscow to Irkutsk, Samara, Kazan, Perm, Ufa and Rostov. The extension will include flights from Dusseldorf, Munich, Frankfurt and Hanover to the new Russian destination of Yekaterinburg via Moscow (airberlin, 10 August).

Etihad Airways and French railway company SNCF signed a codeshare agreement to provide "seamless air-rail connections" between Etihad flights to and from Paris Charles de Gaulle and 20 French cities (’ Chief Commercial Official at press conference, 5 July).

Traffic statistics: July update

Figure 3 and Figure 4 compare July 2011 figures with July 2010 figures. Passenger capacity is measured in available seat kilometres (ASK) and traffic is measured in revenue passenger kilometres (RPK). No figures available for easyJet.

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Figure 4: Main carriers’ load factors.

Aircraft manufacturing

Airbus has confirmed the price premium for the 15% fuel burn advantage of the re-engined A320neo, a trend expected to continue as Boeing enters the market with its re-engined 737 (EADS Chief Financial Officer, 11 August).

Boeing announced the launch of its re-engined B737 called the 737 Max reducing fuel used per seat by 16% and with first deliveries scheduled in 2017. The aircraft will compete with Airbus’s A320neo (Boeing, 30 August).

EADS forecasts Airbus will sell more than 1,000 planes in 2011, helped by a decision to revamp its single-aisle A320 series to use less fuel that gave it a headstart over Boeing in the best-selling jetliner segment. EADS expects 2011 operating profit before one-offs to remain stable year-on-year at around €1.3 billion. For 2012, the group expects a significant improvement in its earnings before interest and tax and one-offs thanks to higher volume, better pricing and improvement of A380 performance at Airbus (EADS, 29 July).

IAG confirmed its order for eight A330-300 aircraft for Iberia’s fleet. The A330 will be Iberia’s only twin engine wide body aircraft, and will fit into its existing Airbus fleet. Deliveries will begin in 2013 (IAG, 26 July).

The first to enter scheduled service will be delivered to launch carrier All Nippon Airlines (ANA) on 26 September (Boeing, 8 August).

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Figure 5: Main European airlines’ financial results.

Financial results of airlines

Six European carriers followed in this bulletin improved their results compared to the corresponding period in 2010 (Figure 5) . Air France-KLM was strongly affected by the difficult situation in important markets for the group (Africa, Middle-East and Japan) and increased oil price.

Other airlines posted their interim report for 2011(first semester) (in million €):

Airline 2010H1 2011H1 Remarks Wideroe +16.3 +24.4 Income before tax. Best six months in the history of the company. Aegean Airlines -31.8 -37.7 Operating loss. Productivity improvements achieved but recession in Greece and higher fuel costs. Norwegian Air -60.3 -43.2 Operating loss. Shuttle Finnair -59.2 -68.3 EBIT.

Cargo

Lufthansa and will this autumn introduce lighter cargo containers in an effort to save fuel and carbon dioxide emissions, replacing the existing complement of under-floor cargo with plastic containers up to 15% lighter than their aluminium equivalents. This means that kerosene consumption can be lowered by about 2,180 tonnes per year (Lufthansa, 11 July).

Boeing’s 747-8 freighter received FAA and EASA certification; the first freighter will be delivered to in September (Boeing, 19 August).

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Figure 6: Carbon prices.

Environment

Lufthansa launched a six-month biofuel trial on 8 of its 28 daily flights between Hamburg and Frankfurt. During the test run period, the use of biofuel will reduce CO2 emissions by up to 1,500 tonnes (Lufthansa, 15 July).

Finnair operated its first biofuel flight between Amsterdam and Helsinki on 18 July using an aircraft and claimed the flight to be the longest commercial biofuel flight flown anywhere in the world to date (Finnair, 20 July).

With the nominal European Union Emission Trading Scheme (ETS) start of 1/1/2012 approaching, European and non-European trade associations, together with some foreign governments are becoming increasingly vocal and active in their objections. In one legal case, the European Court of Justice is expected to publish an initial view in October. (AEA, 26 July, ERA, 27 July, US House of Transportation, 27 July).

