The summer 2016 season came to an end on 29-Oct-2016. Adjusting for an extra week relative to the previous summer, it produced seat growth of 6% for capacity to/from/within Europe, matching the rate of growth in summer 2015, but higher than the 10-year average rate of 4% and higher than any other summer since 2010.
Current indications from data filed with OAG are that Europe will also experience accelerating capacity growth in the winter 2016/2017 season, which runs from 30-Oct-2016 to 25-Mar-2017. Adjusting for the season being shorter by one week relative to last winter, total seat growth in Europe is set to reach 7%, compared with 6% growth in winter 2015/2016 (and 6% growth in summer 2016). This is higher than the 10-year average rate for winter of 3% and the highest winter growth since 2007/2008.
On routes to all but one region from Europe, seat growth this winter will both be faster than last winter and higher than its 10-year average. The one exception is Europe to Middle East, the fastest-growing region, where capacity growth will remain at 10%. This report presents analysis of this winter's seat growth for Europe by region and by airline group.
Europe to all regions: seat growth accelerates to 7% this winter
According to data extracted from the OAG Schedules Analyser in the last week of Oct-2016, total scheduled airline seat numbers to/from/within Europe will increase by 7% year-on-year in winter 2016/2017 compared with the previous winter season.
Note that the raw data indicate a 2% increase, but the coming winter season is one week shorter than last winter and so – the growth rate must be adjusted to reflect this.
The 7% increase in total seat numbers for Europe is an acceleration from the 6% growth rate of last winter and is also faster than the compound average rate of 3% pa in the decade since winter 2006/2007.
This winter's 7% increase is the highest annual growth rate in winter seat capacity since 2007/2008, when it reached 8%.
Capacity growth in Europe was also relatively high in the summer season this year. In summer 2016 total airline seats in Europe increase by 6% for the second successive summer (adjusting for unequal season lengths). Prior to summer 2015, growth had not reached 6% since 2010. The 6% growth rate in summer 2016 was faster than the compound average growth of 4% pa over the 10 years since summer 2006.
Breaking down the growth in seat numbers from Europe to each world region this winter, the highest rate of growth will be to the Middle East, according to the OAG data. Seats between Europe and the Middle East will grow by 10% this winter, in line with the increase last winter and only slightly below the 10-year average of 11% pa.
In every other region from Europe winter 2016/2017 will feature seat growth that is both faster than last winter and above its 10-year compound average rate (see chart below).
Growth in scheduled airline seats from Europe to region indicated: winter 2016/2017 versus winter 2015/2016 and compound annual average 2006/2007 to 2016/2017
Intra-Europe seat growth will be 7% (up from 6% growth last winter), while growth to North America will be 6% (a fractional increase in last winter's rate) and growth to Asia will be 5% (compared with flat last winter). Seat numbers to Latin America will grow by 7% (versus 6% in winter 2015/2016) and to Africa, they will be up by 6% (after a 3% cut last winter).
Summer 2016 capacity growth from Europe was faster than its 10-year average in all but two regions. Capacity was cut to Africa this summer, mainly reflecting geopolitical concerns over North Africa, while capacity growth slowed to Asia, reflecting very weak unit revenues. In both regions there will be an acceleration of growth in the coming winter season.
Europe to Middle East to remain highest-growth region; growth in other regions to accelerate this winter
The Middle East has consistently experienced the highest growth rates in seat numbers to/from Europe, while Africa has consistently underperformed compared with other regions. As noted above, seat growth from Europe to all regions apart from Middle East will be faster than its 10-year average in winter 2016/2017.
Moreover, this winter's year-on-year growth will be the highest winter growth for several years for many regions from Europe.
Intra-Europe seat growth of 7% will be highest since winter 2007/2008, when it reached 8%.
North Atlantic growth of 6% will be the highest since it hit 10% in winter 2010/2011 and – coincidentally – the same applies to Europe-Africa capacity.
Growth of 7% to Latin America this winter is the highest since a 14% increase in winter 2007/2008. In the case of Europe to Asia this winter's growth of almost 5% is above its 10-year average, but it was faster as recently as winter 2013/2014, when it approached 7% (but it was flat to single-digit in each of the past two winters).
Growth (year-on-year) in scheduled airline seats from Europe to region indicated: winter 2006/2007 to 2016/2017
Europe: total seat growth of 7%; faster growth from smaller airlines
The chart below shows the top 20 airline groups in Europe ranked by their share of total seats from Europe to all regions this winter. These 20 groups will operate 79% of all seats to/from/in Europe this winter (compared with 77% in summer 2016).
