Industry Monitor

The EUROCONTROL bulletin on air transport trends

Issue N°171. 01/04/2015

 European flights increased by 0.3% in February EUROCONTROL statistics and forecasts 1 and were below the low forecast range. Preliminary data for March show an increase of Other statistics and forecasts 2 1.2% in flights compared with March last year.  New seven-year forecast (2015-2021) is for 11.4 Passenger airlines 3 million flight movements in Europe in 2021, this is 19% more than in 2014. For 2015 the Cargo 6 flight forecast has been revised downwards to 1.5% with a stronger growth of 3% for 2016. Airports 7  Oil prices were up €1 per barrel in March to Regulation 7 €53. In its March update EIA forecast Brent crude oil price to average €56 per barrel in 2015. Oil 8 Fares 8

EUROCONTROL statistics and forecasts

European flights increased by 0.3% (ESRA – EUROCONTROL Statistical Reference Area) in February 2015 and were below the low forecast range. Preliminary data for March show an increase of 1.2% in flights compared with March last year (Figure 1).

Turkey was no longer one of the top contributors to the European network and moved from adding circa 100 daily flights in January to 40 daily flights in February, this was mainly due to adverse weather conditions during the month. UK took over from Turkey to be the top contributor to local traffic (excluding overflights) with 160 extra daily flights, mainly thanks to its strong internal flow. Spain, Belgium/Luxembourg, Portugal and Greece completed the top five and together added 230 daily flights to the network. Ukraine, Norway and France continued to see a decline in local traffic in February (respectively circa 150, 75 and 40 fewer flights per day). With respect to the market segments, low-cost growth accelerated from circa 7.5% during the past three months to 8.4% in February (vs. same month last year). All-cargo was the only other segment to show growth at 0.2%. The business aviation segment was down 5.6% on February 20141. (EUROCONTROL, March).

1 More statistics on flights are available in SID. Industry Monitor. Issue 171. 01/04/2015 Page 1 © EUROCONTROL 2015

Figure 1: Monthly European Traffic and Forecast.

Based on preliminary data from airlines for delays from all causes 35% of flights were delayed on departure (>= 5 minutes) in February 2015, this was an increase of 5.2 percentage points compared with the historic lows in February 2014. The average all- causes delay per movement in February 2015 increased from 7.4 minutes to 9.3 minutes. Further analysis of the delay reasons shows that reactionary and airline delay increased respectively by 0.8 and 0.3 minutes per flight (Figure 2). (EUROCONTROL, March).

The new EUROCONTROL Seven-Year Forecast of Flight Movements and Service Units 2015-2021 is for 11.4 million IFR movements (±1 million) in the EUROCONTROL Statistical Reference Area (ESRA) in 2021, 19% more than in 2014. Since the previous forecast published in September 2014, the economic outlook in the Scandinavian countries (including Finland) and in Russia has strongly deteriorated in the first years of the forecast. This has a negative impact on European traffic growth overall and is not compensated by the solid growth rates expected for this Summer in Southern countries. In parallel, the various airspace unavailabilities (e.g. Ukraine, Libya) since the second half of 2014 have significantly changed the traffic patterns adding to the disparities in growth within the surrounding countries for 2015. It is to be noted that, the recent fall in oil price has not yet translated into a reduction on ticket prices (see Figure 6), thus not specifically boosted passenger demand. At European level, the flight forecast for 2015 has therefore been revised downwards compared to the September 2014 forecast to 1.5%. For 2016, a stronger growth of 3% is foreseen.

Other statistics and forecasts

IATA reported that scheduled passenger traffic (RPK) in Europe increased by 4.9% in January 2015 compared with the same month a year ago. Capacity was up 4.3% and the total passenger load factor was 76.6% (vs. 76% in January 2014) (IATA, 4 March).

ACI reported overall passenger counts at European airports to be up 4.8% in January 2015 compared with January 2014 with overall aircraft movements increasing by 1.1% (ACI, 5 March).

FAA released its forecast for 2015 – 2035. Commercial IFR flights handled by the FAA are expected to increase by 0.9% a year, from circa 50 million in 2014 to 60 million in 2035. US airlines will experience passenger growth to average 2% per year to reach one billion passengers in 2029 and 1.1 billion by 2035. In 2014 756 million passengers flew on US airlines, an increase of 2.3% on 2013 (FAA, 16 March). Industry Monitor. Issue 171. 01/04/2015 Page 2 © EUROCONTROL 2015

Breakdown of all-causes delay per flight Percentage of flights delayed on departure

Figure 2: Delay statistics (all-causes, airline-reported delay – preliminary data for February 2015).

Passenger airlines

Capacity, costs and jobs

Norwegian Air Shuttle pilots have ended an 11-day strike (28 Feb – 10 Mar) whereby pilots have agreed to be employed by Norwegian’s subsidiaries in exchange for a three-year job guarantee. The strike led to the cancellation of all of the airline’s domestic flights in Norway and Sweden and most flights between the Scandinavian capitals (Norwegian, 10 March).

