European aviation: bottoming out, but no sharp rise likely

Summary

• Europe has 6.9 million seats vs 27.1 million in the same week of 2019, down 74%. It has fallen more deeply than all other regions for 15 successive weeks.
• Europe's Feb-2021 capacity is projected to be down 73% versus 2019, after -71% in Jan-2021, but this may not yet be the bottom.
• EUROCONTROL has two traffic scenarios with improvement from Apr-2021 or May-2021. Neither expects last summer's peak (-51% in Aug-2020) before end 2Q2021.
• Air traffic will only improve once national travel restrictions start to ease.

Europe has 6.9 million seats vs 27.1 million in 2019 - down 74%

In the week commencing 1-Feb-2021, total European seat capacity is scheduled to be 6.9 million, according to OAG schedules and CAPA seat configurations.

This is 74.4% below the 27.1 million seats of the equivalent week of 2019, just 0.2ppts better than the previous week's 74.6% drop, but still bigger than any other rate of fall since Jun-2020. It is the 46th week of very heavy double digit percentage (more than 50%) declines in seats versus 2019.

This week's total seat capacity for Europe is split between 3.1 million domestic seats, versus 7.2 million in the equivalent week of 2019; and 3.8 million international seats, versus 19.9 million.

Europe's domestic seats are down by 57.4% versus 2019, compared with last week's -57.6%.

International seat capacity is down by 80.7% versus 2019, compared with last week's -80.8%.

Europe: percentage change in weekly airline seat capacity vs equivalent week of 2019

Source: CAPA - Centre for Aviation, OAG.

Europe has spent 15 weeks in last place behind the other regions

Europe's run at bottom of the regional league table ranked by the percentage decline in weekly seat numbers from 2019 levels is extended to 15 weeks.

Europe's 74.4% cut in seat numbers is 18.9ppts worse than the next deepest, the Middle East, which is down by 55.6% this week (this gap has widened from 17.7ppts last week).

Africa's seat count has been cut by 50.5%, North America's by 47.8%, Asia Pacific's by 44.7% and Latin America's by 42.1%.

Latin America has held onto its new position as the best performing region on this measure, having taken the top spot from Asia Pacific last week (Asia Pacific was top for 42 weeks before that).

Nevertheless, Asia Pacific has now had 30 consecutive weeks at more than 50% of last year's capacity. North America has now been above this threshold for 13 weeks, while Latin America has now had 10 weeks.

Only Europe and the Middle East have yet to reach the 50% threshold (Africa fell back below it last week, after five weeks at or above it).

All other regions stabilised or modestly improved the trend this week.

Percentage change in passenger seat capacity vs 2019 by region, week of 30-Mar-2020 to week of 1-Feb-2021

Source: CAPA - Centre for Aviation, OAG.

Europe's Feb-2021 capacity is projected at -73%, after -71% in Jan-2021…

Europe remains adrift from the other regions of the world. Nevertheless, this week's stabilisation in its seat capacity as a percentage of 2019 levels is welcome, certainly by comparison with the falling trend suffered since mid Dec-2020.

Capacity derived from schedules filed with OAG for next week (commencing 8-Feb-2021) projects a fall of 74.0% from 2019 levels, fractionally better than this week's 74.4% drop and supporting hopes that the trend may be bottoming out.

Nevertheless, a fall of 73% is projected for Feb-2021 as a whole, slightly worse than the 71% drop suffered in Jan-2021. Moreover, as previously noted by CAPA, capacity for every month of the pandemic so far has turned out lower than projected at the start of the month.

…but this may not yet be the bottom

Even assuming that Feb-2021 turns out with a fall of more than 73%, it is too early to know if this month will mark the low point of the year.

Capacity derived from current schedules for Mar-2021 is down by 58% from 2019 levels, with a fall of only 16% projected for Apr-2021, 12% for May-2021 and 14% for Jun-2021.

Clearly, as has also been noted many times by CAPA, airline schedules are of no value in predicting future capacity in the current pandemic crisis.

EUROCONTROL: two traffic scenarios with improving trends from Apr-2021 or May-2021

However, the air traffic services coordinator EUROCONTROL has recently (28-Jan-2021) published two new traffic scenarios for the development of air traffic movements (ATMs) over the first six months of 2021.

These are based on numbers of flights to/from/within/over Europe, so the precise detail will differ from scenarios based on seat count to/from/within Europe, but the broad trends should be similar.

ATMs were down by approximately 64% compared with 2019 levels in Jan-2021, which is a slide from -60% in Dec-2020. Seat capacity from OAG/CAPA data was down 71% in Jan-2021, after a drop of 68% in Dec-2020.

The seat capacity trend is worse than the trend in ATMs, since long haul flights operated by widebodies (with more seats per flight) have been disproportionately hit by the pandemic.

…but neither expects last summer's peak in Aug-2020 to be reached before the end of 2Q2021

In the first EUROCONTROL case (Scenario A) there is a partial improvement in 2Q2021, and the declining trend versus 2019 bottoms out at -72% in Feb-2021 and Mar-2021, rising to -55% in Jun-2021.

In the second (Scenario B) there is no real improvement in 2Q2021, and the trend bottoms out at -78% in Apr-2021, rising to only -70% in Jun-2021.

In both scenarios the -51% level reached in last summer's peak in Aug-2020 is not attained before the end of 2Q2021.

The following chart illustrates EUROCONTROL's two scenarios, alongside the trends in seat numbers derived from OAG schedules and CAPA seat configuration data.

Europe: percentage change in monthly air traffic movements (ATMs) and airline seat capacity vs equivalent month of 2019

Source: CAPA - Centre for Aviation, OAG, EUROCONTROL.

Air traffic will only improve once national travel restrictions start to ease

Of course, EUROCONTROL does not have a crystal ball, and these are only scenarios. Nevertheless, they capture the reality that air traffic will only improve once national travel restrictions start to ease.

A number of states have only recently tightened restrictions, and significant easing in most European countries is unlikely before late Mar-2021 or Apr-2021.

Progress in 2Q2021 will depend on the availability, take-up and efficacy of vaccines across Europe (including their impact on new variants of COVID-19 that may emerge).

Even then, differences in the time frame of vaccination in different parts of Europe, and in different parts of the world, may lead to caution on the part of governments, even where vaccination programmes are more advanced.

Travel restrictions could remain tight, even after the majority of high risk groups have been vaccinated, if there is a perceived risk of reimporting the virus from countries that are slower to vaccinate.

The recovery is delayed, but peak summer 2021 could be better than 2020

In conclusion, the likelihood is that Europe is close to the bottom of the current capacity cycle, or possibly at the bottom already.

However, hitting the bottom does not equate to starting to rise again. The curve will probably be fairly flat over the next few months, and the subsequent upward movement will not be steep.

Nevertheless, European aviation can start to look forward to at least some improvement in the trend from some time in 2Q2021.

The peak summer months (3Q2021) are likely to be weaker than might have been expected before new strains of the virus and renewed lockdown restrictions emerged, but have the potential to rise comfortably above the equivalent period of 2020.