Industry Monitor. Issue 181. 04/03/2016 Page 1 © EUROCONTROL 2016

European flights increased by 3% in February 2016 compared with February 2015.

IATA reported that European scheduled passenger traffic (RPK) increased by 4% in January 2016 (vs. January 2015). Capacity was up by 2.1% and the total passenger load factors reached a January record high of 78.7%.

New seven-year forecast (2016-2022) is for 11.5 million flight movements in Europe in 2022, this is 16% more than in 2015. The 1.5% growth that was seen in 2015 is expected to strengthen in 2016 and to reach a rate of above 2% (in the ECAC area).

Oil prices remained at €36 per barrel in March.

EUROCONTROL Statistics and Forecasts 1

Other Statistics and Forecasts 4

Passenger Airlines 5

Airports 7

Aircraft Manufacturing 7

Financial Results of Airlines 7

Oil 8

Fares 8

EUROCONTROL Statistics and Forecasts

European flights increased by 3% (ECAC) in February 2016 and were in line with the forecast. Preliminary data for March show an increase of 2.5% in flights compared with March last year (Figure 1). ECAC, the European Civil Aviation Conference Area is now used as the reference zone in STATFOR reports, as it covers a larger area than ESRA08. (Figure 1). Turkey is the top contributor to the European network growth adding circa 230 daily flights in February. UK is the second biggest contributor to local traffic (excluding overflights) with 205 extra daily flights, mainly thanks to its strong internal flow. Spain completed the top three and added circa 190 daily flights to the network. The local traffic in the vast majority of the remaining States have also contributed to bringing growth to the network as shown in Figure 2 with Denmark, Canary Islands, Ireland and Greece seeing experiencing increases in flights. As was the case for more than one year, Norway and Ukraine continued to remove flights from the network but the February losses have however reduced and are now below 25 flights per day (insignificant in Figure 2). Comprehensive statistics on flights are available from the STATFOR dashboard (EUROCONTROL, March). With respect to the market segments, traditional and low-cost growth each grew by more than 4% in February (vs. same month last year). All-cargo was the only other segment to show growth at 1.2%. The business aviation segment was down 2.7% on February 2014

1. The charter segment declined

by more than 13% due to technical changes in airline flight plan filing from non-scheduled to scheduled flight type (EUROCONTROL, March). Comprehensive statistics on flights are available from the STATFOR dashboard (EUROCONTROL, February).

1 More statistics on flights are available in SID. The European Civil Aviation Conference (ECAC) is an intergovernmental organization which was established by ICAO

and the Council of Europe. ECAC now totals 44 members, including all 28 EU, 31 of the 32 European Aviation Safety Agency member states (exc. Liechtenstein) and all 41 EUROCONTROL member states, it is now used as a basis for comparison at European level in the forecasts.

Industry Monitor The EUROCONTROL bulletin on air transport trends

Issue N°182. 04/04/2016

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The United States were the main extra-European partner in February with a daily average of ~730 flights on flows between Europe and the United States, an increase of 5% on February 2015. The Russian Federation remains the second busiest partner with circa 520 daily flights, but with a 21% (continuing) decline in February 2016. Traffic flows between Europe and the Middle East (United Arab Emirates, Israel, Qatar and Saudi Arabia) increased by more than 9% in February 2016. Traffic flows between European states and North-African States (except Algeria) decreased, with Egypt and Tunisia being respectively 33% and 16% below the February 2015 levels (EUROCONTROL, March).

Figure 1: Monthly European Traffic and Forecast (based on the Sep15 updated forecast).