Collectively, the top 20 will grow seat capacity by 6% year-on-year in winter 2016/2017, similarly to their growth rate this summer, but slightly slower than total market growth of 7%. Growth to Eastern/Central Europe, at 15%, will outpace that of Western Europe, at 6%.
Those controlling the remaining 21% of seats will grow by 12% this winter, accelerating from a 6% increase in summer 2016. In aggregate, low cost airlines to/from/in Europe are also growing at 12% this winter, similarly to their 11% increase in summer 2016. They account for 34% of total seats – up from 33% last winter.
The top five airline groups by seats this winter are Europe's three largest legacy airline groups and the two leading LCCs. In order of size by seats in winter 2016/2017 they are the Lufthansa Group (11% of seats), Ryanair (10%), IAG (10%), Air France-KLM (8%) and easyJet (6%).
All but four of the top 20 groups are growing seat capacity year-on-year this winter, with seven growing at rates of 10% or more in winter 2016/2017. In order of their growth rate these seven are Flybe (growth of 19%), Wizz Air (+19%), TAP Portugal (+17%), Norwegian (+13%), Aeroflot (+12%), Ryanair (+12%) and Emirates (+10%), which is the only top 20 player that is not based in Europe.
Other groups in the top 20 that are growing faster than the 10-year average winter growth rate of 3% this winter are easyJet (+8%), Lufthansa Group (+5%), Finnair (+5%), IAG (+4%), Air France-KLM (+4%) and SAS (+4%).
Among these, only easyJet is growing faster than the market rate of 7%. Lufthansa Group's growth is driven by double-digit increases in seat numbers by its LCC Eurowings (+14%) and by SWISS and Austrian, while Lufthansa itself is cutting capacity by 3%.
For Air France-KLM: Air France is lowering its capacity modestly, KLM is growing at around 5% while its LCC subsidiary Transavia is growing seat numbers by 35% this winter. IAG's growth is also mainly driven by its LCC subsidiary, Vueling, which is growing by 14%, while British Airways is growing by less than 1% and Iberia by 3% this winter.
There are five among the top 20 with winter capacity that is either flat or lower year-on-year. Turkish Airlines (seats reduced by 2%) and Pegasus (flat capacity) are responding to a slump in demand in Turkey. Air Berlin Group is keeping its seat numbers just below last winter's level as it embarks on its latest restructuring. Its fellow Etihad investment Alitalia is also holding capacity virtually flat. Aegean Group is cutting seat numbers by 2% this winter, while switching significant capacity from Aegean Airlines to Olympic Air.
Europe to all regions: Top 20 airline groups by share of scheduled seats winter 2016/2017, and their seat growth versus winter 2015/2016
Intra-Europe: LCCs grow by 12%, much faster than overall growth of 7%
Seats on routes within Europe represent 85% of the total number of seats operated from Europe in the winter 2016/2017 schedule. Not surprisingly, therefore, the 7% growth rate on intra-Europe is similar to that in the total market.
Airlines that are classified as low cost airlines in the CAPA LCC database account for 39% of the scheduled seats recorded by OAG on intra-Europe routes for winter 2016/2017 – up from 38% last winter. (These figures are slightly lower than their summer equivalents of 41% in summer 2016 and 39% in 2015).
LCC seat growth will be 12% year-on-year, while growth will be 4% for all other airlines in aggregate on routes within Europe.
The top 20 groups by seats within Europe control 84% of intra-Europe capacity this summer – a higher share than the 79% for the top 20 by seats from Europe to all regions.
Double-digit seat growth on routes within Europe this winter is being implemented by eight groups, of which four are classified as LCCs (Flybe, Wizz Air, Ryanair and Norwegian). S7 Airlines, Brussels Airlines, TAP Portugal and Aeroflot are also growing at more than 10% on intra-Europe routes in winter 2016/2017.
EasyJet is growing capacity by 8% this winter, making it the only other intra-Europe top 20 group to grow faster than the market.
The LCC subsidiaries of the Big Three European legacy airline groups are also growing rapidly within Europe this summer. Lufthansa's Eurowings/Germanwings will increase seat numbers by 14%, similarly to the 13% growth for IAG's Vueling. Air France-KLM's Transavia will grow its seat capacity by 36% year-on-year this winter.
Europe to Europe: Top 20 airline groups by share of scheduled seats winter 2016/2017 and their seat growth versus winter 2015/2016
North Atlantic: 6% growth overall; airlines outside JVs to grow by 30%
On a year-round basis the North Atlantic is the biggest intercontinental market by seats from Europe, accounting for 4% of the total (although the Middle East is slightly bigger in the winter schedule). Growth in seat numbers between Europe and North America in winter 2016/2017 is set to repeat last winter's rate of 6%, the highest since 2010/2011.
