Industry Monitor. Issue 183. 04/05/2016 Page 1 © EUROCONTROL 2016

European flights increased by 2.3% in March 2016 compared with March 2015, matching the EUROCONTROL flight forecast released earlier this year.

ICAO reported that average global passenger load factors (scheduled services) reached 80.2% in 2015, their highest over the last ten years.

Top 10 European airlines listed in this bulletin reported €6.5 billion operating profits during 2015, a 120% increase on 2014.

Oil prices increased to €38 per barrel in April.

EUROCONTROL Statistics and Forecasts 1

Other Statistics and Forecasts 2

Passenger Airlines 4

Financial Results of Airlines 7

Aircraft manufacturing 8

Airports 8

Oil 8

Regulation 9

Fares 9

EUROCONTROL Statistics and Forecasts

European flights (ECAC – European Civil Aviation Conference area) increased by 2.3% in March 2016 compared with March 2015 and match the forecast published in February 2016 (Figure 1). Preliminary data for April 2016 show a 1.5% increase of flights for ECAC on April 2015, a slower growth rate than anticipated in the forecast as the traffic has been affected by temporary factors (industrial action).

The traditional scheduled and low-cost segments were the only drivers of growth in March 2016 with an increase of 3% and 7% respectively on March 2015. The charter segment (-15%) continued to be affected by Russian and North African declines as well as airlines changing their business model. The business aviation and all-cargo segments respectively decreased by 4% and 1% in March 2016 (vs. March 2015). As shown in Figure 2, Spain was the main contributor to local traffic growth (excluding overflights) on the European network in March 2016 followed by UK (respectively adding 280 and 230 daily flights to the network), notably due to the 24% growth on the UK-Spain flow linked to early Easter. Turkey was the third contributor to European traffic growth, adding some 170 flights per day (compared to March 2015). Also, among the top five contributors were Italy and Canary Islands, owing to strong arrival/departure flows to/from UK and Spain. The vast majority of other European States have contributed to the network growth. However, Norway—hit by the oil crisis—continued to see its local traffic declining (82 daily fewer flights). Belgium/Luxembourg is also seeing an 8% reduction in its local traffic in March 2016 (corresponding to 76 daily fewer flights than in March 2015). This decline was recorded after the terrorist attacks that hit Brussels airport on the 22nd of March. On that day, around 500 flights were cancelled and international traffic from/to Belgium declined by 39% despite flights transferring to other airports after Brussels airport closure. The airport resumed progressively passenger flights from the 3rd of April.

Industry Monitor The EUROCONTROL bulletin on air transport trends

Issue N°183. 04/05/2016

Industry Monitor. Issue 183. 04/05/2016 Page 2 © EUROCONTROL 2016

Outside of Europe, the United States were the main extra-European partner in March 2016 with an average of circa 800 daily flights on flows between Europe and the United States, a 5% increase compared to March 2015. The Russian Federation remained the second extra-European partner with an average of 550 daily flights despite a 19% decline (vs March 2015). As the third contributor, the United Arab Emirates generated an average 330 flights per day in March 2016 thanks to a growth of 8.2% compared to March 2015. European flows to/from Egypt or Tunisia continued to decline (respectively -32% and -18% in March 2016 vs March 2015). Morocco was the fourth busiest extra-European partner with an average of 270 daily flights between Europe and the Kingdom of Morocco in March. Comprehensive statistics on flights are available from the STATFOR dashboard1 (EUROCONTROL, April).

Other Statistics and Forecasts

IATA reported that European scheduled passenger traffic (RPK) increased by 7.5% in February 2016 (vs. February 2015). Capacity (ASK) was up by 7.3% and passenger load factors remained stable at 77.7%. February traffic statistics are inflated by the extra day in 2016 (leap year), nevertheless the upwards trend in seasonally-adjusted passenger traffic remains robust since the start of the year (IATA, 7 April). Preliminary figures from ICAO for 2015 show that total scheduled services (worldwide) of passenger traffic (measured in RPK) increased by 6.8% in 2015, a 1 percentage point increase on 2014. This passenger growth outstripped the (passenger) capacity growth (measured in ASK) which grew by 6.1% over the same period. Hence, the 2015 load factors improved to 80.2% (+0.5 pp on 2014), reaching their highest level over the past ten years. World freight traffic (measured in FTK) increased by 2.2% in 2015, reflecting a stagnation of the world trade development but also an improvement of cargo capacity utilisation from air carriers by moving higher volumes of freight via passenger aircraft (ICAO, 23 March).

1 www.eurocontrol.int/statfor/sid

Figure 1: Monthly European Traffic and Forecast (based on the 7-year forecast Feb16).

