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Europe aviation capacity outlook on a plateau as air fares strengthen

Featured Analysis

Airline seat capacity to/from/within Europe is set to be 101.7% of 2019 levels in 4Q2024, according to data from CAPA - Centre for Aviation/OAG. This will be the third successive quarter above 2019 levels, but the trend has been little more than flat since 2Q2024 when the 100% threshold was first breached.

Intercontinental markets to/from Europe are set to reach 105.6% in 4Q (up from 102.2% in 3Q), with intra-Europe at 100.3% (down from 101.3% in 3Q). Low cost airlines continue to grow their seat share in Europe, recovering more strongly from the COVID-19 pandemic.

The fairly static capacity picture is the result of ongoing supply chain constraints. Logic would suggest that this should be good news for yields. Indeed, air fare inflation was positive once more in both the EU and the UK in Aug-2024, after three months of falling prices. However, it is too early to extrapolate from one month of data.

Summary
  • Europe capacity was 101.5% of 2019 levels in 3Q2024, little changed from 2Q2024, and is set to be only slightly higher in 4Q2024 (101.7%).
  • In 4Q2024 intercontinental markets are set to reach 106% (vs 102% in 3Q), with intra-Europe at 100% (101% in 3Q).
  • LCC seat share continues to increase in Europe.
  • Europe RPKs are consistently above 2019 levels this year, but the trend softened between May-2024 and Jul-2024.
  • EU and UK air fare inflation returned positive in Aug-20024 after three months of falling prices.

Europe capacity was 101.5% of 2019 levels in 3Q2024, little changed from 2Q2024…

Based on data from OAG schedules and CAPA - Centre for Aviation seat configurations as of 23-Sep-2024, Europe's total seat capacity for 3Q2024 reached 101.5% of its 3Q2019 level.

This was only slightly better than flat on the 2Q2024 figure of 101.3%, which had been a noticeable improvement from 94.7% in 1Q2024.

The figure for 2Q2024 was 1.6ppts lower than was scheduled for the quarter back in late Jun-2024.

…and is set to be only slightly higher in 4Q2024

The outlook for 4Q2024 is for Europe capacity to remain above 2019 levels for the third successive quarter, but little improved from the previous two quarters.

Based on current schedules, seat numbers are set to reach 101.7% for the Oct-2024 to Dec-2024 quarter.

In 4Q2024 intercontinental markets are set to reach 106% (vs 102% in 3Q), with intra-Europe at 100% (101% in 3Q)

The recovery in intercontinental markets continued to outpace intra-Europe in 3Q2024, with capacity at 102.2% of 2019 levels compared with 101.3% for intra-Europe.

However, intercontinental markets slipped back slightly from 103.9% in 2Q2024, while intra-Europe improved from 100.5% in 2Q2024.

The outlook for 4Q2024 is for intercontinental to step up to 105.6%, while intra-Europe is set to ease back to 100.3%.

Europe: quarterly seat capacity as a percentage of the equivalent period of 2019, 1Q2020 to 4Q2024*

Most intercontinental regions are scheduled to be at a higher level in 4Q than in 3Q

All intercontinental markets to/from Europe, apart from the North Atlantic, are scheduled to be at a higher percentage of 2019 capacity in 4Q2024 compared with 3Q2024.

Europe-Africa is projected to remain at the top of the recovery ranking in 4Q2024, rising to 133.6% from 125.5% in 3Q2024.

North Atlantic seat capacity is projected at 105.5% in 4Q2024, down from 105.9% in 3Q2024.

Europe-Latin America is projected at 104.5%, up from 100.5% in 3Q2024.

Europe-Middle East is scheduled to rise to 99.7% in 4Q2024, from 94.8% in 3Q2024.

Europe-Asia Pacific is projected at 99.6% in 4Q2024, an increase from 96.8% in 2Q2024. This is the only region not to have risen to 100% or above in any quarter since the pandemic.

Europe to main world regions: quarterly seat capacity as a percentage of the equivalent period of 2019, 1Q2020 to 4Q2024*

LCC seat share continues to increase in Europe

Low cost carriers (LCCs) have further increased their seat share in Europe this year, extending their gains since the pandemic.

According to data from CAPA - Centre for Aviation and OAG, LCC share within Europe grew from 41.0% in 2014 to 41.7% in 2019, an increase of only 0.7ppts.

This has risen to 48.5% in the first 10 months of 2024, an increase of 6.8ppts on 2019.

LCC seat share on routes to/from Europe grew from 7.1% in 2014 to 9.9% in 2019. It is 13.0% in Jan-Oct 2024.

Europe low cost carrier seat share, 2014, 2019 and 10M2024*

Europe RPKs are above 2019 levels this year, but the trend softened between May-2024 and Jul-2024

Capacity only makes up part of the picture and it is traffic that drives revenue.

Data on traffic in Europe, and globally, can be obtained from IATA's monthly traffic statistics, although there is a lag.

Europe's passenger traffic, as measured in revenue passenger kilometres, has been back above 2019 levels since Jan-2024, when RPKs reached 101.5% of Jan-2019 volumes.

IATA has not reported data on traffic comparisons with 2019 since Jan-2024, only reporting year on year changes.

In the most recently reported month, Jul-2024, Europe RPKs were up by 7.2% from Jul-2023, when traffic was 5.5% below Jul-2019.

From these figures, it can be calculated that Jul-2024 RPKs were 1.3% above the equivalent month of 2019. This has fallen back from 7.6% in May-2024.

EU and UK air fare inflation returned positive in Aug-2024 after three months of falling prices

In addition to capacity and traffic, the third element of revenue is yield, or fares.

However, air fare inflation in both the UK and the EU is significantly down from the strong double digit rates of much of 2022 and 2023. Indeed it was negative in each of the three months from May-2024 to Jul-2024 for both markets.

However, air fare inflation for both turned positive again in Aug-2024, the most recently reported month for both.

In Aug-2024 the EU, air fare inflation was 2.7% in the EU (source: Eurostat) and 11.9% in the UK (source: Office of National Statistics).

Prior to this, the trend in both markets had been weakening for over a year. There has been quite a bit of volatility in air fare inflation data in recent months and so it may be too early to extrapolate from the uptick in Aug-2024.

To give some additional context, fares remain much higher than they were pre-pandemic.

It can be calculated that the price of passenger air transport in the EU was 32% higher in Aug-2024 than in Aug-2019. In the UK, the increase was 60% over the same time frame.

Inflation in passenger air travel (year on year growth in prices), Jan-2019 to Aug-2024

Stronger pricing is at the cost of constrained capacity

The trend of weaker pricing from May-2024 to Jul-2024 was a concern for Europe's airlines. Capacity constraints arising from supply chain challenges should have been boosting pricing, so falling fares were a worrying sign of weakening demand.

The return to positive air fare inflation is a more welcome sign for airlines that tight capacity is shoring up prices, even if it is holding back the growth plans of some.

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