Study on the economic developments of the EU Air Transport Market FINAL REPORT Written by: EGIS / SEO 16 July 2020 STUDY ON THE ECONOMIC DEVELOPMENTS OF THE EU AIR TRANSPORT MARKET 1/238 FINAL REPORT EUROPEAN COMMISSION Directorate-General for Mobility and Transport Directorate E — Aviation Unit E.1 — Aviation Policy Contact: MOVE E1 Secretariat E-mail: [email protected] European Commission B-1049 Brussels EUROPEAN COMMISSION Study on the economic developments of the EU Air Transport Market Final Report EUROPEAN COMMISSION Europe Direct is a service to help you find answers to your questions about the European Union. Freephone number (*): 00 800 6 7 8 9 10 11 (*) The information given is free, as are most calls (though some operators, phone boxes or hotels may charge you). LEGAL NOTICE This document has been prepared for the European Commission however it reflects the views only of the authors, and the Commission cannot be held responsible for any use which may be made of the information contained therein. More information on the European Union is available on the Internet (http://www.europa.eu). Luxembourg: Publications Office of the European Union, 2021 ISBN 978-92-76-29357-6 doi: 10.2832/561694 © European Union, 2021 Reproduction is authorised provided the source is acknowledged. Image © Dmitrijs Mihejevs Directorate-General for Mobility and Transport Aviation Policy MOVE/E1/SER/2019-266/SI2.809800 STUDY ON THE ECONOMIC DEVELOPMENTS OF THE EU AIR TRANSPORT MARKET – FINAL REPORT Document information GENERAL INFORMATION Marie LANDRU, Clément MARQUIS, Rogier LIESHOUT, Joost ZUIDBERG, Thijs BOONEKAMP, Author(s) Arnout JONGLELING, Andreas HARDEMAN, Roland EMOJEVBE, Maxime DE VILLERS, Jan-Bjorn SCHOMANN, Nathalie BEDERT Version V5 HISTORY OF CHANGES Version Date Checked by Description V1 February 2020 Clément MARQUIS, Jan-Bjorn SCHOMANN, Joost ZUIDBERG Interim Report V2 May 2020 Clément MARQUIS, Jan-Bjorn SCHOMANN, Joost ZUIDBERG Draft Final Report V3 June 2020 Clément MARQUIS, Jan-Bjorn SCHOMANN, Joost ZUIDBERG Final Report V4 June 2020 Clément MARQUIS, Jan-Bjorn SCHOMANN, Joost ZUIDBERG Final Report V5 July 2020 Clément MARQUIS, Jan-Bjorn SCHOMANN, Joost ZUIDBERG Final Report Disclaimer The information and views set out in this study are those of the author(s) and do not necessarily reflect the official opinion of the Commission. The Commission does not guarantee the accuracy of the data included in this study. Neither the Commission nor any person acting on the Commission’s behalf may be held responsible for the use which may be made of the information contained therein. The information and views of this study do not reflect the impact of COVID-19 on the structure and operation of the aviation market. The longer-term impact of COVID-19 on the aviation market is still unknown and any forecasts or anticipated trends presented in this report are therefore uncertain and need to be treated with caution. STUDY ON THE ECONOMIC DEVELOPMENTS OF THE EU AIR TRANSPORT MARKET 5/238 16 July 2020 STUDY ON THE ECONOMIC DEVELOPMENTS OF THE EU AIR TRANSPORT MARKET – FINAL REPORT TABLE OF CONTENTS GLOSSARY OF TERMS ......................................................................................................... 10 TABLE OF FIGURES .............................................................................................................. 15 EXECUTIVE SUMMARY ........................................................................................................ 17 Introduction ...................................................................................................................................... 17 A. General overview of the European air transport market (2016-2019) ................................... 18 A.1. Viable economic landscape of European Aviation .................................................................................. 18 A.2. Rising connectivity levels ............................................................................................................................ 18 A.3. Airline bankruptcies reduce competition on air routes .......................................................................... 19 A.4. Stabilisation of the competitive airport market ...................................................................................... 19 B. Trends & Developments .............................................................................................................. 20 B.1. Environmental policies ................................................................................................................................. 20 B.2. Aviation Agreements bolster standards and market opportunities ..................................................... 20 B.3. Shift in European airport trends ................................................................................................................. 21 B.4. Evolving airline strategies ............................................................................................................................ 22 B.5. Connectivity of remote and peripheral regions ....................................................................................... 23 B.6. About multimodality and intermodality ................................................................................................... 24 B.7. Impact of digitalisation ................................................................................................................................ 25 B.8. Developments up to 2025 ........................................................................................................................... 26 B.8.1. Pre-COVID forecasts ............................................................................................................................................................................................... 26 B.8.2. The impact of the COVID pandemic: first estimates ................................................................................................................................. 28 C. Strategic overview ....................................................................................................................... 29 C.1. PESTEL Model ................................................................................................................................................ 29 C.2. Porter’s 5 (+1) forces model ....................................................................................................................... 30 FOREWORD .......................................................................................................................... 33 An aviation strategy for Europe...................................................................................................... 33 How did the European aviation market develop since 2016? ..................................................... 34 Structure of the report .................................................................................................................... 34 1. OVERVIEW OF THE EU AIR TRANSPORT MARKET (2016-2019) ........................ 35 1.1 Generic Economic Analysis ................................................................................................. 35 1.1.1. Development of passenger traffic by world region ......................................................................... 35 1.1.2. Development of passenger traffic by country .................................................................................. 36 1.1.3. Development of passenger traffic by airline type ............................................................................ 41 1.1.3.1. LCC traffic ........................................................................................................................................................................................................... 41 1.1.3.2. Fastest growing airlines ................................................................................................................................................................................ 43 1.1.4. Development of cargo traffic by world region ................................................................................. 44 1.1.5. Development of cargo traffic by country .......................................................................................... 45 1.1.6. Development of airport financials ...................................................................................................... 48 Study on the economic developments of the EU Air Transport Market 6/238 16 July 2020 STUDY ON THE ECONOMIC DEVELOPMENTS OF THE EU AIR TRANSPORT MARKET – FINAL REPORT 1.1.7. Development of airline profitability ................................................................................................... 49 1.2 Development of air connectivity ....................................................................................... 51 1.2.1. Measuring connectivity ........................................................................................................................ 51 1.2.2. Direct connectivity ................................................................................................................................ 51 1.2.3. Indirect connectivity ............................................................................................................................. 54 1.2.4. Route openings and closures ..............................................................................................................