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Preliminary figures from ICAO for 2015 show that passenger capacity (ASK) in Europe, representing 27% of the total capacity, increased by 4%, comparable to the North American growth rate (+3.9%), but more modest than Middle East (+13.8%), Asia/Pacific (+6.9%) or Latin America/Caribbean (+5.7%) (ICAO, 23 March). FAA released its forecasts for 2016-2036. IFR flights handled at FAA are forecast to increase to 42.5 million (+1.5%) in 2016 and to grow at an average annual rate of 1.4% for the remaining 20 years until 2036 (FAA, 24 March). Based on data from airlines for delays from all causes, 38% of flights were delayed on departure (>= 5 minutes) in March 2016, an increase of 4 percentage points compared with the same month in 2015. The average all-causes delay per flight in March 2016 increased to 10.4 minutes from 8.8 minutes in March 2015 (Figure 3). Following the terrorist attack at Brussels airport on 22 March, a zero rate measure was applied with Liege, Ostend, Amsterdam/Schiphol, Düsseldorf and Charleroi airports taking the majority of diverted flights. Brussels airport was closed for passenger traffic until the end of the month. French ATC industrial actions on 20-21-22 and 31 March resulted in delays in the French ACCs and airports with additional delay reported by Madrid, Maastricht and Barcelona ACCs due to ATFM protective measures; Seasonal weather (fog, strong winds, snow) impacted operations particularly at London/Heathrow, London/Gatwick, and Brussels airports. (EUROCONTROL, April).

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

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Traffic Statistics: March Update

Figure 4 and Figure 5 compare March 2016 figures with March 2015 figures for the European carriers. In addition to the number of passengers (PAX), passenger capacity is measured in available seat kilometres (ASK), traffic is measured in revenue passenger kilometres (RPK) and load factor as a percentage (%).

Passenger Airlines

Capacity, costs and jobs

The first French low-cost long-haul airline, French Blue, an Air Caraïbes subsidiary will start operations from Paris Orly to Punta Cana in September using Airbus A330-300 aircraft (GroupeDubreuil, 17 March). Alitalia and Air Malta (together with the Maltese government) signed a Memorandum of Understanding to complete a comprehensive due diligence with the possible intention of becoming a 49% shareholder in the Maltese airline (Alitalia, 22 April). Easyjet opened recruitment for 450 new pilot positions, including 400 cadet pilots and experienced copilots, as well as 50 direct entry captains. Easyjet currently operates 28 bases in Europe (Easyjet, 18 April).

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 March 2016).

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Egypt has reportedly seen tourism revenue fall to $500 million in the first quarter of 2016, down from $1.5 billion a year earlier, with the country struggling following political and economic upheaval, alongside changes in travel patterns of tourists to resorts such as Sharm El Sheik (Reuters, 25 April). Turkish Airlines will reportedly operate a fleet of 450 aircraft by 2020, from 281 currently. The carrier is notably expecting to receive 10 widebodies this year, as part of a drive to increase the size of its fleet and lower the average age of its aircraft. This 2020 estimated figure is likely to be subject to a limited number of retirements as the carrier’s fleet is relatively young (Reuters, 26 April and STATFOR statistics). Brussels Airlines and Lufthansa have agreed to extend the deadline on Lufthansa’s option to fully acquire Brussels Airlines’ parent company SN Airholding. Under their existing agreement, Lufthansa has the option of acquiring the remaining 55% stake in SN Airholding. A decision was to have been taken by the beginning of June but the deadline has now been extended to the end of August. The call option cannot therefore be exercised before September 2016 (Lufthansa, 27 April).

Failures

The UK regional airline LinksAir Limited based at Doncaster-Sheffield, operating between Cardiff and Anglesey, ceased operations on 24 January 2016 following action by the CAA to revoke its Operating Licence (CAA UK , 7 March).

Figure 4: Main carriers’ traffic statistics.

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Routes, Alliances, Codeshares

