Industry Monitor The EUROCONTROL bulletin on air transport trends

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1 EUROCONTROL 2010 Issue N /06/10 Industry Monitor The EUROCONTROL bulletin on air transport trends European air traffic increased by 2% in May unveiling a slight bounce back Ash-cloud flight cancellations in Europe estimated at (only) 7,000 in May, but delays up IATA revised upwards its 2010 global passenger volume forecast to 7.1% Europe is the only region where IATA forecasts airlines to make losses in 2010 Germany to introduce an environmental tax Greenhouse gas emissions for international aviation and shipping decreased in 2008 for the first time since 1992 Oil prices now down to around $75 per barrel EUROCONTROL Statistics and Forecasts 1 Other Statistics and Forecasts 2 Passenger Airlines 2 Manufacturer 5 Airports 6 Environment 6 Financial Results of Airlines 7 Economy 7 Regulation 7 Fares 8 Oil 8 EUROCONTROL Statistics and Forecasts European flights increased by 2% in May on the same month of last year. In May, further volcanic ash disruptions around 7,000 flights cancelled and a national strike in Greece led to around a 1% reduction in monthly flight growth. Preliminary data for June traffic suggest a clearer bounce back in European travel, towards the higher range of the forecast as shown in Figure 1 (EUROCONTROL, June). Preliminary data shows that the average delay per delayed flight (for departures and from all causes) increased to 31 min in May up from 24 min in May 09 (see Figure 2). 43% of flights were delayed on departure (>5 min), a 10 percentage point increase compared to May 09. ATFCM en-route delays showed the biggest increase mostly due to demand and capacity issues.

2 Figure 1. European Traffic. (Source: EUROCONTROL/STATFOR) Other Statistics and Forecasts According to IATA, air travel and freight strongly bounced back in May after the April disruption due to the closure of European airspace. May statistics (comparison on the same month last year): International passenger volumes for global traffic (RPK) increased by 12% and freight volumes (FTK) shot up by over 34%, In Europe, passenger volumes increased by 8.3% and freight volumes jumped by almost 22% (IATA, 29 June). Ash plume in April dented the rebound in demand but better-than-expected economic growth (except in Europe) led IATA to revise upwards the 2010 forecasts: International passenger volumes (RPK) are expected to grow by 7.1% while cargo volumes (FTK) are to increase by 18.5%; Global airlines are expected to make $2.5 billion profits, nevertheless Europe is the only region where airlines are expected to make losses ($2.8 billion) explained by the ash plume and the Greek crisis (IATA, 7 June). Passenger Airlines Iberia has exercised an option to buy 5 A320s on 3 rd May to be reportedly sold to its forthcoming merger partner British Airways (Airbus, 3 June and reuters, 4 June). Emirates placed an additional order of 32 A380s taking its total number of Airbus superjumbos ordered to 90 (to be delivered by 2017). The Middle-East carrier currently owns 48 A380s and plans to establish Dubai as the central hub for worldwide air travel (see Routes section for other news). Emirates current A380s operations to Europe daily connect Dubai to London, Paris and Manchester. To achieve global network and fleet expansions, the carrier plans to hire 3000 cabin crew and 250 pilots in 2010 (Emirates, 25 May, 3 and 8 June). Industry Monitor. Issue /06/10 Page 2 EUROCONTROL 2010

3 Departure Delay Causes All causes of delay (based on the Total Delay in Minutes from 1 minute onwards) Primary Delay Distribution for May 2010 Preliminary data Share of Primary & Reactionary Delay - May 2010 Primary Delay = 54% Reactionary Delay = 46% Figure 2. European delays. (Source : EUROCONTROL/CODA) As part of its restructuring program, SAS agreed with Estonian Government to divest out its 49% stake in Estonian Air. The Baltic state will proceed to a capital injection ( 21.5 million) and SAS will convert a 2.1 million in loans into equity. The Estonian airline will in effect be renationalised as the Estonian Government will hold 90% of the carrier even if SAS will keep the rest (SAS, 4 June). To start again developing premium business activity, British Airways launched PrivateConnect in partnership with CitationAir, the Cessna private jet s company. BA customers flying within North-America will be offered an ad-hoc service at a pay-per-hour rate on a business jet operated by CitationAir to any destination within North America and the Carribean (British Airways, 14 June). Two Icelandic pension fund companies agreed to invest around 25 million in Icelandair Group, parent company of Icelandair, as part of the undergoing financial restructuring plan to reduce a debt by over 60 million (Icelandair Group, 15 and 16 June). As part of the fleet expansion plan in which Turkish Airlines expects to purchase 105 additional aircraft by 2023, the carrier is to add 10 aircraft - only wide-bodies - in the current financial year with 5 B777s and 5 A330s. In parallel, the carrier continues to lease aircraft (see IM 119) with 1 B737 and 1 A319 to be delivered during summer (Turkish Airlines, 1, 21 and 23 June). Ryanair will cut 16% capacity in the UK during winter (compared to winter 09). The budget carrier will consequently remove 2 aircraft at London Stansted from November (Ryanair, 29 June). Industry Monitor. Issue /06/10 Page 3 EUROCONTROL 2010

