Industry Monitor The EUROCONTROL bulletin on air transport trends

Issue N°156. 31/10/13

European flights followed the positive growth trend started in August and were up 0.8% in September compared with the same month a year ago. Preliminary data for October show a 0.3% increase in traffic on October 2012.

Updated seven-year forecast: flight decline for 2013 revised upwards compared with February release, but still 0.9% fewer flights in Europe. 2014 expected to see 1.4% growth.

Oil prices dropped to €80 per barrel in October.

EUROCONTROL statistics and forecasts 1 Other statistics and forecasts 2 Passenger airlines 3 Airports 6 Cargo 7 Environment 7 Aircraft manufacturing 8 Regulation 8 Oil 8 Fares 8

EUROCONTROL statistics and forecasts European flights increased by 0.8% in September compared with the same month last year and followed the positive growth trend started in August after 18 months of decline (Figure 1). Industrial action in France on 10 September led to the cancellation of 450 flights. Charter traffic decreased by 4% and was the weakest of the market segments in September, being the most strongly affected by the traffic disruption in Egypt. Low-cost, Scheduled and Business segments grew by 2.7%, 0.7% and 0.1% respectively whereas All-Cargo was down 0.2%. Preliminary data for October show a 0.3% increase in traffic on October 2012 (EUROCONTROL, October). Based on preliminary data from airlines for delay from all causes, 37.2% of flights were delayed on departure in September, an increase of 1.9 percentage points on September 2012. The average delay per movement in September 2013 decreased to 8.3 minutes from 9.1 minutes. Further analysis of the delay reasons shows that reactionary delays decreased by 0.4 minutes per flight to 3.7 minutes. ATFCM Airport delay increased by 0.1 minutes per flight. ATFCM En-route delays decreased during the month, this falling to 0.2 minutes per flight compared to September 2012 (Figure 2) (EUROCONTROL, 31 October).

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Figure 1: Monthly European Traffic and Forecast.

The update of the seven-year forecast of flight movements 2013-20191 is for 0.9% fewer flights for Europe in 2013. This is an upwards revision (+0.4 percentage point) on the February forecast as European traffic has been stronger than expected during Summer, notably owing to very dynamic Russian flows. However, despite the slow recovery observed over the last two months, flat economic outlook for EU, weak prospects for the Winter timetable and sharp reductions in traffic from Egypt still explain the traffic decline in 2013. The growth in 2014 is expected to be weaker than expected (1.4% down from 2.8%) as the economic outlook remains weaker than expected for next year. Traffic in 2019 is forecasted to finish at 10.8 million flights, slightly below the figure published in the February forecast (EUROCONTROL, October).

Other statistics and forecasts IATA reported that scheduled passenger traffic (RPK) in Europe increased by 5.4% in August 2013 compared with August 2012. Capacity was up 3.7% and the total passenger load factor hit 86.4% (IATA, 2 October). ACI reported overall passenger counts at European airports increased significantly by 3.9% on August last year whereas overall aircraft movements were stable (+0.2%). Cargo tonnage was flat at 0% (ACI, 7 September).

1 EUROCONTROL Seven-Year Forecast (Flight Movements and Service Units) 2013 – 2019, September 2013

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http://www.eurocontrol.int/sites/default/files/content/documents/official-documents/forecasts/seven-year-flights-service-units-forecast-2013-2019-sep2013.pdf

Breakdown of average delay per flight

Percentage of flights delayed on departure

Figure 2: Delay Statistics (all causes, airline-reported delay – preliminary data for September 2013).

Passenger airlines

Capacity, costs and jobs Aegean Airlines has acquired Olympic Air following the decision by the European Commission competition authorities to clear the merger between the two airlines. Aegean’s first bid in 2011 was rejected because the merger would have created a monopoly in Greece. EC finally concluded that the merger causes no supplementary harm to competition because of the critical financial state of Olympic which would have been out of business without its purchase by Aegean. Olympic to become a simple subsidiary company keeping its own brand and the sole owner of its fleet (EUROPA, 9 October and Aegean, 23 October). Norwegian Air Shuttle has reportedly applied for a new Air Operator's Certificate with a view to setting up a new low-cost airline to counter other low-cost carriers in the Norwegian travel market (ATW, 7 October). Alitalia shareholders have approved an increase in capital of up to €300 million. Members have 30 days from 16 October to exercise their option on the new share. Air France-KLM is the largest shareholder with its 25% stake in the loss-making airline (Alitalia, 15 October). Aeroflot plans to launch its low-cost airline Dobrolet in spring 2014 with B737-800NG aircraft to be based in Moscow and flying to the most popular destinations in the European part of Russia (Aeroflot, 10 October). Iberia has revealed its new visual identity which contributes to the airline’s goal of achieving a stronger, more modern, more competitive Iberia. Iberia reduced its losses in 2Q13 and expects to return to profit in 2014 (Iberia, 15 October).

