Europe aviation recovery hits another high, but prices start to soften
Europe's capacity recovery from the COVID-19 pandemic continues this week, reaching a new high at almost 85% of the seats flown in the equivalent week of 2019. At the same time, the most recent monthly data on price inflation for passenger air travel in the EU-27 and the UK show that price growth has slowed in 2022.
Europe's seat shortfall of -15.5% versus 2019 levels in week commencing 16-May-2022 is only slightly better than last week, but takes it to its best performance on this measure since before the crisis.
However, Europe remains fifth in the regional ranking, above only Asia Pacific, where capacity is down by -29.3%. Middle East capacity is down by -11.7%, while North America capacity is down by -10.7%, Latin America by -5.1%, and Africa – at the top of the ranking for the first time – capacity is down by -4.6%.
The capacity recovery is projected by current schedules to rise to 91% of 2019 levels in 3Q2022. However, uncertainties surrounding future virus developments and geopolitical events remain. The continued capacity recovery may require further price stimulation.
Summary
- Europe has 27.8 million seats this week, down -16% vs 32.8 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, while 2Q2022 is projected at 85% and 3Q2022 at 91%.
- Price inflation for passenger air travel in the EU-27 and the UK has slowed in 2022.
- Domestic prices fell in the EU-27 in Feb-2022 and Mar-2022.
Europe has 27.8 million seats vs 32.8 million this week in 2019, down -16%
In the week commencing 16-May-2022, total European seat capacity is scheduled to be 27.8 million, according to OAG schedules and CAPA seat configurations.
This is -15.5% below the 32.8 million seats of the equivalent week of 2019, which is an improvement of 0.5ppts compared with last week. It is Europe's strongest week on this measure since before the pandemic, but only very slightly better than the level of -15.6% reached two weeks ago.
This week's total seat capacity for Europe is split between 7.0 million domestic seats, versus 7.7 million in the equivalent week of 2019; and 20.8 million international seats, versus 25.2 million.
Europe's domestic seats are down by -9.0% versus 2019 – the same as last week (week of 09-May-2022).
International seat capacity is down by -17.4% versus 2019, compared with last week's -18.2%.
Europe: percentage change in weekly airline seat capacity vs equivalent week of 2019, week of 06-Jan-2020 to week of 16-May-2022
Europe is fifth in the regional ranking by capacity as percentage of 2019
Europe remains fifth in the ranking of regions measured by seats as a percentage of 2019 levels this week.
With capacity down by -15.5%, Europe is 13.8ppts better than Asia Pacific, where capacity is down by -29.3%, but 3.8ppts below the Middle East, where seat count is down by -11.7%. Capacity is down by -10.7% in North America, by -5.1% in Latin America, and by -4.6% in Africa.
A strong surge in capacity in Africa since late Jan-2022 has taken it to the top of the ranking. Africa has taken an upward step in the trend this week, while all other regions are broadly flat on last week.
Percentage change in passenger seat capacity vs 2019 by region, week of 30-Mar-2020 to week of 16-May-2022
Europe's 2Q2022 capacity is projected at 85% of 2019 levels and 3Q2022 at 91%
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. Capacity for 1Q2022 was 74% of 1Q2019 levels.
Capacity for 2Q2022 is currently projected at 85.0% of 2Q2019 levels, which is only a modest downward revision from 85.3% a week ago. May-2022 is projected at 84.5% and Jun-2022 at 86.5%.
3Q2022 is projected at 91.4% of 3Q2019 seat numbers – barely changed from 91.7% projected a week ago, but a noticeable upward step from 2Q.
Price inflation for passenger air travel has slowed in 2022
The chart below shows the year-on-year change in monthly indices of prices of passenger transport by air in the EU-27 and in the UK.
For the EU-27 nations, prices were falling year-on-year for most of the period from Jul-2020 to Jun-2021.
By contrast, the price of passenger air transport in the EU-27 rose strongly in the months from Aug-2021 to Dec-2021, hitting double digit growth rates three months running (peaking at +17.6% in Nov-2021).
The rate of inflation slowed in the first three months of 2022, but remained positive at approximately +5%.
In the UK, passenger air transport prices have generally performed more strongly than in the EU-27, but with a broadly similar pattern of rises and falls. After peaking at +28.8% in Dec-2021, growth in the UK's monthly index slowed to +15.4% in Mar-2021.
The slowing of the rate of inflation for passenger air transport since Dec-2021 in both the EU-27 and the UK reflects growing price sensitivity in European aviation markets.
This period coincided with a pick-up in capacity growth in the market at a time when the Omicron wave of the virus, and then the Russian invasion of Ukraine, softened demand conditions somewhat.
EU-27 and UK: year-on-year percentage change in monthly index of prices for passenger transport by air, 2020-2022
Domestic prices fell in Feb-2022 and Mar-2022
Data for the EU-27 show that prices for domestic flights have outperformed prices for international flights throughout most of the period since the onset of the coronavirus pandemic.
This is not unexpected, given that demand for international travel was significantly reduced by restrictions on international travel during the COVID-19 crisis, whereas domestic travel was relatively less affected.
This pattern has not held in recent months, however: in Mar-2022, the domestic price index fell by -8.8%, whereas the international price index grew by +6.8%. This probably reflects the considerable loosening of travel restrictions, unlocking significant pent-up demand for international travel in preference to domestic travel.
EU-27: year-on-year percentage change in monthly index of prices for domestic and international flights, 2020-2022
The recovery continues, but remains fragile
Although price inflation in Europe's passenger air travel markets slowed in the first three months of 2022, nevertheless it remained positive. This probably reflects airlines' passing on increased fuel costs in addition to strong pent-up demand.
However, Ryanair, Europe's largest airline by passenger numbers, reported a -27% drop in its average fares in the quarter end Mar-2022. This reflects both its aggressive return of capacity into the market (already above its capacity in the equivalent period of 2019) and its high levels of fuel hedging.
The slowing of price growth is a reminder that uncertainties, such as those caused by Omicron and the war in Ukraine, can increase the level of price sensitivity in the market.
The broad outlook for capacity in Europe derived from current schedules indicates a continued recovery into the summer. Ryanair's FY2022 results statement referred to an improvement in bookings in recent weeks.
However, the ultra-LCC also noted that the booking curve is much closer-in than was typical before COVID-19 struck.
As Ryanair said, this recovery remains 'fragile'.