Industry Monitor the EUROCONTROL Bulletin on Air Transport Trends

Issue N°133. 28/09/11

Industry Monitor The EUROCONTROL bulletin on air transport trends

 European flights increased by 1.6% in August EUROCONTROL statistics and forecasts 1 2011, at the upper end of the forecast. Other statistics and forecasts 2  airberlin to reduce its current fleet by 18 aircraft Passenger airlines 2 by summer 2012 as part of its restructuring Airports 5 programme. Environment 6  OECD’s statistics for the first half of 2011 reveal Cargo 6 declines in air cargo volumes, now only 9% Aircraft manufacturing 7 above pre-recession levels in the EU area compared to 15% in February. Regulation 7 Oil 8  Oil prices in September around $115/barrel. Fares 8

EUROCONTROL statistics and forecasts

European flights increased by 1.6% in August on 12 months before, at the upper end of the forecast range for August 2011 (Figure 1). The charter segment decreased by 9.6% over August 2010 while low-cost was up 1.9% and traditional scheduled 3.1%.

Based on preliminary data for delay from all causes, 38% of flights were delayed on departure in August, this was a 7 percentage point decrease on August 2010 and a provisional record low for August delays in the last 5 years. Airline-related delays were a main contributor to primary departure delay. Although this proportion saw a 4 percentage point increase in share of delay minutes, its contribution to the average delay per flight remained stable (Figure 2).

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Figure 1: European Traffic.

Other statistics and forecasts

IATA reported an increase of 9.3% in demand in July 2011 for passenger traffic in Europe. Total load factors for the month stood at 85.1%. IATA stated that European carriers are benefiting from a strong expansion of inward demand that is taking advantage of the weakened currency (IATA, 1 September).

ACI reported overall passenger traffic at European airports to be up 6.9% in July 2011 compared to July 2010 whereas overall aircraft movements increased by 2.8% (ACI, 6 September).

Passenger airlines

Irish government still to consider selling its 25% stake in Aer Lingus. Ryanair responded that it would not bid to take full control of Aer Lingus if a sale went ahead and woud also consider selling its stake in the company if the bid went through. Ryanair’s previous attempts to buy Irish government’s stake in the airline had been blocked by the Irish competition authority and the European Commission (Ministry of Transport’s statement at press conference and Ryanair, 7 September).

Romania’s government approved the sale of 20% of shares in national carrier Tarom on the Bucharest stock exchange. Tarom posted losses of circa €80 million in 2010. (Government of Romania, 1 September).

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Percentage of flights delayed on departure Primary delay distribution for August 2011 (Primary Delay = 56%, Reactionary Delay = 44%)

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

Air France KLM met trade union representatives to discuss potential new cost savings measures following the fall of the airline’s share over the past month. Shares in Air France- KLM fell 16% in value in August (Syndicat Général Force Ouvrière Air France, 9 September).

SAS launched its 4Excellence strategy to replace its previous strategy, Core SAS with which the airline reduced unit costs by 23% since 2008. The strategy 4Excellence aims at reducing unit costs by 3 to 5% per year until 2015 in order to achieve sustained profitability (SAS, 14 September).

Lufthansa announced adjustments to its earnings forecast for the current financial year resulting in slowing down its capacity growth programme. The airline planned to expand capacity by 12% this year, this was cut back to 6% in the middle of the year and will be cut back further, reflecting a weaker than expected monthly result for August. (Lufthansa, 20 September). airberlin provided detailed information on its “Shape&Size” restructuring programme (IM132) aiming now at reducing its current fleet by 18 aircraft. The company forecasts to improve earnings by €200 million (airberlin, 21 September).

Start-up Slovakian Airlines started operating on 20 September and will operate ad-hoc and charter flights until it receives its Air Operator’s Certificate in December when the company plans to operate scheduled flights between Bratislava and destinations in the UK, Ireland, Italy, Turkey and Russia (Slovakian Airlines, September).

It is reported that Royal Air Maroc received €143 million from Moroccan government to help the airline in reducing its workforce by 30% and fuel consumption through its fleet renewal (Reuters, 23 September).

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Figure 3: Main carriers’ traffic statistics.

It is reported that Lufthansa is considering selling BMI as a whole or through its units, BMI Baby and BMI Regional although various options are explored; both companies stated that it is too early to comment on any possible outcome (Lufthansa & BMI at the Sunday Times, 11 September).

Air Baltic’s two shareholders, the Latvian Government and Baltic Aviation Systems agreed to increase the capital of the company (The Cabinet of Ministers of the Republic of Latvia, 28 September).

Routes, Alliances, Codeshares, Intermodality

airberlin and Pegasus have extended their codeshare partnership to increase charter traffic and dedicate two aircraft to routes between Germany and Turkey (airberlin, 1 September).

