Issue N 139. 30/03/12 Industry Monitor The EUROCONTROL bulletin on air transport trends Average daily European flights were 4.6% fewer in February than in the same period last year. Rising oil prices seen as the main risk to the industry in 2012. IATA s oil spike forecast is for an average of 102 per barrel in 2012 (vs. 75 per barrel in December 2011 forecast). UK government to press ahead with an increase in Air Passenger Duty (APD) by 8% in April. Quite mixed operating results for European airlines in 2011. Oil prices near all-time highs, over 95/barrel in March. EUROCONTROL statistics and forecasts 1 Other statistics and forecasts 2 Passenger airlines 3 Financial results of airlines 6 Airports 7 Aircraft Manufacturing 8 Environment 8 Oil 9 Regulation 9 Cargo 10 Fares 10 EUROCONTROL statistics and forecasts Average daily European flights declined by 4.6% in February year-on year, the lowest traffic level since February 2004 and a decrease mainly attributed to severe snow disruptions and industrial action in Europe (see Figure 1). A small bounce-back emerged from the Arab Spring with Egypt contributing the largest increase in flights in February. With the exception of charter, all market segments were down circa 5%. Since it was the most affected by the Egyptian and Tunisian disruptions, the charter segment saw 8% growth on February last year (EUROCONTROL, Based on preliminary data for delay from all causes, 38% of flights were delayed on departure in February, a 4 percentage point increase in comparison with the same month in 2011. Analysis of delay causes contributing to the average delay per flights shows a significant increase in Reactionary. Increases in share were also noted for Airline, Weather and ATFCM Airport related delay (see Figure 2). The February 2012 average delay per flight was higher than the record lows observed in 2011, but at a similar level to those seen in 2009 (EUROCONTROL, Industry Monitor. Issue 139. 30/03/12 Page 1 EUROCONTROL 2012
Figure 1: European Traffic. Other statistics and forecasts In its December forecast (IM136), IATA focused on the Eurozone crisis as the major driver for the industry s reduced profitability but now cites rising oil prices as the main risk to the industry. IATA s oil spike forecast for 2012 is for an average of 102 per barrel (vs. 75 per barrel in its December 2011 forecast). If worsening of the Eurozone crisis has been avoided, IATA expects European airlines to make 450 million loss in 2012, unchanged from the December 2011 forecast (IATA, 20 FAA released its forecast for 2012 2032. IFR flights handled by the FAA are forecast to decrease to 41.2 million (-0.1%) in 2012 and to grow at an annual rate of 2.1% for the next 20 years to reach 62.2 million flights in 2032. The FAA forecast expects that one billion passengers will be flown by US commercial carriers by 2024, 3 years later than in the previous release due to the uncertainty of the US and European economies (FAA, 8 ACI reported that European airports saw a 3.2% increase in passenger traffic in January 2012 compared to January 2011, whereas total cargo traffic reflected continued weakness in the European economy and fell significantly by 7.5%. Total aircraft movements were down by 2.1% on January 2011 (ACI, 2 Industry Monitor. Issue 139. 30/03/12 Page 2 EUROCONTROL 2012
. Breakdown of average delay per flight Percentage of flights delayed on departure Figure 2: Delay Statistics (all causes delay preliminary data for February 2012). Passenger airlines Iberia s low-cost subsidiary, Iberia Express was launched on 25 March with 4 routes from Madrid to Palma de Mallorca, Alicante, Malaga and Sevilla, to be increased to 17 routes in Summer 2012. The new airline will start operations with 4 A320s to reach 14 aircraft by yearend. IAG Group expects to restore profitability on short- and medium-haul services in the Spanish domestic and European market and feed traffic to the long-haul network (Iberia, 23 In protest against new low-cost Iberia Express, Iberia s pilots called 30 days of strike, every Monday and Friday from 9 April to 20 July. Iberia s pilots already held 12 days of strike between December and March (Iberia & Sepla, 27 Air France KLM Group reportedly intends to fully acquire Alitalia by 2013 through a share swap, pending the successful outcome of its restructuring plan. Air France KLM already owns 25% of the Italian flag carrier. (La Tribune, 7 It is reported that Brussels Airlines has contracted FlyBe and Tyrolean Airways to operate turboprops for the next two years (ATW, 15 IAG is seeking EC competition approval for the acquisition of BMI pending the Commission s decision and proposed remedies to secure approval for the deal. In order to address competition concerns, EC wants IAG to give up several take-off and landing slots the Group would gain at Heathrow jumping from 43% to 52% if the purchase is completed (BA, 19 Etihad and airberlin plan to integrate their B787s in a programme which will bring significant cost savings to both airlines and affect a total of 56 firm aircraft (airberlin, 13 Industry Monitor. Issue 139. 30/03/12 Page 3 EUROCONTROL 2012
