Industry Monitor The EUROCONTROL bulletin on air transport trends Issue N°164. 01/07/2014 European flights grew by 1.8% in May, lying on the high-side of the forecast range. Preliminary data for June showed a 2.4% increase in flights EUROCONTROL statistics and forecasts 1 on June 2013. Other statistics and forecasts 2 Updated IATA forecast expects European Passenger airlines 3 airlines to post profit of €2 billion in 2014 as Airports 7 opposed to €2.3 billion in its March forecast. Aircraft manufacturing 7 Oil prices soared to nine-month highs in June Oil 8 due to the Iraq tensions and were up €3 to €82 Fares 8 per barrel. EUROCONTROL statistics and forecasts European flights increased by 1.8% (ESRA – EUROCONTROL Statistical Reference Area) in May compared with the same month a year ago, lying on the high-side of the forecast range for May 2014. Traffic growth is back on track after the less than expected increase of April. Preliminary data for June showed an increase of 2.4% in flights on June 2013 (Figure 1). Total traffic in Ukraine continued to suffer from the situation over Crimea with traffic declining by 27% in May 2014, accounting for a 30% drop in local traffic (international arrivals & departures and domestic flights); and a 25% drop in overflight traffic (vs May 2013). The closure of the airspace resulted in traffic re-routings leading to increases of overflights for Bulgaria, Romania and Turkey and a significant decrease for Moldova when compared with May 2013. The low-cost market segment grew by 7% in May 2014 (vs May 2013), a trend observed since the beginning of the Summer Schedules. The low-cost segment is no longer the only segment growing, as traditional scheduled also moved above the zero line (+0.7% compared with May 2013). The charter segment showed a 6.9% decline in May (vs May 2013) while all- cargo and business aviation segments were also down respectively by 0.3% and 1.1% compared with May last year (EUROCONTROL, June). Industry Monitor. Issue 164. 01/07/2014 Page 1 © EUROCONTROL 2014 Figure 1: Monthly European Traffic and Forecast. Based on data from airlines for delays from all-causes 37% of flights were delayed on departure (>= 5 minutes) in May 2014, this was an increase of 4 percentage points when compared with the same month in 2013. The average all-causes delay per movement in May 2014 increased from 7.8 minutes in May 2013 to 8.7 minutes in May 2014. Further analysis of the delay reasons shows that both Reactionary and Airline delay increased respectively by 0.26 and 0.21 minute per flight. En-Route delay also increased by 0.15 minute to 0.4 minute per flight (Figure 2) (EUROCONTROL, June). Other statistics and forecasts IATA published its revised profit outlook for airlines in 2014 and predicts that European airlines will report profit of €2 billion in 2014 as opposed to €2.3 billion in its March 2014 forecast. Global airlines cut their 2014 industry profit by 1.5% to €13.2 billion compared with the previous forecast, the main drivers being concerns about China’s economy and geopolitical risks such as the Ukraine crisis (IATA, 1 June). IATA reported that European scheduled passenger traffic (RPK) increased by 7.9% in April 2014 compared with a year-ago period. Capacity (ASK) was up 5.2% and the total passenger load factor was up 2 percentage points to 80.7% compared with April 2013 (IATA, 28 May). ACI reported that overall passenger counts at European airports increased by 8% in April 2014 compared with April last year with overall aircraft movements growing by 2%. (ACI, 4 June). Industry Monitor. Issue 164. 01/07/2014 Page 2 © EUROCONTROL 2014 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 May 2014). Passenger airlines Following the arrival of the first aircraft, Greenland Express has launched operations on June 17. The virtual airline is based in Aalborg, Denmark and is offering flights connecting Greenland with Iceland and Denmark. The flights are operated by the Dutch lessor Denim Air ACMI (Greenland Express, June). Norwegian has opened its new base at Madrid Barajas Airport. This is the low-cost airline sixth base in Spain and is seen as of strategically importance to future international operations from that airport (Norwegian, 3 June). Air Serbia, launched its new charter service brand, Aviolet. The service will be fully operated by the national airline and will serve mainly Mediterranean destinations during the Summer 2014 (Air Serbia, 30 May). Cyprus Airways is to sell its remaining slot pair at Heathrow to American Airlines to enhance the company’s liquidity for 2015. Cyprus will operate from Stansted to Larnaca as from 14 September (17 June). Low-cost Georgian start-up flyvista is to launch operations in July from Tbilisi to eight destinations in Kazakhstan, Ukraine, Azerbaijan, Belarus, Russia, Czech Republic, Turkey and Iran (flyvista, June). Ryanair is reportedly interested in acquiring a minority stake in AENA, the Spanish government is to sell 49% of the airports operator (Reuters, 17 June). SAS plans to cut circa 300 staff after it reported financial losses during the second quarter. (SAS, 18 June). Industry Monitor. Issue 164. 