Industry Monitor. Issue 175. 01/09/2015 Page 1 © EUROCONTROL 2015

European flights increased by 1.4% in June and 2.1% in July compared with the same months in 2014 and were in line with the baseline forecast. Preliminary data for August show a 2% increase in flights on August last year.

Top eight European airlines listed in this bulletin recorded €1.8 billion operating profit during the second quarter, a 31% increase on the same period in 2014.

Oil prices hit a six-year low in August falling to €43 per barrel. EIA forecast Brent crude oil price to average €48 per barrel in 2015.

EUROCONTROL statistics and forecasts 1

Other statistics and forecasts 3

Passenger airlines 3

Financial results of airlines 7

Airports 8

Aircraft manufacturing 9

Oil 9

Fares 9

EUROCONTROL statistics and forecasts

European flights (ESRA – EUROCONTROL Statistical Reference Area) increased by 1.4% in June and 2.1% in July compared with the same months in 2014 and were in line with the baseline forecast published in February. In July 2015, traffic hit the highest ever number for July with an average of 31,000 flights per day. Preliminary data for August show a 2% increase in flights on August last year (Figure 1). Low-cost was the strongest market segment with a steady growth rate around 5% since April 2015. The traditional scheduled segment growth accelerated from 1.5% in June to 2.8% in July. The business aviation segment increased by 1.5% in July compared with July 2014. This is the highest growth rate since October 2014. The all-cargo segment remained stable although with a small increase of 0.4% in July 2015 (vs. July 2014). The charter segment continued to decline and was down 13% in July 2015 (vs. 2014), mainly due to a decrease of traffic to/from Russia and Tunisia (-8%). Additionally, the charter traffic decrease is inflated due to some aircraft operators filing a different flight type in 2015 compared with last year, which accounted for almost 4% of the decline. In July, Turkey was the top contributor to growth of local traffic (excluding overflights) in Europe adding 315 daily flights compared with July 2014, followed by UK (+157 flights), Spain (+125 flights), Germany (+97 flights) and Greece (+72 flights). Czech Republic and Hungary were the new contributors, each adding circa 30 daily flights. In total 13 states contributed to more than 25 daily flights to the network in July. Norway continued to see a decline in its local traffic since the beginning of the year with 71 fewer daily flights in July 2015 (vs. July 2014)(Figure 2). Full detailed statistics on flights are available from the STATFOR dashboard1 (EUROCONTROL, August).

1 www.eurocontrol.int/statfor/sid

Industry Monitor The EUROCONTROL bulletin on air transport trends

Issue N°175. 01/09/2015

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Based on preliminary data from airlines for delays from all causes shows a deterioration of the delay situation for the network with 49% of flights being delayed on departure (>= 5 minutes) in July 2015, this was an increase of 5 percentage points when compared with the same month in 2014. The main increases in delay were due to airport operations (including ATFCM) notably at Istanbul’s Atatürk and Sabiha Gökçen airports. The average all-causes delay per movement in July 2015 increased from 12.6 minutes to 13.4 minutes. Further analysis of the delay reasons shows that airport delays (ATFCM & Other) increased by 51% with reactionary and airline delays remaining stable (Figure3) (EUROCONTROL, June).

Figure 1: Monthly European Traffic and Forecast.

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

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Other statistics and forecasts

IATA reported that European scheduled passengers (RPK) increased by 4.8% during the first half of 2015 compared with the same period in 2014. Capacity was up 4.2% and the total passenger load factor went up 0.5 percentage point to 79.8% (IATA, 6 August).

ACI reported that overall passenger counts at European airports increased by 4.5% for the first half of 2015 compared with the year-ago period whereas overall aircraft movements were up 2% (ACI Europe, 5 August).

Passenger airlines

Capacity, costs and jobs

Ryanair has closed its two Danish bases in Copenhagen and Billund and transferred its sole Boeing B737-800 aircraft to Kaunas (Lithuania) although the airline will continue to fly to both airports. The decision comes after a dispute with Danish unions claiming that Ryanair’s pilots and cabin crew contracts were not negotiated with Danish unions (Ryanair, 10 July). Chinese HNA Group, owner of Hainan Airlines is reportedly negotiating the acquisition of a stake in Palma de Mallorca-based Air Europa (Bloomberg, 2 July). Austrian Fly Niki has completely replaced its fleet of seven Embraer 190 aircraft with 21 Airbus family aircraft (5 A319s, 12 A320s and 4 A321s). The E190 aircraft were transferred to Helvetic Airways (Fly Niki, July). Lufthansa is reportedly planning to sell its 13% stake in Luxair and is in talks with other shareholders including the Luxembourg government which owns 39% in the airline (Reuters, 1 July).