4 Figure 3. Main carriers traffic statistics. (Source: Company reports) Capacity, costs and jobs Corsairfly, owned by TUI Travel PLC, will reportedly remove 25% of workforce via voluntary redundancies by The airline, mainly serving France overseas départements, will become an international long-haul traditional airline in the next two years (Les Echos, 27 May). Lufthansa has reportedly announced the increase of fares on flights from Germany and some other markets from the end of June simultaneously with a (smaller) decrease of fuel surcharges on tickets (flights and fares, 17 June). New routes, codeshare Iberia will resume its flights to Dubrovnik, Zagreb and Saint Petersburg for summer. The Spanish carrier will also add new destinations by September: to Jordanian, to Syria (Damascus) and to Algeria (Oran). Iberia will also fly from Argentina (Cordoba) to Europe and to El Salvador (San Salvador) and will make the Madrid-Panama city flight direct by then end of October (Iberia, 15 June). After Ryanair settled its 42 nd base in Barcelona El Prat (see IM120), the Spanish airport is to become Vueling s connecting hub from the 5 th July. The Spanish budget carrier which currently serves 43 routes from El Prat expects connecting traffic to account for 10% of its passengers at the airport by 2011 (Vueling, 9 June). Ryanair will open 10 new routes from its 43 rd base in Valencia from November and will base 2 aircraft at the Spanish airport (Ryanair, 23 June). Industry Monitor. Issue /06/10 Page 4 EUROCONTROL 2010

5 Figure 4: Main carriers load factors. (Source: company reports) Middle-East carriers are adding more European routes: Emirates to serve Prague and Madrid from Dubai (Emirates 4 June), Qatar Airways to operate Bucarest, Budapest, Brussels and Nice from Doha this Winter and next year (Qatar Airways, 21 June), Etihad to codeshare with Malev in September expanding both carriers networks from Budapest and Abu Dhabi (Etihad, 3 June). Alliances, Mergers Vietnam Airlines and Tarom Airlines joined the SkyTeam alliance, adding 31 new destinations to the alliance s network offering almost 900 destinations in 169 countries. The alliance plans to develop its presence in Asia in welcoming China Eastern by mid-2011 (SkyTeam, 10 and 25 June). Traffic Statistics: May update Figure 3 and Figure 4 compare May 10 figures with May 09 ones. Passenger capacity is measured in available seat kilometres (ASK) and traffic is measured in revenue passenger kilometres (RPK). Except for British Airways, which shows a traffic decline in May (14-day cabin crew industrial action has reportedly accounted for 6% reduction in capacity), all carriers followed in this bulletin have improved their traffic statistics in May (company reports, June). In May, British Airways traffic and capacity in Europe declined by 15% and 11% respectively (compared to same month last year). This resulted in a passenger load factor decrease of 3.6 percentage points in Europe to 68.7% (BA, 3 June). Manufacturer Due to the continuing demand for Next-generation 737s, Boeing announced an increase in production rate to 35 aircraft per month by early 2012 from the 31.5 aircraft currently produced (Boeing, 15 June). Airbus delivered its 30 th A380 and still plans to deliver 20 super-jumbos by the end of 2010, twice the number of 2009 deliveries (EADS, 4 June). Industry Monitor. Issue /06/10 Page 5 EUROCONTROL 2010