Norwegian Long Haul will reportedly set up a base in Paris Orly for its low-cost transatlantic flights using Boeing B787 aircraft. To date Orly offers limited long haul flights due to noise regulations. Norwegian will next open a base at Barcelona, bringing to six its number of long-haul bases in Europe after Copenhagen, Oslo, Stockholm, Gatwick and Orly (check-in.dk, 26 March).

Lufthansa Pilot’s Union Vereinigung Cockpit went on a 4-day strike from 18 to 21 March resulting in over 700 short- and medium-haul flight cancellations per day. The airline’s dispute with pilots which started two years ago involves early retirement benefits and costs cut. Last year’s strike actions reduced Lufthansa Group’s operating results by €232 million. (Lufthansa, 20 March).

Spanish start-up Air Horizont will start operations in April with one B747-400 flying from Zaragoza to Alicante, Sevilla, Rome Fiumicino and Munich (Air Horizont, March).

Start-up Air Croatia will start operations on 2 April with flights from Zagreb to 4 destinations: Prague, Budapest, Milan and Rome using one ATR-42 aircraft (Air Croatia, March). Estonian Air has established a new subsidiary, Nordic Flyways which will provide flight capacity to other airlines. During the last two years, the airline has already been cooperating with other airlines to offer available flight capacity. The airline’s fleet consists of three Bombardier CRJ900 and four Embraer E170 aircraft. (Estonian Air, 20 March).

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Figure 3: Main carriers’ traffic statistics.

SWISS ordered three more B777-300ER aircraft, adding to its previous order for six B777- 300ER placed in 2013. (Boeing, 12 March).

Austrian Airlines plans to replace its fleet of 21 Fokker regional jets with Embraer E195 aircraft, 17 of these transferred from Lufthansa CityLine. The fleet renewal which is pending approval from the airline’s Supervisory Board is to start in autumn 2015 and is expected to be completed in 2017 (Star Alliance, 13 March).

Start-up FLYmii based in Funchal will reportedly start operations with a fleet of A320-200 aircraft on Madeira to mainland Portugal and to Europe (ch-aviation, 26 March).

Wizz Air will further restructure operations in Ukraine, shifting eight routes into and out of Ukraine from Wizz Air Ukraine to Wizz Air Hungary and opening a base in Kiev with one A320 aircraft. Wizz Air Ukraine will cease operations from 20 April onwards following the continuing instability in Ukraine (Wizz Air, 26 March).

Air France-KLM Group has ordered 15 Embraer E175 aircraft and two E190 aircraft to renew the fleet of KLM Cityhopper and to be delivered between March 2016 and June 2018 and by December 2015 for the latter. The Group has signed an option for a further 17 Embraer aircraft for Cityhopper or Air France Hop! (KLM, 30 March).

KLM has reportedly postponed the delivery of two B787-9 aircraft with a view to cut cost. The airline has ordered a total of 10 B787 aircraft and the delivery of the first remains on track for the last quarter of 2015 (ch-aviation, 19 March).

Belgian VLM airlines delayed the delivery of its Sukhoi Superjet 100 aircraft until the third quarter of 2016 to enable the completion of the European Aviation Safety Agency (EASA) certification. The airline ordered two SSJ100-95 LR aircraft in October last year for an initial delivery in April 2015 (Belga news agency, 17 March).

Air France will reportedly downsize its B747-400 aircraft operations to one route, Paris Charles De Gaulle to Mexico, effective 25 October (routesonline, 17 March).

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Figure 4: Main carriers’ load factors.

It is reported that Monarch is to cut capacity by circa 17% in summer as a result of a fleet cut from 42 to 34 aircraft. The airline will cease operating all eight routes from its East Midlands base (anna.aero, 10 March and Monarch, March).

Routes, Alliances, Codeshares bmi regional will bring to eight its destinations from Bristol with three new routes to Düsseldorf, Paris Charles De Gaulle and Nantes (bmi regional, March).

Regional airline Flybe will open a new base at Cardiff and serve 11 destinations to Belfast, Cork, Dublin, Düsseldorf, Edinburgh, Faro, Glasgow, Jersey, Munich, Milan Malpensa, and Paris Charles de Gaulle with two Embraer E195 aircraft (Flybe, 5 March).

Ryanair will open a new base at Berlin Schönefeld with 5 aircraft and 16 new routes with the start of the winter schedule. The new routes include Alicante, Athens, Barcelona, Bari, Bologna, Bratislava, Brussels, Glasgow, Madrid, Malaga, Palermo, Palma, Riga, Rome Ciampino, Venice and Valencia (Ryanair, 5 March).

With the start of the winter schedule, Ryanair will launch seven new routes from its Cologne base to Berlin Schönefeld, Copenhagen, Gran Canaria, Milan, Porto, Valencia and Warsaw and increase from one to three based aircraft (Ryanair, 10 March).