Germanwings released its summer 2012 schedule adding new routes from different German airports to Pristina (Kosovo) and increasing capacity on existing routes; Cologne/Bonn – Berlin up 31%, Stuttgart – Berlin up 40% among others (Germanwings, September).

Carpatair (Romania) and Alitalia signed a codeshare agreement taking the Alitalia code to flights to Timisoara from Italy and through to other Romanian destinations, plus Ukraine and Moldova. The partnership will allow Carpatair to access more than 90 additional destinations around the world (Carpatair, 20 September).

Jet Airways concluded an intermodal codeshare agreement with Thalys for a rail service between Brussels and Paris, effective 30 October. The airline offers six daily flights from Brussels to India and North America (Jet Airways, 15 September).

British Airways acquired six daily slot pairs at London Heathrow from BMI to be used from late October; the airline is looking to expand both its longhaul and shorthaul network at Heathrow (IAG, 23 September).

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Figure 4: Main carriers’ load factors.

Traffic statistics: August update

Figure 3 and Figure 4 compare August 2011 figures with August 2010 figures. Passenger capacity is measured in available seat kilometres (ASK) and traffic is measured in revenue passenger kilometres (RPK).

Airports

The main European airports posted their 2011 interim financial results (in million €)

2011H1 Growth on 2010H1 Note Aéroports de Paris 180 +30.6% net result Frankfurt 358.4 +17.7% EBITDA BAA (London) 585.6 +27.1% adjusted EBITDA Amsterdam 97.3 +40.6% net result

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Figure 5: Carbon prices.

Environment

The European Commission published the benchmark values which will be used to allocate greenhouse gas emission allowances free of charge to more than 900 aircraft operators from January 1, 2012 onwards. In 2012 airlines will receive 0.6797 allowances per 1,000 tonne- kilometres whereas from 2013 to 2020 these will be decreased to 0.6422 allowances (Europa, 26 September).

The price of carbon contracts for 2014 was €14/tonne in recent weeks (Figure 5).

Cargo

Cargolux decided to cancel the delivery of the first two Boeing 747-8 freighters scheduled for 19/21 September (IM132) attributing it to unresolved contractual issues between Boeing and Cargolux as regards the freighter’s performance targets. Atlas Air also decided to exercise termination rights for three of the earliest B747-8 built, citing lengthy delays and performance considerations. On the other hand, it is reported that Cathay Pacific is satisfied with its commercial arrangements with Boeing and expects to take delivery of its first B747-8F in October (Cargolux, 17 September, Atlas Air, 21 September & Cathay Pacific’s statement to Flightglobal, 21 September).

OECD’s statistics show declines in global freight volumes during the first half of 2011 indicating a slowing economy. Air cargo volume, which had been 15 percent above pre- recession levels in the EU in February, is now up only 9 percent. (OECD’s International Transport Forum, September). All-Cargo statistics for August 2011 show a slight growth of 3.9% compared to the same month of the previous year (EUROCONTROL/STATFOR/SID).

Figure 6: Brent and kerosene prices.

Aircraft manufacturing

In its updated Global Market Forecast (GMF), Airbus predicts that European airlines will see 4.0% annual growth in RPK. This is down from 4.3% in the GMF of two years ago, with a significant cut in later years, from 4.7%/year (2019-2028 in GMF2009) to 3.8%/year (2021- 2030 now). World growth, on the other hand, at 4.8% annually is little changed, as other regions are revised upwards to take up the slack. (Airbus, 19 September).

First joint order for the Air France KLM Group approving the order of 110 long-haul aircraft (50 firm orders and 60 options), split between Boeing B787-9 entering into service with KLM in 2016 and Airbus A350-900 entering into service with Air France in 2018 (Air France KLM Group, 16 September).

Regulation

The European Union lifted sanctions against Libyan Arab Airlines although Afriqiyah Airways, Libya’s second state airline did not appear among Libyan entities freed from restrictions. (EU Official Journal, 1 September).

The European Court of Justice declared that Lufthansa’s mandatory retirement age for pilots at 60 constitutes discrimination and was therefore ruled out. European and German law allows pilots to continue flying for five additional years if they are members of a multi-pilot crew. Lufthansa to wait until a decision by the German’s Federal Labour Court is made (Court of Justice of the European Union, 13 September).

Oil

Although they have fallen back in recent days, oil prices have averaged $115 per barrel in September so far (Brent benchmark). Converted price indices for Kerosene and Brent up to September are shown in (Figure 6).

Fares

Deflated ticket prices in Europe increased by 14.7% in August year-on-year, based on preliminary values (Eurostat, 15 September).

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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 133. 28/09/11 Page 8 © EUROCONTROL 2011