The European Business Aviation Association welcomed EC’s new draft of the ETS Monitoring and Reporting regulation which raises the threshold for small emitters from 10,000 tonnes of CO2 per year to 25,000 tonnes of CO2 per year. This means that many more business aviation commercial and non-commercial operators will be able to report their emissions through the simplified procedure or use EUROCONTROL's ETS Support Facility (EBAA, 26 August).

The price of carbon contracts for 2014 was €15/tonne in recent weeks (Figure 6).

Fares

Deflated ticket prices in Europe increased by 9.6% in July year-on-year, based on preliminary values (Eurostat, August).

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Airports

The Competition Commission confirmed that BAA must sell two of its UK airports (IM 129), London Stansted and either Edinburgh or Glasgow and concluded that the sale of the airports will allow passengers and airlines to benefit from greater competition. The sales process for Stansted will start in three months' time, and will be followed by the sale of one of the Scottish airports. BAA said it was dismayed at the decision and would now consider a judicial review. Ryanair and easyJet support the efforts of the Competition Commission to improve outcomes for passengers in the London and Scotland airport markets. (Competition Commission, BAA, Ryanair and easyJet, 19 July).

The Department for Transport (DfT) published growth forecasts suggesting that without new runways Heathrow, Gatwick and Stansted will be at full capacity by 2030 and all growth beyond 2040 will occur at regional airports (UK Department for Transport, 25 August).

The Spanish government approved the sale of a 90% stake in Madrid Barajas and Barcelona El Prat airports (IM131) along with the sale of a 49% stake in AENA Aeropuertos. AENA will maintain the remaining stakes in Madrid and Barcelona airports. The contract tender opened on 30 July with a decision expected by November; the winning bidder will take over the 20- year contracts in spring 2012 (AENA, 29 July).

The UK Department for Transport to trial mixed-mode operations at Heathrow during times of severe disruptions. The new measures would allow, exceptionally, both Heathrow’s runways to be used simultaneously for either arrivals or departures as a way to cut delays and cancellations and get punctuality back on track (Department for Transport, 14 July).

EU to invest €1 million in a study to transform Catania airport into an intermodal hub. The study will look at various designs for building a large, intermodal hub to connect the airport to the local road network and four main railway lines, allowing passengers and freight to quickly transfer between air, rail and road, thereby fostering co-modality and efficient mobility (Trans– European Transport Network Executive Agency, 10 August)

Regulation

The Irish government to uphold €3 Travel Tax until a review in spring 2012 (IM130). The tax will be used to support inbound tourism. The government said that given economic circumstances, airlines were not in a position to make commitments on the restoration of key inbound routes and capacity, noting that the new routes offered by the airlines were predominantly to Mediterranean hotspots. Ryanair criticised the Department of Transport for under-evaluating the airline’s commitments to increase traffic and said that DAA (Dublin Airport Authority) airport cost increases cause devastating damages to Irish traffic, tourism and jobs (Department of Transport, 2 August and Ryanair, 8 August).

A high-level European Commission task force has put a €30 billion price tag on the Single European Sky project; the investment breakdown for the operators is about 64% in updating their airborne equipment, and ANSPs, airports and military ground installations will share the cost of the remaining 36% (EUROPA, 11 August).

EC launched an inquiry into airlines' controversial "add-on" charges allowing them to advertise low prices bearing little resemblance to what ticket buyers end up paying (EUROPA, 8 August).

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Figure 7: Brent and kerosene prices.

EC opened three separate in-depth state aid investigations regarding the Marseille and Frankfurt Hahn airports. EC said state aid may, under certain conditions and circumstances, constitute an appropriate instrument to develop small regional airports and air transport services, but it has a duty to avoid distortions of competition within the EU's single market and some of the regional airports in Europe are no longer so new or small. EC is currently investigating aid to Wizz Air at Timisoara airport, aid to infrastructure at Leipzig-Halle airport and aid to Dortmund airport (EUROPA, 13 July).

Oil

Oil prices closed at around $111 per barrel on 26 August (Brent benchmark). Converted price indices for Kerosene and Brent up to August are shown in (Figure 7).

© 2011‐ European Organisation for the Safety of Air Navigation (EUROCONTROL)

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