Vueling posted significantly increased traffic results in February, following Spanair s bankruptcy in January. The airline carried 26.6% more passengers in February 2012 compared with February 2011 and reached a load factor of 77.8%, up 9.4 percentage points (Vueling, Air Baltic announced a business reshaping plan aimed at returning the airline to profitability in 2014 by reducing costs by 16% and sustaining future developments from its hub in Riga (Air Baltic, 6 French charter carrier Air Méditerranée is to shift half of its 10 aircraft to its Greek subsidiary, Hermes Airlines, and hire Greek crew (IM138) (Le Parisien, 29 February). Brussels Airlines reportedly threatens to relocate if the Belgian Government refuses to offer tax breaks to help it compete against Ryanair (De Morgen, 28 Low-cost carrier Arkefly, owned by TUI Group expands its low-cost long-haul operations to the US west coast and will serve Los Angeles and San Francisco from its Schiphol base (Arkefly, Air Berlin plans to reduce its fleet from 170 to 152 aircraft in summer 2012 and decrease its weekly frequencies by 100 to 2,190 (airberlin, Shape & Size Program, Kingfisher is to cut its international operations from April and significantly reduce its domestic services. British Airways suspended their code-share agreement. The airline has been struggling for months to avoid bankruptcy (Kingfisher, 14 Negotiations failed between Austrian Airlines and its crew union relating to the work package for flying staff and will result into transferring Austrian to its subsidiary Tyrolean to reach a better cost base; wages at Tyrolean being circa 25% lower than Austrian (Austrian 15 Lufthansa reportedly announced to postpone the acquisition of Brussels Airlines (SN) until 2013. Lufthansa Group first aims to increase in 2012 its adjusted operating margin of 3.4% for 2011. The Group bought a 45% stake in SN in 2009, with an option to acquire the final 55% from 2011 (ATW, 21 A general strike in Spain to protest government budget cuts and reforms on 29 March led to hundreds of flight cancellations (Iberia Group, 29 Industry Monitor. Issue 139. 30/03/12 Page 4 EUROCONTROL 2012
Figure 3: Main carriers traffic statistics. Routes, Alliances, Codeshares Czech Airlines transferred two of its routes, Prague Ljubljana and Prague Berlin Tegel to regional Central Connect Airlines but keeps these destinations via codesharing (Central Connect Airlines, 4 Aegean Airlines launched 4 weekly flights between Athens and Budapest, taking advantage of Malev s bankruptcy last February (Aegean Airlines, Etihad Airways signed its first codeshare agreement with a Chinese carrier, Hainan Airlines which places its code on Etihad-operated flights between Abu-Dhabi and Beijing, Chengdu and Shanghai (Etihad, 1 New Spanish low-cost airline, Volotea to start operations on 5 April from its Venice base (IM138) reportedly announced setting up two more bases: Nantes with 14 new routes and Bordeaux with 5 new routes along with a route between Biarritz and Lille (routes online, 22 Ryanair opened 2 new bases in March; one in Billund (Denmark) with 2 B737s allowing the airline to add 5 new destinations (Carcassonne, Corfu, Krakow, Venice and Zadar) and the other in Palma de Mallorca with 4 B737s increasing its routes from 30 to 47 (Ryanair, Airberlin expanded its codeshare agreement with Etihad Airways and increased its operations to Abu Dhabi, Bangkok and Pukhet to a daily flight from Berlin and Düsseldorf (airberlin, 8 Industry Monitor. Issue 139. 30/03/12 Page 5 EUROCONTROL 2012
Figure 4: Main carriers load factors. Traffic statistics: February update Figure 3 and Figure 4 compare February 2012 figures with February 2011 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). Financial results of airlines Figure 5 shows 2011 operating results for main European carriers. Turkish Airlines and Ryanair financial data are not yet available but will be updated in a later publication. In 2011, market uncertainty and high fuel costs prices weighed on European carriers results. Consolidated carriers (groups) report lack of unformity in terms of operating results amongst their constituent carriers. As far as the biggest three network carriers are concerned, Lufthansa posted the highest operating profits in 2011 but ended with a 20% decrease on last year s results, attributable notably to BMI s losses. IAG doubled operating profits in 2011 with British Airways largely outpacing Iberia's contribution. Air France-KLM reported the largest operating losses (- 353 million) in 2011 amongst the carriers reported in this bulletin, largely attributable to Air France (Company reports, (Erratum: Air Berlin Group results quoted in IM138 were referring to 3rd quarter only instead of 9 months. Full year results are presented here in Figure 5) Industry Monitor. Issue 139. 30/03/12 Page 6 EUROCONTROL 2012
Figure 5: Airlines financial results. Airports Fraport saw 430 million in operating profit (19% of revenue) in 2011. The outlook for 2012 is for circa 4% growth in passenger traffic at Frankfurt taking into account the impact of strikes last February (Fraport, 8 More airports financial results can be found in IM138. Infratil, a New Zealand infrastructure company is to sell its underperforming assets, Glasgow Prestwick and Manston (Kent) airports (Infratil, 8 Aéroports de Paris (ADP) signed a purchase agreement for a 38% stake in TAV, the Turkish airports operator. This addition brings to 37 the number of airports in ADP s portfolio, now in the top three airport operators in the world (ADP, 12 Aéroports de Paris (ADP) consortium won the concession to operate Zagreb airport for the next 30 years and will finance and construct a new passenger terminal by 2015 (ADP, 14 Budapest airport is to gradually close its Terminal 1 following the grounding of Malev in February (Budapest Airport, A ground handling strike for higher wages at German airports on 27 March led to Lufthansa cancelling circa 400 flights at Frankfurt (Lufthansa, 26 Industry Monitor. Issue 139. 30/03/12 Page 7 EUROCONTROL 2012