Norwegian will launch flights to three United States airports from Paris CDG airport on July 29. Service will commence with four weekly flights to New York, two weekly flights to Los Angeles and one weekly flight to Fort Lauderdale. The airline is also waiting for final approval to start service between Cork and Boston, all operations will be flown using Boeing 787 equipment (Norwegian, 19 February). Meridiana will start flying twice a week between Milan Malpensa and Cairo from 31 May (Meridiana, 29 April). Easyjet will operate flights to Gibraltar from Manchester commencing in July 2016, using A320 aircraft two times per week. The low-cost airline has also put its winter 2016/17 tickets on sale to/from UK (Easyjet, 26 and 14 April). Wizz Air is increasing flights to the Canary islands in winter 2016/17 with flights from Budapest to Lanzarote and Fuerteventura with A320 aircraft. Wizz Air announced plans to serve Dubai Al Maktoum two times per week from Katowice as from the start of the 2016 winter season in October. (Wizz Air, 27 and 13 April). Wizz Air will begin operations from London Gatwick to Bucharest beginning of June 2016, with a daily rotation (Wizz Air, 20 April). Romanian carrier Blue Air will reportedly start domestic flights within the country offering flights from Iași to Cluj and Timisoara using Boeing 737 aircraft from October 2016 (routesonlines, 1 April). Ryanair launched its first flights into Serbia with the airline operating from Berlin to Nis in the south of the country; the service will be flown twice per week. The airline has also increased its offering from Bristol in winter 2016 with new flights to Krakow, Milan Bergamo and Venice Treviso giving a total 68 weekly flights from the UK city (Ryanair, 20 April). British Airways will launch a daily flight service between London Heathrow and Tehran from winter 2016 using a Boeing 777 aircraft (British Airways, 3 February). Air Europa will reportedly offer two seasonal routes from Ibiza to A Coruna (twice weekly) and Valencia (weekly) from July to August (Routesonline, 26 April).

Figure 5: Main carriers’ load factors.

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Airline Associations

Airlines for Europe (A4E) has welcomed more airline members to its association with Norwegian, Finnair, Jet2.com and Volotea joining the existing members of Air France/KLM Group, International Airlines Group (IAG), Lufthansa Group and Ryanair (A4E, 18 March, 21 and 29 April).

Financial Results of Airlines Financial results are now available for the ten European airlines (Figure 6) reported in this bulletin (see partial results in IM181 and IM182). All airlines returned to profitability in 2015, apart from airberlin and Alitalia. airberlin recorded operating losses slipping to €307 million (-4.5% on 2014), mainly due to restructuring costs, the impact of geopolitical events in Egypt and the negative effect related to the dispute over its codeshare agreement with part-owner Etihad. Nevertheless, the German airline enhanced its underlying performance in 2015 reporting some improvement in yield, load factor and operating seat costs (airberlin, 28 April). Alitalia cut net losses from €580 million in 2014 to €199 million in 2015. The Italian carrier was more efficient in controlling costs, heading for profitability in 2017 but still undergoing through radical changes to build a “new” Alitalia. 2015 has notably been marked by challenges including May's fire at its Rome Fiumicino hub (Alitalia, 29 April). Based on an estimation2 of the 2015 results for Ryanair, and in spite of the partial heterogeneity of the types of results for each company, the ten European airlines reported in this bulletin recorded a €6.5 billion operating profits in 2015, a substantial improvement on 2014 (€2.9 billion).

2 Estimation based on adjusted profits after tax for the calendar year 2015.

Figure 6: Operating Profits of Airlines in 2015.

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Aircraft manufacturing Boeing will reportedly eliminate approximately 4,000 jobs in its commercial aircraft division by the middle of 2016 and further jobs in its test and evaluation division that conducts flight and lab tests (SeattleTimes, 31 March).

Airports

Dublin Airport Authorities is moving forward with its plans to deliver a new runway to be completed by 2020. Construction is scheduled to start in 2017 and should support circa 1,200 jobs during its development (daa, 7 April).

In the context of the “Grand Ouest” airport project in France, the electorate of the Loire-Atlantique department are invited to take part to a referendum on 26 June to answer the question: "Are you in favour of the project aiming at transfering the Nantes-Atlantique airport to the Notre-Dame-Des-Landes site?". The debated "Grand Ouest" project, firstly considered in 1963, envisage the building of a new aiport, 30 km north-west of Nantes, with two runways expected to welcome 4 million passengers by 2020, in the base scenario (Journal officiel, 24 April).

Oil

Oil prices increased to around €38 per barrel in April 2016. Converted indices for Kerosene and Brent are shown in Figure 7.

Figure 7: Brent and kerosene prices.

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Regulation

A new directive regulating the use of Passenger Name Record (PNR) data in the EU for the prevention, detection, investigation and prosecution of terrorist offences and serious crime was approved by the European Parliament in April. It will oblige airlines to send passenger data for all flights from third countries to the EU and vice versa to national authorities (Europa, 14 April).

Fares

Ticket prices in Europe increased by 2.5% in March year-on-year, based on preliminary values. This is above the trend (12-month trailing average) shown in Figure 8, but is likely to be a temporary Easter effect (Eurostat, 29 April). 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.

© 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

Figure 8: Ticket Prices in Europe.