European airlines headed for double-digit traffic declines in May – European traffic review
Europe's full service airlines continue to cut seats at an increasing pace, with Association of European Airlines (AEA) members displaying commendable capacity discipline. But ongoing weakness will demand even more capacity restraint in the weeks and months ahead.
Demand gap narrowing
For the week ended 24-May-2009 (Week 21), total traffic (RPKs) for AEA members was down 9.3% year-on-year, a mild improvement on the previous week, but still the third week in a row demand has fallen by 9% or more.
Association of European Airlines' weekly passenger traffic (RPKs) growth (% change year-on-year) by region: First 21 weeks of 2009
Source: Centre for Asia Pacific Aviation & AEA
Asia Pacific traffic was clearly the worst performer, down 14.6%, the second consecutive week of double-digit declines. Cross-border European traffic was also weaker, although only mildly so, dropping from -6.8% in Week 20 to -7.4% in Week 21. North Atlantic traffic somewhat arrested its decline (after three consecutive weeks of double-digit falls), down 8.1%, compared to the 12.4% in the previous week. (See The Centre's recent US carrier traffic review for April).
Capacity cut backs continue unabated
AEA carriers continue to cut back capacity, with total scheduled ASKs declining 5.8% year-on-year in Week 20.
Association of European Airlines' weekly passenger traffic (ASKs) growth (% change year-on-year) by region: First 21 weeks of 2009
Source: Centre for Asia Pacific Aviation & AEA
Capacity on the Nth Atlantic has seen the strongest reductions since late March-2009, and contracted 7.2% in Week 21. The decline in capacity between Europe and the US has been outstripped by the reductions in seating on operations between Europe and the Asia Pacific, where ASKs dropped by 7.6% in Week 21.
The Association of Asia Pacific Airlines' (AAPA) reports Apr-2009 traffic improved somewhat over 1Q2009, indicating that the region "may at least be through the worst", although business conditions are difficult and the April figures were still poor. AAPA Director General, Andrew Herdman, commented that some Asian economies are "holding up reasonably well", although he also said the "outlook for the remainder of the year is one of continued challenges."
Capacity reductions by AEA members on cross-border European markets were again the smallest, down 5.3%.
Load factors coming back
Passenger load factors continued their upwards climb, again with the exception of the long-haul Asia Pacific market. Total scheduled passenger load factors were 73.8%.
Association of European Airlines' weekly passenger load factor (% change year-on-
year) by region: First 21 weeks of 2009
Source: Centre for Asia Pacific Aviation & AEA
Asia Pacific load factors dropped down to 71.7%, hitting their second consecutive low point this year. If recent trends continue, Asia Pacific load factors could drop below that of Europe, which has been the worst performing region. European load factors continue to rally, at 70.4% in Week 21. The rise in passenger load factors on North Atlantic operations has continued, with AEA carriers achieving 83.4% on trans-Atlantic services.
Outlook: More "green shoots", but not out of the woods yet
The Conference Board stated late last week that the Leading Economic Indicators for the Euro area suggested the "bottoming out process may be getting under way", with European economic performance improving more rapidly than that of the US, although off a lower base.
IATA too is suggesting that the "worst may be over", although there is no sign of a recovery just yet.
In short-haul markets, AEA member airlines remain under pressure from European LCCs, with Air Berlin, Ryanair and easyJet all maintaining their expansionist strategies. Virgin Atlantic CEO, Steve Ridgway, stated the situation for the carrier is "not about making a profit this year, it's about making sure we protect our cash…Fares and yields are at all-time lows and the premium market has shrunk dramatically". Virgin Atlantic has stated that no network airline will be profitable in 2009, as the "toughest-ever" market is forcing carriers to cut their prices to record lows.
Virgin Atlantic called upon the EU to extend the suspension of slot usage regulation that require airlines to use their slot allocations 80% of the time beyond the current 24-Oct-09 timeframe. Mr Ridgway told the Associated Press, "the important thing is that this happens during the Winter. The industry needs to balance capacity to the demand that is out there".