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Note: IAG monthly pro-forma including Vueling in the baseline.

Figure 3: Main carriers’ traffic statistics.

easyJet is to expand in Italy with the opening of its third Italian base in Naples in spring 2014. The airline will base two aircraft and operate 20 routes among which five new ones to Hamburg, Brussels, Catania, Mykonos and Corfu (easyJet, 10 October). Serbia’s national carrier JAT Airways was renamed Air Serbia on 26 October with an inaugural flight to Abu Dhabi. Thanks to its partnership with Etihad (IM154), Air Serbia is to expand its network with 12 new routes and a new fleet of A319 aircraft (Air Serbia, October). Resulting from extensive customer feedback on its website, Ryanair said it committed to improve customer service with a number of measures to be implemented between November and March next year. Improvements include easier website bookings, increasing the hand baggage allowance and cutting baggage and boarding pass fees (Ryanair, 25 & 30 October).

Routes, Alliances, Codeshares Transaero and easyJet signed a commercial agreement, effective 27 October. Last year, easyJet was granted the rights by UK Civil Aviation Authority (UK CAA) to fly from Gatwick to Moscow Domodedovo under the bilateral agreement with Russia (IM150) (Transaero, 30 September). Low-cost Norwegian is to launch three transatlantic routes from Gatwick to New York JFK, Los Angeles and Fort Lauderdale in Summer 2014 and will add five new European routes from Gatwick to Budapest, Santorini, Cyprus, Catania and Corfu between March and July next year (Norwegian, 17 October). The two Star Alliance airlines, Aegean Airlines and Egyptair signed a codeshare agreement for flights between and within Greece and Egypt (Aegean, 15 October).

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http://www.eurocontrol.int/sites/default/files/content/documents/official-documents/industry-monitor/eurocontrol-industry-monitor-154.pdfhttp://www.eurocontrol.int/sites/default/files/content/documents/official-documents/industry-monitor/eurocontrol-industry-monitor-150.pdf

Note: IAG monthly pro-forma including Vueling in the baseline. Figure 4: Main carriers’ load factors.

As part of its 2014 Summer schedule, easyJet is to launch 10 new routes from its bases at Gatwick, Edinburgh, Glasgow, Newcastle and Belfast to destinations across the UK and Europe (easyJet, 23 October). Ryanair will launch eight new routes from Shannon to Berlin, Faro, Fuerteventura, Krakow, Munich, Nice, Paris and Warsaw, effective April 2014. The announcement comes after the Irish government’s decision to remove the air travel tax of €3 per passenger from April next year (Ryanair, 16 & 24 October). Latvia’s flag carrier airBaltic and Etihad signed a codeshare agreement and will begin four-weekly Riga-Abu Dhabi flights, effective 16 December, subject to regulatory approval. airBaltic will place its code on six Etihad destinations to Cairo, Singapore, Bangkok, Amman and Muscat. Etihad will place its code on 19 airBaltic destinations (airBaltic, 9 October). Transaero is to launch scheduled flights from Moscow Vnukovo to Istanbul Atatürk, effective 27 October. On the other hand, Pegasus has been granted by the Russian authorities three-weekly flights on the Istanbul Sabiha Gökcen – Moscow Domodedovo route (Transaero, 1 October and Pegasus, 8 October). Qatar Airways joined oneworld alliance on 30 October and became the first major Gulf airline to join a global alliance (oneworld, 30 October).

Failures New national airline Solyom Hungarian Airways due to replace Malev (suspended operations in February 2012) never started operations after failing to reach a deal with potential investors. The airline planned to operate a fleet of six aircraft and fly to seven European cities from Budapest starting in October (Budapest Business Journal, 24 October). Norwegian FlyNonstop filed for bankruptcy. The defunct airline started operations in April 2013 (FlyNonstop, 29 October).

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Figure 5: Carbon prices.