Ryanair will be the first airline to operate scheduled flights from Castellon airport, to London Stansted and Bristol, effective September. Castellon which lies in the north of Valencia opened in 2011 but until now remained unused (Ryanair, 11 March).

Lufthansa will shift 55 routes from its low-cost subsidiary Germanwings to its low-cost subsidiary Eurowings, effective 25 October. The Germanwings brand is expected to be gradually phased out (routesonline, 23 March).

Lufthansa’s low-cost subsidiary Eurowings will start long-haul routes from 25 October onwards with flights departing from Cologne/Bonn to Dubai, Bangkok, Phuket, Varadero and Punta Cana. The airline will operate a fleet of two A330-200 aircraft to grow to a total of seven A330s (Lufthansa, 4 March).

Turkish Atlasjet now rebranded as AtlasGlobal will launch flights from Antalya to Almaty, Astana and Karaganda in Kazakhstan, effective April (AtlasGlobal, April). Industry Monitor. Issue 171. 01/04/2015 Page 5 © EUROCONTROL 2015

Figure 5: Brent and kerosene prices.

SWISS will launch 22 new destinations in summer from its Zurich hub. The destinations will include Gothenburg, Helsinki, Riga, Leipzig, Dresden, Toulouse, Graz, Thessaloniki, Izmir, Bilbao, Santiago de Compostela whereas seasonal services will include Palermo, Bari, Naples, Brindisi, Ljubljana, Krakow, Sarajevo, Sofia and Zagreb. The airline will also expand its Geneva hub with 6 new routes to Florence, Valencia, Sarajevo, Skopje, Algiers and Dublin (SWISS, 16 March).

Failures

ES-air which started operations on 2 March ceased operations on 29 March due to weak demand. The virtual airline linked Esbjerg (Western Denmark) to Copenhagen.

Cargo

Turkish Airlines has signed an order for four A330-200F freighter aircraft to be operated by its Turkish Cargo subsidiary. The order will complement its fleet of five A330-200Fs and will be delivered between 2015 and 2017 (Airbus, 9 March).

Resulting from a business model requiring less freighter capacity, Air France-KLM will cut over 330 employees at its all-cargo subsidiary Martinair and scale back its fleet by June 2016, retiring all six MD-11F aircraft and leaving three B747-ERF aircraft and one B747- BCF aircraft. Martinair has been in financial difficulties since the merger of Air France and KLM in 2004 (KLM, 16 March).

Recapitalisation plans at Cargolux to meet future financial commitments and to remain competitive included the transfer of one aircraft to Cargolux Italia and the increase of crew duty days from 186 to 200 per year. The decision led to criticism from Luxembourg’s pilot association (ALPL) and Trade Unions (LCGB and OGBL) which led Cargolux management to cap the disputed growth of Cargolux Italia to four aircraft. No progress has yet been made on crew duty days (ch-aviation 9 March and Cargolux, 12 March).

Figure 6: Deflated ticket prices in Europe.

Traffic statistics: February update

Figure 3 and Figure 4 compare February 2015 figures with February 2014 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

UK Government has commissioned a new study into the possibility of reopening Plymouth airport which closed in December 2011 following the withdrawal of flights to London. Following this announcement, Heathrow plc has announced a ‘package of commitments’ including a review of how much Heathrow would charge an operator to land and take-off on flights between Plymouth and London (Plymouth Chamber of Commerce, 23 March).

Communications and Works Ministry of Cyprus has put forward incentive schemes including new routes, landing fees discounts and marketing support to boost the use of Cyprus airports (Hermes airports, 11 March).

London City airport’s planning approval (IM170) has been reportedly blocked by the Mayor of London due to concerns about noise (Financial Times, 26 March).

Regulation

France and Germany called for a joint European solution regarding fair competition in the context of the aviation dialogue of the Gulf Cooperation Council (GCC) states, arguing that. state subsidies received by Gulf carriers create distortions in the commercial aviation market. European Commission supports the initiative and agreed that instead of renegotiating bilateral agreements with the Gulf states, it will pursue an EU agreement on behalf of the member states (Consilium Europa, 13 March).

In the wake of the Germanwings Airbus A320 crash, the European Aviation Safety Agency (EASA) has issued a recommendation to implement a policy requiring that at least two crew members including at least one qualified pilot are in the cockpit at all times of the flight (EASA, 27 March).

Oil

Oil prices were up €1 per barrel in March to €53. Converted indices for Kerosene and Brent are shown in Figure 5.

In March, EIA forecast Brent crude oil price to average €56 ($59) per barrel in 2015, with prices increasing from an average of €52 ($56) per barrel in 2Q15 to an average of €62 ($67) per barrel in 4Q15. In 2016, Brent crude oil is forecast to average €69 ($75) per barrel (EIA, 10 March).

Fares

Deflated ticket prices in Europe increased by 3.8% in February year-on-year, based on preliminary values. This is above the trend (12-month trailing average) shown in Figure 6 (Eurostat, 16 March).

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STATFOR, the EUROCONTROL Statistics and Forecast Service [email protected] www.eurocontrol.int/statfor