6 Airports After UK government opposed to building additional runway at South East airports (see IM 119), a task force has been set up to develop more competitive aviation industry with the existing infrastructures. The task force will concentrate on economic regulation of airports to benefit passengers, notably sharpening the incentives on airports and investing in improved airport facilities. The UK Secretary of State for Transport set the new tone: "We need to start a new chapter in aviation policy - one that promotes a competitive aviation industry, supporting UK economic growth, whilst recognising the need for restraint" (Number10, 25 May and BBC, 15 June). BAA published Heathrow s capital investment plan: 1.2 billion a year over the 5 years to 31 March 2013 will be invested for construction programmes amongst which: the building of the new Terminal 2 (future home of Star Alliance airlines), the completion of a second satellite at Terminal 5 to be opened early next year and the development of an integrated baggage system across the airport (BAA, 24 June). Gatwick s current owner GIP reached an agreement with CalPERS, a Californian public pension fund to sell 13% shareholding in the London s airport (GIP, 18 June). ADP unveiled Paris CDG s Satellite 4 (S4) project to be put into service by Q312. The new building of Terminal 2E, dedicated to long-haul flights, will be able to operate 16 aircraft simultaneously (including 7 super-jumbos) and to handle up to 7.8 million passengers per year. S4 will house SkyTeam airlines in addition to the most recent Terminals 2 (ADP, 3 June). French regional airport Bordeaux-Mérignac opened a low-cost terminal billi to sustain the increasing share of its low-cost traffic. Billi will compensate for the airport s loss in the number of passengers because of the improvement of the high speed train line Paris-Bordeaux in 2016 (3h to 2h). Four low-cost airlines already operate at billi which is supposed to welcome 1.5 million passengers per annum by 2015 (Bordeaux-Aéroport, 10 June). Dublin Airport s new passenger terminal is to open to public in November. The T2, designed to handle 15 million passengers per year, will notably include a US Custom and Border Protection facility enabling Dublin passengers to clear US controls from Ireland (DAA, 23 June). Berlin Brandeburg International opening has been postponed to June 2012 due to the EU recent amendment of aviation security standards requiring larger passenger-screening systems by April 2013 (BBI, 25 June). Environment Emissions of greenhouse gases (GHG) from international aviation and shipping activities - accounting for around 6% of total GHG emissions - in 2008 decreased for the first time since 1992 in EU27 notably due to the recession. Aviation sector s GHG in the EU stabilised below 140 million tonnes in 2008 and remained lower than Maritime sector s ones though growing more rapidly at 4.2% yearly since 1990 (European Environment Agency, 2 June). Industry Monitor. Issue /06/10 Page 6 EUROCONTROL 2010

7 Figure 5: Carbon prices (Source: Point Carbon) Financial Results of Airlines Ryanair reported a profit of 319 million in FY09/10, a 204% improvement on the same period last year. Traffic increased by 14% to 66.5 million passengers over the same period. For FY 10/11, the budget carrier expects 11% growth in traffic to 73.5 million passengers and a 10% to 15% increase of profits to around 360 million provided higher yields manage to offset increasing fuel and other operating costs (Ryanair, 1 June). Economy Last Eurostat updates: GDP in the Euro area and EU27 increased by +0.2% compared with Q409. During the same period, US GDP grew by +0.8% whereas Japanese GDP declined by 1.2%, Annual inflation was 1.6% in Euro area and 2.0% in EU27 in May (Eurostat, 4 and 16 June) Regulation Three years after the first stage, the second stage of EU-US open skies agreement has been signed, bringing some additional commercial advantages (more liberalisation of airlines ownership) and regulatory improvements (cooperation on environmental and security matters) on transatlantic operations (Europa, 24 June). The EU and Georgia signed a visa facilitation agreement making easier and cheaper the acquisition of short term visas for the EU to Georgian citizens. The agreement is not applicable for non Schengen (UK, Ireland) and a few other States (Europa, 17 June). German government has reportedly announced the introduction of an environmental tax on domestic air travel to contribute to the reduction of its structural deficit (reuters, 7 June). Industry Monitor. Issue /06/10 Page 7 EUROCONTROL 2010

8 Figure 6: Brent and Kerosene Prices. (Source: Kerosene prices EIA ; Prices&Exchange Rates EUROSTAT) Fares Deflated ticket prices in Europe decreased by 0.6% in May year-on-year, based on preliminary values (Eurostat, June). Oil Oil prices closed at around $76 per barrel on 25 June (Brent). Converted price indices for Kerosene and Brent up to June are shown in Figure 6 (Brent and WTI cushing) European Organisation for the Safety of Air Navigation (EUROCONTROL) This document is published by EUROCONTROL for information purposes. It may be copied in whole or in part, provided that EUROCONTROL is mentioned as the source and it is not used for commercial purposes (i.e. for financial gain). The information in this document may not be modified without prior written permission from EUROCONTROL. STATFOR, the EUROCONTROL Statistics and Forecast Service statfor.info@eurocontrol.int The EUROCONTROL Statistics and Forecast Service (STATFOR) is ISO 9001:2008 certified. Industry Monitor. Issue /06/10 Page 8 EUROCONTROL 2010