The top 20 airline groups in this market operate a combined share of 95% of seats this winter. Immunised joint ventures within the three global alliances account for 71% of seats between the two continents in winter 2016/2017. This share has dropped from 74% in winter 2015/2016.
The Atlantic ++ JV within Star is growing capacity by 5% this winter, driven mainly by Air Canada, also by Lufthansa and SWISS, but the other two alliances are reducing capacity this winter. In oneworld the 1% capacity reduction in the North Atlantic JV is mainly due to American Airlines, while SkyTeam's JV will have 1% less capacity as a result of cuts from Delta and Alitalia.
The total in immunised JVs is 76% of seats including the capacity of Virgin Atlantic, which has a JV with Delta. This has fallen from 80% last winter for the reasons given above, and because Virgin will reduce its seat numbers on the North Atlantic by 6%.
Total capacity in the three alliance-based JVs will grow by 1% – slower than market growth. Including the Virgin-Delta JV, total JV growth will be less than 1%. By contrast, capacity outside the immunised JVs will grow by 30% this winter.
The top 20 groups will increase seat numbers on the North Atlantic by just under 6% and those outside the top 20 will grow by 22% this winter.
Four airline groups have a North Atlantic seat share this winter of 10% or more. The top two are European: leader IAG, with 16% of seats, and number two Lufthansa Group, with 12%. The next two are from the US: United and Delta, both with a seat share of 10%. Fifth placed Air France-KLM has 9%, and number six American Airlines has 8% of seats. Air Canada (6%) and Virgin Atlantic (5%) also have a seat share of 5% or more.
Five of the top 10 groups in this market are to reduce capacity in winter 2016/2017: United, Delta, American, Virgin Atlantic and Turkish Airlines.
The fastest-growing big player on the North Atlantic this winter is Air Canada, with seat growth of 15%.
LCCs are increasing seat numbers by 147% in aggregate this winter. In addition to those already mentioned, Eurowings and WestJet are new entrants this winter relative to last winter (although they both operated in the summer).
The tour operator Thomas Cook Group is growing scheduled capacity for its airlines by 17% across the North Atlantic. Other groups outside the top 20 that are growing rapidly this winter include Air Europa and Brussels Airlines (both increasing capacity by around 50%).
As previous CAPA analysis reports have observed: the immunised alliances remain dominant on the North Atlantic, but the emergence of alternative business models is providing increased competition.
Europe to North America: Top 20 airline groups by share of scheduled seats winter 2016/2017 and their seat growth versus winter 2015/2016
Europe-Asia: growth accelerates to 5%
The top 20 airline groups in the market from Europe to Asia control 80% of seats. This market is set to increase seat numbers by almost 5% in winter 2016/2017, after flat capacity last winter (and growth of less than 2% in summer 2016).
European airline groups occupy the top five places in this market: Lufthansa Group (10% of seats), Air France-KLM (9%), Turkish Airlines (8%), Aeroflot Group (8%) and IAG (5%).
Note that around a quarter of Aeroflot Group's seat capacity to Asia is on routes to Central Asia, which mainly comprise former Soviet republics. This boosts its Asia capacity total, but it would still occupy fourth place even without its Central Asia capacity. (Note, too, that domestic Russian cities that are classified as being in North East Asia by virtue of their geographic location in Russia's far east are excluded from this analysis).
With the exception of Aeroflot, the leading European groups are growing at cautious rates this winter on Europe-Asia (see chart below). The leading Asian airline groups - Thai Air, Singapore Airlines, Air China, Cathay Pacific, Air India - are also growing fairly cautiously. Among these, only Cathay is growing faster than the 5% market growth on Europe-Asia (it is increasing seats by 7%).
The fastest-growing airline group in the top 20 on Europe to Asia this winter is China Eastern, with an increase in seat numbers of 29%. Uzbekistan Airways and Ural Airlines are both growing at 28%, but their capacity is dominated by Central Asia.
Aeroflot Group is increasing seat numbers by 19% between Europe and Asia (this is 18% if Central Asia is excluded). There is also double-digit growth from Pakistan International Airlines, Jet Airways and Air Astana (again, a Central Asian airline).
Europe to Asia: Top 20 airline groups by share of scheduled seats winter 2016/2017 and their seat growth versus winter 2015/2016
Europe-Middle East: growth remains at 10%
Europe-Middle East accounts for 4% of total seats to/from/in Europe in winter 2016/2017. The top 20 airline groups between Europe and the Middle East have a combined seat share of 87% this winter, led by Emirates with 26% of seats. This is the highest seat share for any operator in any market from Europe.