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 July 2015).

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Ryanair was reportedly offered nine daily slots at Amsterdam Schiphol available as from the winter 2015-16 schedule. The airline is still to make a decision as to whether it will take or return these slots. Moving towards using primary airports is part of Ryanair’s strategy to attract more business travellers. easyJet opened a base at Schiphol in April this year (De Telegraaf, 29 June). Ryanair has accepted IAG’s offer for its 29.8% stake in Aer Lingus. The acquisition by IAG has been approved by the European Commission, subject to the airlines giving up five slot pairs at Gatwick airport thereby allowing more competition among airlines flying between Dublin and London and between Belfast and London (Ryanair, 10 July & EUROPA, 14 July). Cypriot start-up Tus Airways started operations on 1 July with flights from Larnaca to Greece (Kos, Karpathos, Samos and Mytilene), Lebanon (Beirut) and Israel (Haifa) and flights from Paphos to Haifa. The airline operates a fleet of one Saab 340B aircraft and one Saab2000 aircraft (Tus Airways, July). The Slovenian government which owns 70% of flag carrier’s Adria Airways agreed with the other two owners of the airline to issue a call for an expression of interest to acquire a combined 91.6% stake. An international call for bids was first published in August 2012 but failed (Slovenian Sovereign Holding, 1 July). UK start-up Firnas Airways plans to launch long-haul operations in 2016 with flights from the UK to ‘underserved’ destinations in Sylhet (Bangladesh), Islamabad (Pakistan), Jeddah (Saudi Arabia) using a one-class Boeing B767-300 aircraft (Firnas Airways, July). Air France-KLM announced the relaunch of its Transavia Europe project with operating bases outside of France and the Netherlands by the start of the summer 2016 schedule. Plans to develop Transavia into a pan-European low-cost were aborted in September 2014 after a labour dispute with pilots (IM166) (Air France-KLM, 24 July).

Figure 4: Main carriers’ traffic statistics.

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Iberia will open new routes to Asia, Africa, North and South America in the course of 2016-17. Its parent company, IAG converted into firm orders 13 Airbus (five A330-200 aircraft and eight A350-900 aircraft) to expand Iberia’s long-haul fleet. Earlier this year, IAG also ordered 16 long-haul Airbus aircraft for its subsidiary. This expansion results from the successful outcome of Iberia’s Plan de Futuro restructuring programme which was implemented in April 2014. In 2014 Iberia posted its first operating profit in six years (Iberia 31 July & IAG, 6 August).

Routes, Alliances, Codeshares

Ryanair will launch three routes to Eilat in Israel from Budapest, Kaunas and Krakow, effective November (Ryanair, 7 July). Atlasglobal Ukraine, a subsidiary of Turkish Atlasglobal (formerly Atlasjet) will start scheduled service on routes from Istanbul Atatürk to three airports in Ukraine: Lviv, Kharkiv and Zaporizhia, effective 31 August (AtlasGlobal, July). Low-cost Norwegian Air Shuttle will start internal Spanish flights on 25 October. The carrier will fly from three airports in mainland Spain to Canary Islands as follows: Madrid to Gran Canaria and Tenerife North; Barcelona to Gran Canaria, Tenerie North and Fuerteventura and Malaga to Gran Canaria and Tenerife South (Norwegian, 9 July). Wizz Air will launch four new routes from its Sofia base to Oslo, Bristol, Hamburg and Alicante when its sixth Airbus A320 aircraft is delivered in March 2016 (Wizz Air, 5 August). Royal Air Maroc will establish a new base in Rabat with one Boeing B737-800 aircraft and launch four new routes to Brussels, London, Madrid and Marseille, effective 26 October.

The airline’s main hub is in Casablanca (RAM, 11 August).

Figure 5: Main carriers’ load factors.

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Failures

Estonian regional airlines Avies was reportedly declared bankrupt on 26 June after it lost the right to fly on three routes in Sweden for non-payment of Swedish suppliers claims. However, the airline continues domestic flights from Tallinn to Kuressare and Kärdla and international flights from Tallinn to Stockholm Arlanda (ECC Sweden, 6 July). Bosnia and Herzegovina’s flag carrier, B&H airlines was declared bankrupt on 2 July. Until 11 June the airline operated scheduled flights from Sarajevo to Zurich and charter service to Italy with one ATR-72 aircraft. Earlier in 2015 the carrier suspended flights to Copenhagen and Belgrade (B&H Airlines, July). Start-up Leon Air based in Burgos ceased operations end of June. The airline started operations on 27 April (IM172) on the Burgos – Barcelona route but could not compete with high speed rail services on that route (Leon Air, July).