Traffic statistics: September update Figure 3 and Figure 4 compare September 2013 figures with September 2012 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 CAA calls on UK’s six busiest airports (Heathrow, Gatwick, Stansted, Birmingham, East Midlands and Manchester) to use differential landing charges to encourage airlines to operate more environmentally friendly flights (UK CAA, 15 October). Heathrow was awarded the ‘Optimisation’ accreditation for the fourth year in a row by Airport Carbon Accreditation, the only independent institutionally endorsed carbon certification standard for airports. Heathrow’s strategy is to reduce the airport’s CO2 emissions by 34% by 2020 (Heathrow, 22 October). It is reported that Spanish airport authorities will grant incentives to airlines in the hope of attracting an additional 4 million passengers in 2014 at Spanish airports. Airport taxes will be removed completely for carriers opening new routes whereas a discount of 75% will be applied to carriers increasing traffic on existing routes. The measure will take effect from 1 January 2014 (El Pais, 14 October).

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Figure 6: Brent and kerosene prices.

It is reported that the Spanish government should sell up to 60% of Aena airports group to three to five private investors. Aena operates 46 Spanish airports plus London Luton (IM154) and has shares in 14 South American airports and has been looking for years to privatise Aena (Financial Time, 28 October). Low-cost Wizzair from Budapest was the first commercial flight to touch down at Dubai World Central (DWC) which is expected to become the world’s largest airport by 2030. DWC will then be able to accommodate 160 million passengers per year on five runways (Al Maktoum International Airport, 27 October).

Cargo Lufthansa Cargo is reportedly planning to set up an air cargo alliance modelled on the passenger ‘Star Alliance’. The benefits are a better utilisation of aircraft, improved quality control, access to new markets and additional connections. A decision on the potential partners is expected by mid-2014 (Frankfurter Allgemeine, 18 October).

Environment The price of carbon contracts for 2016 remained at €6/tonne in recent weeks (Figure 5).

ICAO Member States agreed to develop by 2016 a global market-based measure (MBM) to limit CO2 emissions from aviation. In the coming three years substantive progress on the design of the scheme needs to be made at a technical level, including the use of better alternative aviation fuels. The MBM scheme should come into force in 2020. EU must decide on the next steps with respect to the EU ETS (ICAO & EUROPA, 4 October).

Lufthansa will modify 157 aircraft from its A320 family from January 2014. Based on the findings of research carried out by Lufthansa and the German Aerospace Center, Airbus has developed vortex generators especially for the A320 family that reduce the total noise generated by the approaching aircraft by up to two decibels (Lufthansa, 29 October).

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Aircraft manufacturing Emirates is reportedly in negotiation with Boeing to place an order for up to 100 long-haul aircraft. The deal could be finalised at Dubai Air Show in November (Financial Times, 27 October). Boeing is reducing the production rate of its B747-8 from 1.75 aircraft to 1.5 aircraft per month through 2015 due to lower than expected demand for large passenger and cargo aircraft (Boeing, 18 October).

Regulation EC is conducting an in-depth investigation to assess whether marketing deals between the Spanish authorities and Ryanair and other airlines operating at Girona and Reus breach EU state-aid rules (EUROPA, 16 October).

Oil Oil prices dropped to €80 per barrel in October. Converted indices for Kerosene and Brent are shown in Figure 6.

Fares Deflated ticket prices in Europe increased by 3.4% in September year-on-year, based on preliminary values (Eurostat, 16 October).

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© 2013- European Organisation for the Safety of Air NavigationEUROCONTROL)

This document is published by EUROCONTROL for information purposes.It may be copied in whole or in part, provided that EUROCONTROLs mentioned as the source and it is not used for commercial purposes(i.e. for financial gain). The information in this document may not bemodified without prior written permission from EUROCONTROL.

STATFOR, the EUROCONTROL Statistics and Forecast Servicestatfor.info@eurocontrol.intwww.eurocontrol.int/statfor

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The EUROCONTROL Statistics and Forecast Service (STATFOR)is ISO 9001:2008 certified.

© 2013- European Organisation for the Safety of Air NavigationEUROCONTROL)

This document is published by EUROCONTROL for information purposes.It may be copied in whole or in part, provided that EUROCONTROLs mentioned as the source and it is not used for commercial purposes(i.e. for financial gain). The information in this document may not bemodified without prior written permission from EUROCONTROL.

STATFOR, the EUROCONTROL Statistics and Forecast Servicestatfor.info@eurocontrol.intwww.eurocontrol.int/statfor

(

i

The EUROCONTROL Statistics and Forecast Service (STATFOR)is ISO 9001:2008 certified.

EUROCONTROL statistics and forecastsOther statistics and forecastsPassenger airlinesCapacity, costs and jobsRoutes, Alliances, CodesharesFailuresTraffic statistics: September update

AirportsCargoEnvironmentAircraft manufacturingRegulationOilFares