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The new EUROCONTROL Seven-Year Forecast of Flight Movements and Service Units 2016-2022 predicts an average growth of 2.2% per annum in ECAC between 2015 and 2022 in the base forecast scenario. In this ‘most-likely’ scenario there will be approximately 11.5 million flights in 2022, 16% more than in 2015. Overall the average annual growth rate remains two nearly percentage points below historic trends prior to the financial crisis. Air traffic, in the medium term, will be largely driven by the economic growth; with the other drivers of growth having a dwindling effect. For the short-term, the modest growth that was seen in 2015 is expected to strengthen in 2016 and to reach a rate of above 2% (in the ECAC area). Amongst the factors contributing to this are an expected increase in demand in Iberia and Greece. These countries are preferred by air travellers, staying away from the North African destinations leading to strong growth rates for these countries during Summer. In February 2016 inter-island flights in the Canaries and Greece drove growth in the region. Flights from Denmark to Sweden, Spain and UK also increased. Ireland experienced increases in flight to the UK as well as Netherlands and Spain during the month. The low-cost sector is expected to continue to be dynamic, with new aircraft for some operators. The traffic patterns in the Eastern part of Europe are still subject to changes in relation to the tensions in Ukraine and Russian Federation. In 2017, the expected number of flights in ECAC (10.4 million) would exceed the previous record high of 10.2 million flights recorded in 2008. For more details on European air traffic forecasts for 2016-2022, download the Seven-Year Forecast of IFR movements and Service Units report. The detailed forecast figures for individual States are also available through the STATFOR Interactive Dashboard (SID).

Figure 2: Main changes to traffic on the European network in February 2016.

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Based on preliminary data from airlines for delays from all causes, 34% of flights were delayed on departure (>= 5 minutes) in February 2016, remaining stable when compared with the same month in 2015. The average all-causes delay per flight in January 2016 decreased to 8.5 minutes from 9.9 minutes in February 2015 (Figure 3). The implementation of a new ATM system in Brest Area Control Centre (ACC) generated en-route ATFM delays. Adverse weather conditions impacted operations at London Heathrow, Geneva, Frankfurt, and Brussels. Istanbul Atatürk and Sabiha Gökçen airports experienced airport capacity as well as weather delays. (EUROCONTROL, March).

Other Statistics and Forecasts

ACI reported that overall passenger counts at European airports saw an increase of 6.3% in January 2016 compared with January 2015 2014. Total aircraft movements remained aligned with previous months at 2.2%, pointing to continued airline capacity discipline (ACI, 4 March). IATA reported that European scheduled passenger traffic (RPK) increased by 4% in January 2016 (vs. January 2015). Capacity (ASK) was up by 2.1% and total passenger load factors reached a record January high of 78.7%. (IATA, 5 February).

Traffic Statistics: February Update

Figure 4 and Figure 5 compare February 2016 figures with February 2015 figures for the number of passengers travelling with an airline. 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).

Percentage of flights delayed on departure

Breakdown of all-causes delay per flight

Figure 3: Delay statistics (all-causes, airline-reported delay – preliminary data for January 2016).

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Passenger Airlines

Capacity, costs and jobs

UK tour operators Thomson Airways and Thomas Cook have cancelled summer holidays and flights to Tunisia following continued unrest in the country. (ch-aviation January 2016). Air France – KLM Royal Dutch Airlines has sold two of its London Heathrow slot pairs to Emirates and Oman Air. Kenya Airways also has sold one slot pair to Oman Air also at London Heathrow (Sunday Times). Wizz Air will move flights from Lubeck airport to Hamburg from 17 April, the routes previously operated are Gdansk, Skopje and Kiev. (Wizz Air 17 March). Albanian start-up Albawings has taken delivery of a single Boeing 737-300 with an aircraft leased from Blue Panorama of Italy. (ch-aviation 8 March). Ryanair has announced a new base at Kaunas in Lithuania the airline will base two aircraft with routes to Berlin Schonefeld and Malta commencing in October 2016. The airline will also open a new base in Sofia from October 2016, with 3 based aircraft and 21 routes from the city (Ryanair 30 March). Lufthansa ended operations its last Boeing 737-500 fleet as the airline continues its fleet renewal, deliveries of this type to the airline commenced in 1990. (Lufthansa 22 March). Ryanair says it is likely to exercise all options on its Boeing 737 MAX 200 aircraft order, the airline will be 200 seat variant launch customer in 2019. (Ryanair February). Air Europa received its first 787-8 on 27 March, the aircraft will initially be operated domestically for crew training it will then be moved onto the Madrid – Miami route in April 2016. (Flightglobal March). Jet Airways has commenced operations at Amsterdam Schiphol following the move of its European hub from Brussels in line with the start of the 2016 IATA summer season on the 27 March. (Jet Airways 27 March).

