Yearbook 2003 cargolux Association of European Airlines Association of European Airlines Avenue Louise 350 B - 1050 Brussels Tel. +32 (0)2 639 89 89 Fax 639 89 99 E-mail [email protected] July 2003 Dear Reader of the AEA Yearbook, The AEA Yearbook has always been During my chairmanship of the AEA in _________ the benchmark for the European 2003, we have undertaken a root and aviation industry. It is a source of branch review to raise awareness of its information on current trends supported role and effectiveness as an industry by facts, figures and careful analysis. body. The web-site has been revamped and well received and our This yearbook is no different. communications have greatly improved. It seeks to outline and explain the impact on our industry of one of the Without doubt, this has been a very toughest periods in the history of critical year for the industry as a result aviation. of external pressures - the continued threat of terrorist activity, the Iraq war Against a background of global and the weak global economy. economic slowdown, the war with Iraq, However, it has also been an historic and SARS, global airlines have year. The European Commission has suffered four consecutive years of been granted the mandate to negotiate losses and no growth. a new air treaty with the US. If it comes to fruition we will achieve true The continued crisis however, has been liberalisation and create a vibrant, a catalyst for change and it has competitive market which the AEA has energised us to develop new solutions long called for. to meet the changing needs of our customers and the marketplace. I hope you enjoy reading this document and that it will provide the basis for a AEA member airlines have dramatically continued discussion about the future reduced their overall cost of operations of European aviation. and many are re-evaluating core elements of their current business model, addressing structural inefficiencies, particularly in the short- haul sector. This Yearbook details the problems and Rod Eddington the solutions we are seeking to implement to ensure European aviation Chief Executive of British Airways is healthy and vibrant. AEA Chairman 2003 Adria Airways, Aer Lingus, Air France, Air Malta, Alitalia, Austrian Airlines, BMI, British Airways, Cargolux, Croatia Airlines, CSA, Cyprus Airways, Finnair, Iberia, Icelandair, JAT, KLM, LOT, Lufthansa, Luxair, Malev, Meridiana, Olympic Airways, SAS, SN Brussels Airlines, Spanair, SWISS, TAP Air Portugal, Tarom, Turkish Airlines, Virgin Atlantic Airways. CONTENTS SECTION I AEA AIRLINES IN 2002 I-1 At a Glance I-2 Welcome to Virgin Atlantic Airways I-4 The Global Economic Environment I-5 Traffic Development 2002 I-7 ‘No-frills’ carriers l-8 Spotlight on the North Atlantic I-10 Spotlight on the Far East I-11 Operating Results 2002 I-12 Punctuality Performance I-14 SECTION II OUTLOOK FOR 2003 II-1 The Story so Far.. II-2 Traffic Development II-3 Operating Results II-4 SECTION III LOOKING FORWARD III-1 Towards an Efficient European Air Transport System III-2 Are Air Transport Networks Sustainable? III-4 Improving the Industry’s Regulatory Framework III-5 The Dynamics of the Value Chain III-6 A transatlantic Open Aviation Area ? III-7 Bilateral Agreements – Where now ? III-8 Denied Boarding Compensation III-9 External Shocks – Security and Insurance III-10 SECTION IV SPOTLIGHT ON THE AEA IV-1 AEA Highlights IV-3 Airline Profiles & Review of 2002 IV-6 SECTION V KEY STATISTICS V-1 Key Statistics - Total AEA V-2 Key Statistics - By Carrier V-4 AEA Fast Facts V-11 What do we mean by…? V-12 ASSOCIATION OF EUROPEAN AIRLINES I - 1 AT A GLANCE -0.87Total Financial billion Loss (-0.94 US$ € bn) Total Scheduled-2.4 bn Revenue US$ Revenueall services (-2.5 less € bn) -13.8 millionTotal Scheduled fewer PassengerPassengers numbers OPERATING PROFIT / LOSS TOTAL SCHEDULED ROUTES 3.0 billion current US$ after interest 2.5 2.0 1.5 1.0 0.5 0.0 -0.5 -1.0 US$ -0.87 bn -1.5 (€ -0.94 bn) -2.0 -2.5 US$ -3.02 bn (€ -3.2 bn) -3.0 90 91 92 93 94 95 96 97 98 99 00 01 02 Source: AEA AEA_YB_03_01 -4.8% PassengerTotal Scheduled Traffic Passenger loss Kms -8.7% reductionTotal Scheduled in Seat Capacity Kms on offer 2002 over 2001 I–2 ASSOCIATION OF EUROPEAN AIRLINES MAR-JUL 2003 20% change in RPKs 10 North Atlantic 0 Markets which should have been -10 Geographical Europe recovering from their prolonged -20 weakness were belaeguered once again -30 in early 2003 , first by the Iraq War, then Far East / Australasia -40 by the wholly disproportionate effect of Middle East the SARS outbreak. -50 -60 W12 W15 W20 W25 Source: AEA AEA_YB_03_02 MONTHLY