01/07/2014 Page 3 © EUROCONTROL 2014 Figure 3: Main carriers’ traffic results. Alitalia Board of Directors approved the proposal for an equity investment by Etihad. It is reported that Etihad will acquire a 49% stake in Alitalia and invest €1.25 billion in the Italian flag-carrier over the next four years. Resulting cost-cutting measures will incur circa 2,000 staff redundancies at Alitalia. The deal should be completed by 15 July (Etihad, Alitalia, 25 June, Reuters, 11 June). It is reported that Estonian government is examining options for state-owned Estonian Air if the airline goes bankrupt. The European Commission is currently investigating whether restructuring aid to the airline is in line with EU state-aid rules. In case of a negative decision, the options would then be to establish a new company or work with Air Baltic (Estonian Public Broadcasting ERR, 18 June). Finnair will reportedly outsource cabin crew services on 20 short and long-haul services over the next two years in a tentative to cut costs. This will lead to 540 staff redundancies (Helsinki Times, 23 June). It is reported that by 2015 Croatia Airlines plans to expand its fleet with four A319 aircraft. The airline currently operates a fleet of 10 aircraft (Air Finance Journal, 26 June). EuroLOT was granted a Foreign Air Carrier Permit by US Department of Transportation allowing the airline to operate scheduled and charter passenger and cargo flights between and beyond the European Union and the United States. EuroLOT reportedly plans to wet- lease a LOT B787-8 aircraft for long-haul charter flights on behalf of tour operators (ch- aviation, 23 June). Ryanair is planning to leave Lübeck as from October due to the uncertain future of the airport. Lübeck filed for insolvency in April but continues to operate (IM162) (Lübeck Airport, 16 June). Industry Monitor. Issue 164. 01/07/2014 Page 4 © EUROCONTROL 2014 Figure 4: Main carriers’ load factors. Traffic statistics: May update Figure 3 and Figure 4 compare May 2014 figures with May 2013 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). Routes, Alliances, Codeshares Wizzair opened a new base in Riga with one A320 and four new routes from Riga to Barcelona, Doncaster Sheffield, Dortmund and Paris Beauvais (Wizzair, 17 June). Air Moldova signed a code-share agreement with Ukraine International Airlines on 10 weekly services from Chisinau to Kiev (Air Moldova, 19 June). Czech Airlines and TAROM signed a code-share agreement on services from Prague to Bucharest, Kosice and Ostrava (CSA, TAROM, 1 June). Vueling is to launch three temporary destinations from Brussels to Prague, Florence and Catania during the autumn holiday, from 24 October until 2 November (routesonline, 10 June). British Airways and Vueling started codeshare operations on 50 routes, mainly focused on Vueling’s operations in Italy with 37 international and 11 domestic routes from its Fiumicino base. British Airlines will eventually add its flight code to more than 170 Vueling services (British Airways, 19 June). Royal Air Maroc will launch 3 new routes to Europe, from Casablanca to Milan Malpensa, Paris Charles De Gaulle and Montpellier (routesonline, 17 June). Industry Monitor. Issue 164. 01/07/2014 Page 5 © EUROCONTROL 2014 Figure 5: Brent and kerosene prices. Failures Polish charter carrier Bingo Airways suspended operations in June. The airline started operations in May 2012 with destinations from Poland to the Canaries, Tunisia, Sicily, Greece, Turkey, Egypt, Croatia and Bulgaria (Bingo Airways, June). Czech Central Connect Airlines reportedly ceased all operations on 30 June. The carrier served scheduled services from Pori (Finland) to Helsinki on behalf of Air100 along with leasing and charter services with a fleet of two Saab 340Bs. It already stopped scheduled services in June 2012 from Prague to Berlin, Stuttgart, Hanover, Ljubljana, Krakow and Zagreb in cooperation with Czech Airlines (ch-aviation, 26 June). Start-up low-cost Dalmatian was due to start flying on 30 June (IM162) but suspended operations after one of its investors left the company. The airline was planning to serve 10 destinations from Zagreb (Dalmatian, 24 June). Livingston Air filed for bankruptcy protection to avoid suspension of its operations from 14 July onwards after the Italian civil aviation authority revoked its Air Operators License.