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Europe's airlines raise 4Q capacity, but supply/demand balance wobbles

Analysis

Europe's total seat capacity is at 86.2% in the week commencing 12-Sep-2022, which is a shortfall of 13.8% against the equivalent week in 2019.

Europe has slipped to fifth in the regional ranking, above Asia Pacific, where capacity is down by 26.7% versus 2019, but just below the Middle East, where capacity is down by 13.6%. Africa capacity is down by 10.7%, North America by 7.7%, and Latin America is down by 3.7%.

Capacity projected for Europe in 4Q2022 is back up to 88% this week after having been trimmed from 88% to 85% over the previous two weeks. If this is borne out, it will continue the progress with each successive quarter since 27% in 1Q2021.

However, with 2Q2022 reaching 84% and 3Q2022 projected at 87% and 4Q2022 now at 88%, the pace of improvement is sputtering. Moreover, load factor data indicate that matching supply to demand may be becoming more testing for Europe's airlines. This could lead to further volatility in the 4Q2022 capacity outlook.

Summary

  • Europe has 31.5 million seats this week, down 14% vs 36.5 million in the same week of 2019. Europe is fourth in the regional ranking on this measure.
  • Europe's 1Q2022 capacity was at 74% of 2019 levels and 2Q2022 at 84%.
  • 3Q2022 is projected at 87%, and 4Q2022 has been raised from 85% to 88%.
  • In Jul-2022 European airline load factors were no longer edging closer to 2019 levels.
  • Data from Ryanair, Wizz Air and Norwegian suggest that this trend may have continued into Aug-2022.

Europe has 31.5 million seats vs 36.5 million this week in 2019 — down 14%

In the week commencing 12-Sep-2022, total European seat capacity is scheduled to be 31.5 million, according to OAG schedules and CAPA seat configurations.

This is 13.8% below the 36.5 million seats of the equivalent week of 2019 and a deterioration of 0.7ppts from last week's -13.2% (week of 05-Sep-2022).

This is the third successive week of modest decline after a pandemic era peak of -11.4% three weeks ago. It keeps Europe's recovery broadly in the same range it has occupied since late May-2022.

This week's total seat capacity for Europe is split between 7.8 million domestic seats, versus 8.4 million in the equivalent week of 2019; and 23.7 million international seats, versus 28.2 million.

Europe's domestic seats are down by 7.4% versus 2019, compared with last week's -6.6%.

International seat capacity is down by 15.7% versus 2019, compared with last week's -15.1%.

Europe: percentage change in weekly airline seat capacity vs equivalent week of 2019, weeks of 06-Jan-2020 to 12-Sep-2022

 

Europe slips to fifth in the regional ranking by capacity as percentage of 2019's

Europe has fallen to fifth place in the ranking of regions measured by seats as a percentage of 2019 levels this week – but only just.

With capacity down by 13.8%, Europe is 12.8ppts better than sixth placed Asia Pacific, where capacity is down by 26.7%, but 0.2ppts below the Middle East, where seat count is down by 13.6%.

Capacity is down by 10.7% in Africa, by 7.7% in North America, and by 3.7% in Latin America.

Asia Pacific and Latin America have taken upward steps in the trend this week, whereas Europe and North America have taken downward steps.

Middle East and Africa are broadly level on last week.

Percentage change in passenger seat capacity vs 2019 by region, week of 30-Mar-2020 to week of 12-Sep-2022

 

Europe's 3Q2022 is projected at 87%...

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.

The improvement is continuing in 2022 so far. Capacity for 1Q2022 was 74% of 1Q2019 levels and 2Q2022 was at 84% of 2Q2019 levels.

Projections for 3Q2022 are at 86.9% of 3Q2019 seat numbers, unchanged from last week.

…and 4Q2022 has been raised from 85% to 88%

Looking ahead to 4Q2022, the projection has been raised to 87.8% this week from 85.3% last week – reversing the two previous weeks of decreases.

The Oct-2022 capacity projection is broadly unchanged, but Nov-2022 has been raised by 4% and Dec-2022 has been raised by 6%.

Each month of 4Q2022 is back above the 86% to 87% range that Europe capacity has occupied almost every week since late May-2022.

Jul-2022: European airline load factors are no longer edging closer to 2019 levels

The latest monthly traffic data from IATA indicate that European airlines' load factor reached 87.0% in Jul-2022.

This was the highest level since before the COVID-19 pandemic, but seasonal variations need to be taken into consideration, since July and August typically enjoy the highest load factors.

This figure for Jul-2022 was 2.1ppts below the Jul-2019 load factor for Europe, closer to pre-COVID levels, and a slight widening of the gap since Jun-2022.

The gap to 2019 load factors had narrowed from 10.0ppts in Mar-2022 to 5.7ppts in Apr-2022, 3.0ppts in May-2022 and 1.5ppts in Jun-2022.

European airlines: monthly passenger load factor (percentage), 2019 to 2022

 

Aug-2022: Ryanair, Wizz Air and Norwegian are no longer narrowing the load factor gap to 2019

Industry-wide traffic data are not yet available for Aug-2022, but the few leading European airlines that still report monthly all of them LCCs give us some idea of how the trend may be turning.

Over a number of months up to Jul-2022, each of Ryanair, Wizz Air and Norwegian had reported both month-on-month load factor gains and a narrowing of the gap to their 2019 load factor levels.

However, there was no further narrowing of the load factor gap to 2019 levels in their Aug-2022 data.

Norwegian managed to exceed its Jul-2019 load factor in Jul-2022 by 1.0ppt, helped by having much less capacity than in 2019.

However, Norwegian's Aug-2022 load factor of 85.5% was 4.5ppts below Aug-2019.

Ryanair's Aug-2022 load factor of 96% was 1ppt below its Aug-2019 load factor, while Wizz Air's 90.5% was 5.8ppts short of the same month three years ago.

For both Ryanair and Wizz Air, the load factor gap to 2019 in Aug-2022 was no different from what they reported for Jul-2022.

Ryanair, Wizz Air and Norwegian Groups: passenger load factor (percentage) in Jun-2022, Jul-2022 and Aug-2022 vs Jun-2019, Jul-2019 and Aug-2019

 

Both Ryanair and Wizz Air are operating at more than 100% of 2019 capacity levels this summer.

Moreover, in Aug-2022; both reported more passengers than they had ever carried in a single month. Ryanair had 16.9 million passengers and Wizz Air had 4.9 million.

Nevertheless, the drop in their load factors versus 2019 indicates that even these high traffic levels are not quite enough to fill their expanded capacity.

Matching capacity to demand is becoming more challenging

Low cost airline load factor trends cannot necessarily be extrapolated to other airlines, but they may be a reasonable indicator that the gap to 2019 levels is no longer narrowing across Europe.

It appeared for a while that the capping of capacity caused by labour shortages was helping to boost load factor as demand recovered from the COVID-19 crisis and the summer season began.

However, European airlines now seem to be moving into a more challenging environment in terms of matching capacity to demand. If so, the increase in 4Q2022 capacity plans could turn out to be short-lived.

Concerns about flight disruption may be deterring some travellers, just as rising inflation and interest rates are reducing discretionary spend for many consumers.

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