TRAFFIC MONITOR 30% change in RPKs 25 20 North Atlantic 15 10 Geographical Europe 5 Gulf War II (20-Mar/14-Apr) September 11th 0 -5 -10 -15 -20 Far East / Australasia -25 -30 -35 JUN-01 JUN-02 MAY-03 Source: AEA AEA_YB_03_03 SEP-DEC 2001 10% change in RPKs 0 Geographical Europe -10 -20 Agraphic reminder of the shockwave Far East / Australasia sent through the market by the events of -30 September 11. -40 -50 North Atlantic -60 W37 W40 W45 W50 Source: AEA AEA_YB_03_04 ASSOCIATION OF EUROPEAN AIRLINES I –3 WELCOME TO VIRGIN ATLANTIC AIRWAYS AEA gained its newest member on July In 2002 passenger-kilometre terms, the airline 1st 2003, with Virgin Atlantic Airways ranked seventh among AEA airlines overall, formally joining the Association. fifth in long-haul and fourth across the North Atlantic. The passenger count for the year Virgin’s membership application was exceeded 3.8 million. unanimously approved by the AEA Presidents’ Assembly held in Brussels in May. The fleet, amongst the youngest in the industry, consists of twelve Boeing 747s Virgin Atlantic began operations in 1984 and 14 Airbus A340s. These latter with a single aircraft on a single route include four dash-600 models – the (Gatwick-Newark). From the outset, it longest civil aircraft in existence – for has been seen as a pacesetter, with a which Virgin was the launch customer. strong public image combining both value and service elements – in the words of In December 1999, Singapore Airlines founder Sir Richard Branson, “a brand acquired a 49% stake in Virgin Atlantic. name that is known internationally for The two airlines cooperate on the innovation, quality and a sense of fun”. London-Singapore route and offer On early flights, performers were offered reciprocal frequent-flyer and lounge free passage if they would entertain their benefits. Virgin also has commercial fellow-passengers en route. agreements with other airlines, including Continental, Malaysian and bmi. From these modest beginnings, Virgin Atlantic has grown into a major global Virgin Atlantic is part of the highly diversified player. Its exclusively long-haul network Virgin Holdings group (retailing, publishing, links London (Heathrow and Gatwick) financial services, telecommunications…). and Manchester with nine US The group also includes low-fare airline destinations, five in the Caribbean, four in brands in Europe (Virgin Express) and West and South Africa and four in Asia. Australia (Virgin Blue). I–4 ASSOCIATION OF EUROPEAN AIRLINES THE GLOBAL ECONOMIC ENVIRONMENT While 9/11, the Iraq War and SARS have The European airlines’ second-largest dominated the airline-related headlines since overseas market, Japan, has under- 2001, it should not be overlooked that during performed both the EU and the US with this time the industry has been struggling close-to-zero growth in both 2001 and through a serious economic downturn – a 2002. Japan has in fact suffered an downturn, indeed, not unconnected with extended period of depression, having these events. posted only two GDP increases in excess of 2% (and one decrease) in eleven REAL GDP GROWTH RATES years. 7% growth in real GDP 6 Sustained powerful increases in the Japan Chinese economy, pushing the 5 passenger market into a position where it 4 challenges Japan in importance for AEA EU airlines, have come to an abrupt end in 3 2003 with the devastating impact of SARS. 2 USA 1 Within the EU, the largest national economy, Germany, has also been the 0 most depressed, with GDP growth of only -1 0.2% in 2002 and a projected 0.4% in 2003. Fourth-place Italy and sixth-place -2 Netherlands have been scarcely any 1986 1988 1990 1992 1994 1996 1998 2000 2002 03E 04E stronger. Source: OECD Economic Outlook n.73 AEA_YB_03_05 Size of Economy GDP growth rate The global economic slowdown of 2001-3 2002 GDP levels 1995 prices has been the most severe since the US € bn economy slumped in 1991, followed by 2002 2003 Europe two years later. This time Germany 2108 0.2 0.4 around, US and European economies United Kingdom 1661 1.8 2.2 have weakened more or less France 1521 1.2 1.1 simultaneously. Italy 1258 0.4 1.0 Spain 694 2.0 2.0 Netherlands 444 0.3 0.5 The slump in the US economy, from a Belgium 261 0.7 1.2 GDP growth of close to 4% in 2000 to Sweden 256 1.9 1.4 just above zero in 2001, was followed in Austria 217 1.0 1.2 2002 by a partial recovery to 2.5%. Denmark 183 1.6 1.5 Finland 140 1.6 2.2 In Europe, the drop in 2001 was less severe, Portugal 129 0.5 0.5 but worsened again in 2002 and is projected Ireland 115 6.0 3.3 Greece 99 4.0 3.6 to mount only the weakest of recoveries in Luxembourg 19 0.4 1.1 2003.