European airline capacity planning: uncertainty is increasing
The UK's reimposition of quarantine rules on arrivals from Belgium, Andorra and the Bahamas, not long after similar action on Spain, is another reminder of the uncertainties facing airline capacity planners. COVID-19 cases are also increasing elsewhere.
After 10 straight week-on-week increases, European capacity has moved from 14% of 2019 levels, the lowest of any region 10 weeks ago, to 45% this week (commencing 10-Aug-2020), now the third highest.
The year-on-year reduction of -55.0% is now almost level with North America's -53.4%, while Asia Pacific remains in the lead with capacity cut by 42.9% (still the only region at more than 50% of 2019 levels). Latin America has the deepest cut, -74.1%, followed by Africa's -67.6% and the Middle East's -67.3%.
However, the capacity curve in Europe (and most of the other world regions) is showing signs of levelling out, influenced by the uncertainty over travel restrictions. Moreover, capacity plans for the rest of 2020 from leading European airline groups in their recent quarterly reports are more cautious than the schedules they are still filing with OAG.
- European capacity has increased from 14% to 45% of 2019 levels, making it the third highest region.
- Europe's domestic capacity has been cut by 27.6% year-on-year, while international capacity is down by 62.7%.
- Capacity reductions in most regions, including Europe, have plateaued in recent weeks.
- Future schedules continue to shrink, with projected capacity for August down by 54% compared to last year.
- Ryanair and Wizz Air have the most ambitious capacity plans, aiming to increase their seat capacity in the coming months.
- Other European airlines, such as EasyJet, Air France-KLM, Lufthansa Group, IAG, and Finnair, are more cautious in their capacity plans, expecting lower levels of demand to return in the near future.
Summary
- Europe: 16.6 million seats, -55% vs 36.9 million a year ago. Only Asia Pacific and North America Africa have narrower cuts. Most regions are levelling out.
- Future schedules are still shrinking, but remain uncertain. Winter schedules have not yet been changed in any meaningful way.
- Ryanair and Wizz Air have the most ambitious capacity plans, but other European airlines are more cautious.
Europe: 16.6 million seats vs 36.9 million a year ago - down 55%
Total European seat capacity is scheduled to be 16.6 million in the week of 10-Aug-2020, according to schedules from OAG combined with CAPA Fleet Database seat configurations.
This is a 1.6% increase week-on-week, but still 55.0% below the 36.9 million seats of the equivalent week a year ago.
This week's total is split between 5.8 million domestic seats, versus 8.1 million last year; and 10.8 million international seats, versus 28.9 million.
Europe's domestic seats have been cut by 27.6% year-on-year (compared with last week's -26.3%). This is now the seventh week running with domestic capacity at more than 50% of last year's.
International seats are down by 62.7% (narrower than last week's -63.6%).
The 55.0% year-on-year cut in total seats this week is the 21st week of very heavy double digit percentage (more than 50%) declines in seats.
It is only 0.6ppts narrower than last week's 55.6% drop, and the 10th consecutive week of year-on-year cuts at a lower percentage than the previous week.
Europe: year-on-year percentage change in airline seat capacity, 1H&2H2019 and weekly in 2020
Europe remains in third place, but is closing in on North America
For the sixth week running, Europe has the third narrowest cut among world regions this week. It is now very close to North America in terms of its year-on-year capacity cut.
Seats are down by 74.1% in Latin America, maintaining the region's position as having the deepest cut. Over recent weeks Africa, whose seat numbers are now down by 67.6%, has widened the gap with Latin America.
The Middle East is only fractionally ahead of Africa, with a year-on-year reduction of 67.3%. Capacity is down by 53.4% in North America and by 42.9% in Asia Pacific.
Asia Pacific has now had five consecutive weeks at more than 50% of last year's capacity.
Percentage change in passenger seat capacity by region, week of 10-Aug-2020 vs 12-Aug-2019
Most regions are levelling out
Year-on-year rates of capacity reduction in most regions have plateaued in recent weeks.
Europe is on the longest unbroken run of narrowing its year-on-year capacity cut, but has also levelled out this week.
