Europe aviation: intercontinental yield even stronger than intra-Europe
CAPA's regular analysis of Europe's capacity recovery from the COVID-19 pandemic shows that the trend continues its broadly sideways trajectory.
A report from IATA contains charts indicating that 2022 passenger demand and airline revenue in Europe will reach lower percentages of 2019 levels than capacity. Nevertheless, airline revenue is set to recover faster than passenger numbers, both within Europe, and between Europe and other continents. This indicates yield strength, particularly on intercontinental routes.
Europe's capacity has halted its recent slide as a percentage of 2019 levels. Europe remains fifth in the regional ranking, above only Asia Pacific.
In the week of 14-Nov-2022 seat numbers are at 84.9%, a shortfall of 15.1% against the equivalent week in 2019. This is an improvement of 1.1ppts from last week, but Europe's capacity recovery has not moved significantly outside the range of 85% to 86% of 2019 capacity for the past six months.
- Europe's capacity recovery from the COVID-19 pandemic remains stagnant, with capacity levels hovering around 85-86% of 2019 levels for the past six months.
- Europe's domestic seat capacity is down 16.3% compared to 2019, while international seat capacity is down 14.7%.
- Europe ranks fifth in terms of seat capacity recovery among global regions, with a 15.1% decline compared to 2019.
- Projections indicate that Europe's capacity in Q4 2022 will reach 86% of 2019 levels, and 90% in Q1 2023.
- Intra-Europe passenger demand has recovered faster than intercontinental routes, with passenger numbers expected to reach around 60% of 2019 levels in 2022 for intra-Europe flights, compared to only 40% for intercontinental flights.
- Revenue recovery is outpacing passenger demand recovery, particularly on intercontinental routes, indicating strong yields in the market.
Summary
- Europe has 23.7 million seats this week, which is down 15% vs 28.0 million in the same week of 2019. Europe is fifth in the regional ranking on this measure.
- Europe's 1Q2022 capacity was at 74% of 2019 levels, 2Q2022 at 84% and 3Q2022 at 87%; 86% is projected for 4Q2022 and 90% for 1Q2023.
- Passenger demand and airline revenue have recovered faster on intra-Europe than intercontinental routes.
- Revenue recovery is outpacing the passenger demand in both markets.
- Yields are even stronger on intercontinental routes than on intra-Europe.
Europe has 23.7 million seats vs 28.0 million this week in 2019 - down 15%
In the week commencing 14-Nov-2022 total European seat capacity is scheduled to be 23.7 million, according to OAG schedules and CAPA seat configurations.
This is 15.1% below the 28.0 million seats of the equivalent week of 2019 - an improvement of 1.1ppts from last week's -16.2% and 2.8ppts below the level of two weeks ago.
This week's performance almost takes Europe's capacity back into the range of -15% to -14% that it has occupied for most of the past six months.
This week's total seat capacity for Europe is split between 6.1 million domestic seats, versus 7.3 million in the equivalent week of 2019; and 17.6 million international seats, versus 20.7 million.
Europe's domestic seats are down by 16.3% versus 2019, compared with last week's -17.3%.
International seat capacity is down by 14.7% versus 2019, versus last week's -15.9%.
Europe: percentage change in weekly airline seat capacity vs equivalent week of 2019, weeks commencing 06-Jan-2020 to 07-Nov-2022
Europe remains fifth in the regional ranking by capacity as percentage of 2019's
Europe is still in fifth place in the ranking of regions measured by seats as a percentage of 2019 levels this week.
With capacity down by 15.1%, Europe is 12.4ppts better than sixth placed Asia Pacific, where capacity is down by 27.5%, but 7.4ppts below the Middle East, where seat count is down by 7.7%.
Capacity is down by 4.7% in North America and by 3.9% in Africa.
Latin America's seat numbers are 2.7% above the equivalent week of 2019, and that is the third successive week that it has been above 2019 levels.
Europe, North America, Latin America and Middle East have taken upward steps in the trend this week, while Africa and Asia Pacific are broadly flat on last week.
Percentage change in passenger seat capacity vs 2019: by region, week of 30-Mar-2020 to week of 14-Nov-2022
Europe's 4Q2022 capacity is projected at 86% of 2019 levels, and 1Q2023 at 90%
According to data from OAG and CAPA, Europe's capacity as a percentage of 2019 levels improved with each successive quarter of 2021. It was 27% in 1Q2021, 34% in 2Q2021, 64% in 3Q2021 and 71% in 4Q2021.
The improvement has continued in 2022 so far, albeit at a slowing rate.
Capacity for 1Q2022 was 74% of 1Q2019 levels; 2Q2022 was at 84%; and 3Q2022 was at 87% of the equivalent periods in 2019.
For 4Q2022 the projection is 82.2%, compared with 86.3% last week, but the sixth successive week of minor trimming.
Full year capacity for 2022 is projected at 86.2% of 2019 seat numbers.
Current schedules for 1Q2023 project capacity in the first quarter of next year stepping up to 89.8% of 1Q2029 seat numbers, but this has been trimmed from the 90.2% projected in the week of 07-Nov-2022.
Passenger demand and airline revenue have recovered faster on intra-Europe than intercontinental
Previous CAPA analysis has noted the faster recovery in intra-Europe capacity compared with intercontinental capacity.
A report published by IATA on 7-Nov-2022 sheds additional light on the passenger demand and revenue recoveries in these two markets.
Judging from IATA's chart (reproduced below) the total number of origin-to-destination (O-D) passengers carried in the intra-Europe market was a little more than twice the number carried on flights between Europe and other continents in 2019.
However, the airline revenue generated on intercontinental flights was 1.5-2 times the revenue of flights within Europe.
In terms of passenger demand, IATA expects annual O-D passenger numbers on intra-Europe to be around 60% of 2019 levels in 2022, while passenger numbers on intercontinental routes are set to be only around 40% of 2019 levels.
This means that intra-Europe passenger numbers will be around 3 times intercontinental numbers in 2022, compared with more than 2 times in 2019.
O-D passenger demand: intra-Europe vs intercontinental Europe, 2019-2022
In terms of revenue, the second IATA chart, reproduced below, indicates expected intra-Europe revenue in 2022 at around 65% of 2019 levels and intercontinental revenue at around 50%.
This means that intercontinental revenue will be less than 1.5 times intra-Europe revenue in 2022, compared with 1.5-2 times in 2019.
Blended airline revenue: intra-Europe vs intercontinental Europe, 2019-2022
2022 yields are strong, particularly on intercontinental
The IATA data suggest total passenger numbers for 2022 in excess of 50% of 2019 levels and total revenue in 2022 above 55%.
The revenue recovery appears to be outpacing the passenger demand recovery by a greater degree on intercontinental routes than on intra-Europe routes.
While there may be a danger in extrapolating too much from these charts, CAPA analysis suggests 2022 revenue per passenger may be 10% above 2019 levels on intra-Europe and close to 30% up on intercontinental routes.
Nevertheless, in both markets the IATA charts indicate that 2022 revenue is expected to reach a higher percentage of 2019 levels than passenger numbers.
This is a sign of strong yields, particularly on intercontinental routes.