Europe-Middle East is the only route region from Europe where most of the leading places are not occupied by European airline groups. Ranked second is Qatar Airways, with 12% of seats, followed by Turkish Airlines (the biggest European airline group in this market), with 9%, and Etihad, with 6%.
This demonstrates the continued importance of the four global superconnectors in this market, although their year-on-year growth rates are slowing this winter relative to their summer 2016 growth.
Emirates' winter growth will reduce by 9%, after 17% in the summer; Qatar Airways will grow by 9% this winter, after 17% in the summer; Turkish is set to cut seat numbers by 2% this winter, after growth of 16% in the summer; and Etihad is to maintain flat capacity on Europe-Middle East this winter, as it did in summer 2016.
The next biggest Western European group, Lufthansa Group, is growing by only 3% this winter, but the top 10 is then completed by two airlines with strong double-digit growth on Europe-Middle East – namely flydubai and Pegasus Airlines. There are a further eight airline groups in the top 20 that are growing at double-digit rates.
Europe to Middle East: Top 20 airline groups by share of scheduled seats winter 2016/2017 and their seat growth versus winter 2015/2016
Europe-Africa: growth resumes at 6% after capacity cuts
Routes from Europe to Africa account for just under 3% of total seats to/from/in Europe in winter 2016/2017. Total Europe-Africa seat capacity is set to increase by 6% this winter, after a 3% cut last winter and a 9% cut in summer 2016. Capacity cuts were focused on North Africa, as a result of terrorist events, particularly in Egypt.
The planned growth on Europe-Africa this winter is the biggest rate of increase since winter 2010/2011.
The top 20 groups in this market have a joint share of seats of 88% this winter. They are led by Air France-KLM, with 15% of seats, followed by Royal Air Maroc, with 8%. Third placed Air Algerie has 7%, just ahead of Turkish Airlines and IAG, also with a seat share 7%. TUI Group is sixth, with 6%, just ahead of Tunisair and Ryanair, with 5%.
Among the top 20 there will be double-digit seat capacity growth this winter by a number of airlines, including the North African Royal Air Maroc, Air Algerie, Tunisair and Air Arabia Maroc, in addition to the European Lufthansa Group, TAP Portugal (the fastest-growing, with a 40% increase), Brussels Airlines and Alitalia
Thomas Cook Group and easyJet are still planning capacity cuts to Africa – mainly reflecting holiday destinations in Egypt.
Europe to Africa: Top 20 airline groups by share of scheduled seats winter 2016/2017 and their seat growth versus winter 2015/2016
Europe-Latin America: growth increases to 7%
The smallest market by seats from Europe is Latin America (1% of total seats in Europe). On Europe-Latin America the top 20 airline groups control 96% of seats in the winter 2016/2017 schedule.
Seat numbers will be up by 7% on Europe-Latin America in summer 2016 – an increase on the 6% growth rate last winter.
European groups dominate this market, led by Air France-KLM (21% of seats in winter 2016/2017), IAG (16%), TUI Group (8%), Lufthansa Group (6%), Thomas Cook Group (6%) and Air Europa (6%). The highest placed Latin American group is LATAM, which is seventh this winter with 6% of seats, fractionally ahead of TAP Portugal (5%).
According to OAG, 16 of the top 20 airline groups in this market are growing seat numbers and eight are growing at double-digit rates this winter (see chart below). Although the top five are growing at fairly slow rates, there is strong growth from Air Europa, Air Caraibes, Avianca, Alitalia, Aeromexico, XL Airways, Aeroflot and Evelop Airlines.
Only three (TAP Portugal, Air Berlin Group and Blue Panorama) are cutting capacity, while Lufthansa Group is keeping it flat.
Europe to Latin America: Top 20 airline groups by share of scheduled seats winter 2016/2017 and their seat growth versus winter 2015/2016
Capacity acceleration is a concern at this point in the cycle
As ever, OAG schedules data are subject to change and airlines continually adjust their capacity plans.
That said, the available data do nothing to dampen concerns that capacity growth is accelerating in Europe this winter, after an acceleration in the summer season also. LCCs are driving growth and taking market share on intra-European routes, but are also starting to have an impact on long haul routes – most notably on the North Atlantic.
Global macroeconomic and geopolitical concerns, coming when the world's airline sector has been producing operating profit margins at new high levels, have led to question marks about the sustainability of the upswing that the industry has enjoyed since the global financial crisis.
Europe's airlines will need to remain vigilant for any sign of weakening demand in the face of the current capacity acceleration.