Only Africa is still on a clearly upward trend, while Asia Pacific, Latin America and Middle East are taking modest downward steps this week.
Year-on-year percentage change in passenger seat capacity by region, week of 30-Mar-2020 to week of 10-Aug-2020
Future schedules are still shrinking…
The trend of future schedules being trimmed with each passing week continues this week.
Projected capacity for Aug-2020 is lower by 3% since last week and is now projected to be 54% below last year's (compared with -68% for Jul-2020).
Projected Sep-2020 seat numbers are 6% lower than expected last week and are now anticipated to be down by 37% year-on-year. This is 63% of last year's levels - much more cautious than the 83% projected four weeks ago for Sep-2020, but still quite aggressive.
For 3Q2020 as a whole - normally the peak quarter of the year - European seat numbers derived from schedules filed with OAG are projected to be 49% below the same quarter of 2019, i.e. at 51% of last year's level.
…but remain uncertain
The short term nature of capacity planning, driven by uncertain demand, means that European airlines have not yet even begun to adjust their schedules into the winter season in any meaningful way.
Capacity derived from OAG schedules for Nov-2020 and Dec-2020 is still projected to be down by only approximately 10% year-on-year. This remains virtually unchanged from what was projected last week or any other week over the past two to three months.
Europe: year-on-year percentage change in airline seat capacity, with outlook at different dates*
Ryanair and Wizz Air have the most ambitious capacity plans
Beyond the OAG schedules, the best guide to the capacity outlook - at least for the larger airline groups in Europe - is to read what the airlines themselves are saying on the subject.
Ryanair has said that it was flying approximately 40% of its normal seat capacity (across 90% of its routes) in Jul-2020. It plans to increase this to 60% in Aug-2020 and 70% in Sep-2020.
Wizz Air has said that it was flying 70% of its seat capacity as of Jul-2020. Although it has not given further guidance on capacity, its fleet plan aims for 137 aircraft at Mar-2021, which is a 13% increase on Mar-2020.
Ryanair and Wizz Air are ahead of their rivals in their capacity ramp-up. They are betting on market share increases as a result.
See related report: Ryanair & Wizz Air: first mover advantage in European aviation's reset
Other European airlines are more cautious
EasyJet is aiming for only approximately 40% of capacity in calendar 3Q2020.
Air France-KLM plans to operate at 45% of its 2019 capacity (in ASKs) in 3Q2020 and at 65% in 4Q2020. In 2021 a maximum of 80% is planned, and AF-KL does not expect pre-crisis levels of global demand for "several years".
Lufthansa Group expects to reach 2019 ASKs in 2023. It is planning for its hub airlines to fly only 40% of last year's ASKs on intra-Europe and just 20% on long haul in 3Q2020.
The group expects to operate half of 2019 ASK levels by the end of the year (slightly higher, 55%, on intra-Europe). However, it plans to fly 95% of its intra-Europe routes and 70% of its long haul destinations at that time.
IAG does not expect 2019 passenger demand to return before 2023. It is planning an average of only 26% of last year's ASKs across 3Q2020 (building from 15% in Jul-2020), and 54% for 4Q2020.
On 24-Jul-2020, Finnair's 2Q results statement said that it planned c50% of last year's flights in Sep-2020, compared with c25% in Jul-2020. However, on 12-Aug-2020, it reduced this Sep-2020 target to 30%, due to increased travel restrictions in a number of countries.
The capacity/demand disconnect is likely to remain
These announced capacity plans by leading European airline groups of somewhere around 30% to 45% of last year's capacity in 3Q2020 and 50% to 65% in 4Q2020 compare with projections derived from OAG schedules of 51% in 3Q2020 and 85% in 4Q2020.
Even the announced plans are subject to change and uncertainty, as Finnair has recently demonstrated.
Moreover, there is a further problem for airline capacity planning.
According to preliminary data from ACI Europe, passenger numbers at Europe's airports were down by 78% year-on-year in Jul-2020, and seat numbers derived from schedules were down by 68%.
This disconnect between capacity and passenger demand is likely to remain.