European airlines hail long-awaited North Atlantic reopening
The North Atlantic market will reopen following the US decision to lift the ban on travellers from a number of countries, including the EU and UK. The Biden administration will allow fully vaccinated travellers into the US from early Nov-2021. Quarantine will not be required, but passengers will need to provide proof of vaccination, a negative test and contact information.
The ban has weighed heavily on capacity and traffic. As a percentage of 2019 capacity, the North Atlantic has underperformed versus all Europe since Apr-2020. Moreover, it has been Europe's second weakest passenger traffic region (Europe-Asia has been weaker).
This matters to European airlines: the North Atlantic is their most important intercontinental market.
British Airways and Lufthansa led Europe's airlines by North Atlantic ASKs in 2019. However, smaller airlines – La Compagnie, Virgin Atlantic, Icelandair and Aer Lingus – had the highest percentage of their 2019 ASKs on North Atlantic. IAG had the biggest exposure among Europe's big airline groups.
There are wrinkles to be ironed out, such as exactly which vaccines the US will recognise, but the North Atlantic capacity recovery should surely soon catch up.
- Europe to North America capacity has underperformed all Europe capacity throughout the pandemic.
- North Atlantic RPKs have been weaker than capacity and have been Europe's second weakest traffic region.
- The North Atlantic is the most important intercontinental region for Europe's airlines, and more important to European than to North American airlines.
- British Airways and Lufthansa led Europe's airlines by North Atlantic ASKs in 2019. IAG led among the big airline groups.
- La Compagnie, Virgin, Icelandair and Aer Lingus had the highest percentage of their 2019 ASKs on North Atlantic.
Europe-North America capacity has underperformed all-Europe capacity
According to data from OAG/CAPA for the week commencing 20-Sep-2021, the North Atlantic market has reached a level of 44% of seat capacity operated in the equivalent week of 2019.
This is a recovery from a range of 22% to 25% through the first five months of 2021.
Nevertheless, the North Atlantic remains much weaker than the overall Europe market, where total seat numbers are at 66% of 2019 levels. Moreover, the North Atlantic has consistently underperformed as a percentage of 2019 throughout the pandemic.
North Atlantic and all-Europe: weekly airline seat capacity as a percentage of 2019 levels, weeks commencing 30-Dec-2019 to 20-Sep-2021
North Atlantic RPKs have underperformed capacity…
IATA monthly data reported for Jun-2021 show that North Atlantic RPKs were down by 81.0% compared with Jun-2019. This compares with OAG/CAPA capacity data showing that ASKs for Jun-2021 were down by 72.5%.
Preliminary IATA data for Jul-2021 indicate that the RPK reduction versus 2019 had improved to approximately -70%, while ASKs were at -67%.
…and have been Europe's second weakest traffic region
Up to Jun-2021, North Atlantic RPKs had been consistently down by 80% to 90% throughout the coronavirus pandemic.
Year-on-year RPK growth by route region to/from Europe (percentage), Jan-2020 to Jul-2021
IATA data on regional passenger yields reported that the North Atlantic had the weakest results of all regions from Europe for almost all of the period form Mar-2020 to Dec-2020. North Atlantic yield was down by 15% to 27% throughout that time.
IATA has not reported yield data by region since then.
The North Atlantic is the most important intercontinental region for Europe's airlines…
For those European airlines that actually operate in this market, the North Atlantic accounted for not far off a quarter (23.2%) of 2019 ASKs (analysis of the importance to individual airlines appears later in this report).
…and more important to European than to North American airlines
In 2019, European airlines had 60% of North Atlantic ASKs
In 2019 there were more than 30 European airlines flying on the North Atlantic, compared with only seven North American operators. European operators had a 60% share of total North Atlantic ASKs.
Nevertheless, the big three US legacy airlines held three of the top four places in the ranking of operators by North Atlantic ASKs in 2019 (United first, Delta second and American fourth), and Air Canada was sixth.
British Airways and Lufthansa are the biggest European operators to North America
Among European airlines, British Airways (third overall) was the biggest by North Atlantic ASKs in 2019, followed by Lufthansa. Both had more than 60 billion ASKs in this market (similar in scale to United, Delta and American).
La Compagnie, Virgin, Icelandair and Aer Lingus had highest percentage of 2019 ASKs on North Atlantic
The breakdown of capacity by ASKs gives a better indication of a region's revenue importance than comparing its share of an operator's seat capacity.
The chart highlights those most vulnerable to the loss of this route region and those with most to gain from the reopening of the market.
This ranking is headed by La Compagnie, with 100% of its ASKs on the North Atlantic in 2019.
Virgin Atlantic was second, with 70%, while Icelandair and Aer Lingus both had 55%. Norwegian Air, in fifth, had 44% of its ASKs on the North Atlantic in 2019 (and has since withdrawn entirely from this market).
European airlines ranked by percentage of total ASKs on North Atlantic, 2019
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IAG had more North Atlantic exposure than Lufthansa and Air France-KLM
As a share of group ASKs, IAG also had the highest exposure, with 32.0% of its ASKs on the North Atlantic, followed by Lufthansa Group, with 27.7%, while Air France-KLM had 21.5% of ASKs in this route region.
North Atlantic capacity recovery could catch up
The US announcement that the North Atlantic will fully reopen to vaccinated passengers is very welcome news to European airlines operating in this market.
The large majority on residents of both sides – those who are fully vaccinated – will now be allowed to fly between Europe and North America (restrictions between Europe and Canada are already eased).
See related report: North Atlantic: US airlines enjoy access bias; BA awaits RASK return
Since 2019 Norwegian, Air Italy, Thomas Cook Airlines, XL Airways and WOW Air have left the North Atlantic market. However, there are new entrants to this market to take their place, among them JetBlue, Neos Norse Atlantic, and PLAY.
According to schedules currently filed with OAG and seat configuration data from the CAPA Fleet Database, the North Atlantic's capacity performance gap to the overall European market is set to narrow.
North Atlantic seat numbers are scheduled to grow from 44% of 2019 levels currently to 82% by the end of Feb-2022, compared with an increase from 66% to 89% for the total European market.