Traffic statistics: July update

Figure 4 and Figure 5 compare July 2015 figures with July 2014 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).

Figure 6: Main carriers’ financial results 2015Q2.

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Financial results of airlines

During the second quarter (April – June 2015), seven of the eight airlines reported in this bulletin posted positive results and for five of these airlines, these results were an improvement compared with the same quarter a year ago. Eight of the top ten European airlines (based on 2015 traffic shares – EasyJet and Alitalia results were not available) recorded €1.8 billion operating profit during 2Q2015, a 31% increase on the same period in 2014 (Figure 6). airberlin was the only airline in this bulletin to report a second quarter loss of €16 million which widened from a €7 million loss in the year-ago period. The carrier attributed its weak performance to this year’s shift in the Easter holidays and last year’s Lufthansa strikes. Benefits due to the low oil prices were offset by fuel hedging and the fluctuations in the exchange rates. IAG reported a 39% increase of its operating profit for this quarter compared with the year-ago quarter. British Airways made a profit of €453 million (vs. €332 million in 2014), Iberia more than tripled its profit to €51 million (vs. €16 million in 2014) and Vueling reduced its profit to €24 million (from €30 million in 2014) Currency fluctuations had a positive impact on the Group’s result.

Air France-KLM reported a 22% decrease of its operating profit during 2Q2015 (vs 2Q2014) resulting from volatility in fuel process and currency exchange fluctuations. This lack of results improvement will lead to the closure of non-profitable routes, a capacity cut for the winter season and the acceleration of its cost-cutting measures (source: company reports).

Figure 7: Brent and kerosene prices.

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Airports

Passenger traffic and aircraft movements during the first half of 2015 at top five European airports in number of departures compared with the same period a year ago were as follows (growth on 1H2014):

Passenger traffic Aircraft movements

1. London Heathrow 35.5 million (+1.3%) 233K (+0.4%) 2. Paris CDG 31.3 million (+1.6%) 227K (-1.2%) 3. Frankfurt 28.9 million (+4.1%) 230K (+0.2%) 4. Istanbul Atatürk 29.0 million (+7.1%) 214K (+5.7%) 5. Amsterdam Schiphol 27.0 million (+5.0%) 216K (+3.0%)

(source: airport reports) Fraport Group recorded 1H15 EBITDA2 up 8.7% compared with the first half of 2014 (Fraport Group, 6 August). Heathrow reported 1H15 EBITDA up 6.3% compared with 1H2014 (Heathrow, 24 July). Aéroports de Paris reported 1H2014 EBITDA up 3.2% compared with the same period in 2014 (ADP, 30 July).

Munich airport was granted approval to build a third runway after a federal court rejected the remaining appeals against its construction due to environmental concerns, ten years after the launch of the expansion project. Munich currently handles circa 40 million passengers a year and projects an increase to 58 million passengers by 2025 (Munich Airport, 7 July).

2 EBITDA : Earnings before interest, taxes, depreciation, and amortization

Figure 8: Deflated ticket prices in Europe.

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Aircraft manufacturing In its updated Pilot and Technician Outlook 2015-2034, Boeing forecasts a global demand for 558,000 new commercial pilots over the next 20 years. The European region will account for circa 17% of the total demand or 95,000 new pilots (vs. 94,000 forecast in 2014). In terms of new aircraft, Boeing predicts a demand for 7,310 new units for Europe (vs. 7,450 forecast in 2014) (Boeing, 20 July). Airbus reported 348 commercial net orders during the first half of 2015 and delivered 304 units (Airbus, July). Boeing reported 281 commercial net orders during the first half of 2015 and delivered 381 aircraft (Boeing, July) Embraer reported 124 commercial net orders during the first quarter of 2015 and delivered 27 commercial jets (Embraer, 30 June).

Oil

Oil prices hit a six year low in August, falling to €43 per barrel. Converted indices for Kerosene and Brent are shown in Figure 7. In August, EIA forecast Brent crude oil price to average €48 ($54) per barrel in 2015 and €52 ($59) per barrel in 2016 (EIA, 11 August).

Fares

Deflated ticket prices in Europe increased by 2.8% in July year-on-year, based on preliminary values. This is above the trend (12-month trailing average) shown in Figure 8 (Eurostat, 16 August). 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 2005 constant euros.

© 2015 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