EUROCONTROL released (08-Jul-2013) its fourth 'Challenges of Growth' study, which looks ahead to the state of air transport in 2035. EUROCONTROL stated: "Growth is expected to return, with the most likely scenario showing by 2035, and despite the current economic situation, that traffic in Europe will pick up again significantly with an increase in the number of flights to 14.4 million, which is 50% higher than in 2012. This predicted growth is slower than that forecast five years ago, as well as having been delayed for several years." The organisation projects an increase in airport capacity by 2035 of 17% as opposed to the 38% growth by 2030 it projected in 2008. Given the scaling back of airport capacity increases, EUROCONTROL stated: "In the most likely scenario, 1.9 million flights in 2035 would not be accommodated – 12 % of total demand. This scenario would also see more than 20 airports operating at 80% or more of capacity for six or more hours per day, compared to just three such airports in 2012. This would drive ATFCM (air traffic flow and capacity management) delay up to around 5-6 minutes, taking it from a minor or intermittent to a permanent, major contributor of delay. To put this number in context, the current 2014 EU target for en-route ATFM delay is only 0.5 minutes per flight." [more - original PR]
EUROCONTROL predicts 50% increase in flights and capacity challenges for 2035
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Flybe: largest regional airline in Europe leads the airline capacity growth charge in winter 2016/17
The surprise departure of Flybe CEO Saad Hammad on 26-Oct-2016 "by mutual agreement" raises questions about the future strategic direction of Europe's largest regional airline. Mr Hammad joined in Aug-2013 and implemented a restructuring programme, returning Flybe to profit in FY2016 (March year end).
Capacity reduction during the restructuring has been followed by a period of accelerating growth. So much so that Flybe is Europe's fastest-growing airline group among the top 20 in Europe by seat numbers this winter, with an increase of 19%. CAPA has identified 45 new Flybe routes in calendar 2016 (compared with a late summer total of 165), on the majority of which Flybe has no airline competitor.
Despite low competition on its network, Flybe's FY2016 operating margin was one of the lowest among listed European airlines and coincided with weakening unit revenue. Pricing has softened further, not least due to uncertainties such as Brexit, just as Flybe's capacity growth has accelerated.
Until a replacement for Mr Hammad is found, Flybe's Chairman Simon Laffin will assume executive responsibility. Significant strategic change may be unlikely in the interim, but a key question for the next CEO will be whether to continue with such aggressive capacity growth in the face of falling fares.
Ryanair, easyJet, Norwegian, Wizz Air, Pegasus Airlines: Europe's top LCCs' collective margin drops
CAPA's previous analysis of the 3Q2016 results of Europe's big three legacy airline groups highlighted a fall in their collective operating margin, after growth in 1H2016. This report shows that Europe's five leading LCCs, in aggregate, also suffered a fall in profit and margin in the quarter.
Three of the five – Ryanair, Norwegian and Wizz Air – improved their profit margin in the quarter, but easyJet's drop in margin was heavy enough to bring down the collective result. Pegasus' margin also declined.
Nevertheless, the LCC five remain collectively far more profitable than the legacy three. Moreover Europe's two most profitable airlines, Ryanair and Wizz Air, look set to increase their margin lead this year. Even easyJet, which has had a bad year by its standards, achieved a higher margin for calendar 9M2016 than the most profitable of the big three legacy groups, which was IAG.
The divergence of results in the European sector suggest that not all airlines are following the same cycle. However the collective margin decline for the continent's leading LCCs, and its major legacy airline groups, at least gives reason to question whether or not the cyclical upswing may have run its course.