Figure 6: Carbon prices. Aircraft Manufacturing Bombardier s profits (EBIT) amounted to 900 in 2011, the same as last fiscal year. The manufacturer expects to deliver approximately 180 business jets and 55 commercial aircraft in 2012 (Bombardier, 1 Airbus Commercial Aircraft segment profits (EBIT) reached 543 million in 2011, a 87% increase on 2010. For 2012, Airbus targets 570 commercial aircraft deliveries (vs. 534 in 2010 (IM137) (EADS, 8 Embraer reported 240 million EBIT in 2011, a decrease of 19% on 2010. Embraer s results slumped to a net loss of 70 million in Q411 (vs. 93 million profit in Q410) due to a provision for American Airlines bankruptcy, which is re-negotiating the leases on its Embraer fleet (Embraer, 20 LOT Polish airlines subsidiary EuroLOT renews its fleet with a firm order for 8 Bombardier Q400 NextGen, plus an option to purcharse a further12 aircraft (Bombardier, 9 Environment Boeing, Airbus and Embraer signed a memorandum of understanding to collaborate in the development of affordable biofuels that all aircraft models could use. The three manufacturers agreed to speak in unity to government, biofuel producers to support the availability of new jet fuel sources (Boeing, Airbus, Embraer 22 The price of carbon contracts for 2015 decreased to 9/tonne in recent weeks (Figure 6). Industry Monitor. Issue 139. 30/03/12 Page 8 EUROCONTROL 2012
Figure 7. Brent and kerosene prices. Oil Oil prices still impacted by tensions in Iran and supply concerns surged to 95 per barrel in March. Converted indices for Kerosene and Brent are shown in (Figure 7). Regulation An alliance of more than 30 airlines (British Airways, Virgin Atlantic), airports (BAA, Gatwick and Manchester airports), tour operators and trade associations united to launch a Fair Tax on Flying campaign showing the damages of the Air Passenger Duty (APD) for the UK economy. The alliance launched an online petition to support the anti-apd campaign. The UK Government refused to bow and APD is to increase by 8% in April, with a further rise scheduled for 2013 (ABTA, 3 March and HM Treasury, 23 Airbus and Boeing reportedly unite against EU ETS, appeal to EU to delay the scheme and suggest that ICAO work on a global emissions reduction solution to avoid a trade war with other nations. Airbus stated that China suspended its national carriers orders for long-haul aircraft (Reuters, 23 March & AFP, 8 EU and Israel finalised negotiations on a comprehensive aviation agreement whereby all EU airlines will be able to operate direct flights to Israel from any EU airport and Israeli carriers will be able to operate flights to airport throughout the EU by summer 2017 (Europa, 22 Airlines for America, the trade association for the leading US airlines, filed a complaint to reject the German eco-tax on airline passengers amounting to 45 on long-haul flights. The association argues the eco-tax violates the Chicago Convention, the US-EU Open Skies Agreement and the German Constitution (Airlines for America, 21 Industry Monitor. Issue 139. 30/03/12 Page 9 EUROCONTROL 2012
Cargo UPS reached an agreement to buy TNT Express for 5 billion (IM138). TNT has a fleet of 50 aircraft connecting 65 destinations; the acquisition will help UPS expand in Europe, especially UK, France and Germany, but also grow its business further (UPS & TNT, 19 It is reported that Lufthansa Cargo will not be able to operate flights out of Russia, through Aerologic, due to Russia delaying approval for traffic rights in reaction to EU ETS. Lufthansa asked for the approval of 30 routes and only 11 were granted (ATW, 23 Qatar Airways is reportedly willing to increase its equity interest from 35% to 49% in Cargolux, but faces strong opposition by the freighter s unions. In 2011, Cargolux reported a net loss of 14 million compared with a 45 million profit in 2010. Freight Tonne Kilometres (FTK) decreased by 4.6% to 5 million in 2011 (OGB-L, 26 March and Cargolux, 28 It is reported that Lufthansa Cargo may get rid of its air cargo fleet if the current night flight ban at Frankfurt is confirmed by a court in Leipzig on 4 April. The freighter said the night flight ban would reduce earnings by 40 million a year if it were made permanent. Lufthansa Cargo posted an operating profit of 249 million in 2011, but said profitability outlook for 2012 is in danger due to overcapacity, a weak Chinese market and the night flight ban at Frankfurt (Reuters, 26 March and Lufthansa Cargo, 21 Fares Deflated ticket prices in Europe increased by 1.8% in February year-on-year, based on preliminary values (EUROSTAT, 14 2012 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 The EUROCONTROL Statistics and Forecast Service (STATFOR) is ISO 9001:2008 certified. Industry Monitor. Issue 139. 30/03/12 Page 10 EUROCONTROL 2012