Figure 4: Main carriers’ traffic statistics.

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Routes, Alliances, Codeshares

easyJet has started flying four times per week between London Southend and Paris CDG using A319s. The airline has also commenced flight between Geneva and Pisa three times per week. (easyJet February). Brussels Airlines launched flights between Brussels and Nuremberg six times per week operated by BMI Regional Embraer 145 equipment (Anna Aero February). Pegasus Airlines has ordered 5 more Boeing 737-800’s to be delivered in 2017. The airline currently has 2 A320s and 75 A320neos on order (Pegasus & Boeing). Lufthansa will base its first A350-900 aircraft at Munich from January 2017 with Delhi and Boston being the first destinations for this type. (Lufthansa February). Wizz Air in November will launch new services from Budapest to Sofia three times per week. The number of aircraft based in Sofia will grow to 6, Budapest will have 10 by the summer. The airline has also increased flights between Bucharest and London Luton making a total of 25 weekly flights (Wizz Air 17 March). Air Serbia will commence operations 5 times per week between Belgrade – New York JFK on the 23

rd June using A330-200 equipment. (Air Serbia 25 February).

Swiss took delivery of its first of nine 777-300ER aircraft, the aircraft will be used on the Zurich - New York JFK service. (Swiss 29 January). British Airways started services between London Gatwick and Porto four times per week alongside existing services to Faro and Funchal. (British Airways February). Norwegian will commence a service between Oslo and Las Vegas in November using Boeing 787-8 aircraft once per week. (Norwegian March).

Figure 5: Main carriers’ load factors.

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Airports

The Schiphol Group has issued a final approval of plans to develop a new pier and terminal at Amsterdam Airport Schiphol scheduled for completion in 2023, it will be constructed to the south of Schiphol Plaza, directly next to the air traffic control tower and will be connected to the existing terminal. It is anticipated to serve some 14 million passengers per year. (Amsterdam Schiphol Airport March).

Aircraft Manufacturing Boeing confirmed that the Boeing 747-8 production line declined to one aircraft per month as the order back log is down to 19 aircraft (7 freighters and 12 passenger versions), this figure may be revised downwards following the bankruptcy of Transaero who had ordered airframes. (Boeing March).

Financial Results of Airlines Six of the main European airlines (AF/KLM, IAG group, Norwegian, SAS group, Turkish Airlines and EasyJet) reported returned to profitability in 2015 (see last month bulletin IM181). Full year operating results are not yet available for airberlin, Alitalia and Ryanair. However, Lufthansa Group reported a 77% increase of its profit from operating activities for 2015 (vs. 2014), helped by low oil price, strict capacity discipline (fleet downsized by 15 aircraft compared to 2014) and profitability of its low-cost subsidiary airlines (Eurowings, Germanwings). Lufthansa Group made a profit from operating activities of €1.55 billion in 2015. The Lufthansa Group passenger airlines have more than doubled their profit (EBIT) in 2015 up to €1.46 billion (compared to 2014). The breakdown of profit (EBIT) per airline shows a 130% increase for Lufthansa passenger and Germanwings to €0.9 billion, a 64% increase for Swiss to €0.46 billion and a 218% increase for Austrian airlines to €0.05 billion on 2014 (Lufthansa, 17 March).

Figure 6: Brent and kerosene prices.

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Oil

Oil prices remained around €35 per barrel in March. Converted indices for Kerosene and Brent are shown in Figure 7. EIA reported that Brent crude oil prices averaged €46 ($52) per barrel in 2015, they are forecast to decline again and average at $34 (€30) per barrel in 2016, then at $40 (€35) per barrel in 2017. (EIA, 8 March).

Fares Ticket prices in Europe decreased by 5.4% in February year-on-year, based on preliminary values. This is an acceleration of the decline of 0.6% (12-month trailing average) shown in Figure 7 (Eurostat, 29 February).

Note: to eliminate the influence of inflation on euro figures, the ticket price is deflated with a price index. The STATFOR deflated ticket prices are estimated in 2015 constant euros.

Figure 7: Deflated ticket prices in Europe.

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© 2016 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 www.eurocontrol.int/statfor