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Jet2.com: growth mainly in Spain and Manchester. Overcapacity an issue, and competition strong

The strongly seasonal nature of Jet2.com's schedule and the financial performance of the airline and its parent Dart Group were examined in a Jul-2016 analysis report by CAPA. That report also noted that all of the increase in passenger numbers since the year to Mar-2013 was attributable to traffic booked via Dart Group's package holidays business – Jet2holidays.com.

This report looks in some detail at Jet2.com's network and how it has changed in the three years since summer 2013.

Over the past three years Jet2.com has increased its peak summer weekly seat capacity by one third. By airport, the biggest share of this incremental capacity has been at Manchester. By destination, the lion's share of its growth has been to Spain, where there is now a capacity glut. Its markets have become increasingly competitive – not only due to other LCCs, but also because of the growth of airlines owned by integrated leisure groups such as TUI and Thomas Cook.

The above-mentioned Jul-2016 report by CAPA can be read at the following link: Jet2.com: LCC airline's summer may be cooled by new Boeings, despite parent group's profit leap

CAPA also examined Jet2.com in Jul-2013: Jet2.com: strong FY2013 profit growth hides major challenges

Jet2.com has resumed strong capacity growth

In its financial year to 31-Mar-2016 Jet2.com cut its seat numbers by 1.1% to 6.6 million, according to data reported by its parent company Dart Group. This capacity cut was focused on the first half of the financial year and substantially the summer 2015 season, possibly in an attempt to start reducing the strong seasonal emphasis in the airline's schedule on 1H.

However, after last summer's capacity restraint Jet2.com is growing rapidly again in summer 2016. According to data from OAG for the week of 1-Aug-2016, its seat numbers are up by 16% year-on-year for the peak summer period and will grow by 13% for all of calendar 2016.

Jet2.com has seven bases in northern UK

Jet2.com specialises in serving leisure destinations in Europe from seven bases in the north of the UK. Its head office is located at Leeds Bradford Airport, but its biggest base by seats is Manchester Airport.

It also has bases at Newcastle, Nottingham East Midlands, Glasgow, Edinburgh and Belfast International. Its former base at Blackpool Airport was closed in 4Q2014, when it transferred its two aircraft previously based there to Manchester.

From Apr-2017 the airline will add Birmingham as its eighth UK base (see later for route details).

Jet2.com top 10 bases by seats: 1-Aug-2016 to 7-Aug-2016

Manchester: Jet2.com is number two at its biggest base, where it has focused growth since summer 2013

At Manchester, Jet2.com’s biggest base by seat capacity, it is the number two airline with 11% of seats, behind Ryanair (14% of seats) and just ahead of third-placed Thomson (11%).

It has grown its seat capacity by 43% and improved its ranking by one place at Manchester over the past three years. In absolute terms Jet2.com has increased its weekly seat numbers by 24,000 – more than at any of its other airports.

(Note that references in this report to growth in seat numbers in summer 2016 relative to summer 2013 are based on scheduled capacity in the week of 1-Aug-2016 versus the week of 29-Jul-2013.)

Manchester Airport seat capacity by carrier: 1-Aug-2016 to 7-Aug-2016

Leeds Bradford: Jet2.com is number one at its number two base, but has grown little

At its second biggest base, Leeds Bradford, Jet2.com has grown its capacity by just 3% since summer 2013. It remains the leading carrier at the airport with a share of 45%, ahead of Ryanair and Monarch.

Leeds Bradford Airport seat capacity by carrier: 22-Jul-2013 to 28-Jul-2013

Newcastle: Jet2.com is number one

At Newcastle it has increased its seat numbers by 14% since summer 2013 and it is still the largest airline, with 22% of seats, although this share is down from 29% three years ago.

EasyJet is still number two, but with a seat share down to 17%, from 24% in summer 2013. British Airways has been pushed down from number three to number five by the leisure airlines Thomson Airways and Thomas Cook Airlines.

Newcastle International Airport seat capacity by carrier: 22-Jul-2013 to 28-Jul-2013

Number two at Nottingham East Midlands

Jet 2.com retains the second biggest airline presence at Nottingham East Midlands, but it has increased its capacity by 63% over the past three years and its seat share has grown over this time from 17% to 21%. As with Manchester, Ryanair is the number one airline at this airport.

Nottingham East Midlands Airport seat capacity by carrier: 22-Jul-2013 to 28-Jul-2013

No. five at Edinburgh, no. four at Glasgow; no. two at Belfast

Jet 2.com has grown fairly rapidly at its two Scottish airports over the past three years. It has increased its seat numbers by 74% at Edinburgh since summer 2013; its ranking there has moved from number six to number five (behind easyJet, Ryanair, Flybe and British Airways) and its seat share from 4% to 6%.

Over the past three years it has increased its seat capacity at Glasgow by 41%, retaining its number four ranking and 12% share of seats (behind easyJet, BA and Flybe, and just ahead of Ryanair).

Jet2.com remains the second biggest airline by seats at Belfast International with a share of 9%, behind easyJet on 71% and ahead of Ryanair in 8%.

Jet2.com's 64 destinations - versus 58 in 2013

According to OAG data, Jet2.com's network includes 53 destinations (at 7-Aug-2016). The route map on its website shows 64 cities, including winter destinations, and this compares with a total of 58 three years ago.

Jet2.com route map

100% of summer capacity is UK-Europe, but seasonal short breaks to New York offered in 4Q

All of Jet2.com's capacity operates to destinations in Europe (77% in Western Europe and 23% in Eastern/Central Europe). It offers flights to New York for very short periods in the Autumn and early Winter – targeting the UK's October school half term period, the US Thanksgiving holiday and the New Year period.

These flights can be purchased as part of a holiday break package with Jet2holidays, or as seat only.

Jet2.com international seat capacity by region: 1-Aug-2016 to 7-Aug-2016

Spain accounts for 59% of Jet2.com's seats

Spain is by far Jet2.com's biggest destination market, accounting for 59% of its seats in the week of 1-Aug-2016. The only other countries that represent 5% or more of its capacity are Portugal (9%), Greece (9%) and Italy (5%).

Its top 10 countries also include Turkey, Cyprus, Croatia, France, Czech Republic and Hungary. In total Jet2.com currently serves 16 countries, the others being Malta, Jersey, Netherlands, Germany, Poland and Austria.

Jet2.com international seat capacity by country: 1-Aug-2016 to 7-Aug-2016

Spain: Jet2.com's biggest absolute increase in seats in an oversupplied market

In Jet2.com's biggest market, Spain, its has grown by 41% over the past three years, which is a little slower than the total UK-Spain seat growth of 54%. Spain has accounted for an additional 21,000 weekly seats from Jet2.com's total increase of 31,000 since summer 2013.

The Spanish market has experienced particularly strong growth this summer, when a number of airlines have switched capacity to destinations in Spain from geopolitical hotspots in North Africa, the Middle East and Eastern Mediterranean.

The UK-Spain market has grown by 18% year-on-year in summer 2016, based on the week of 1-Aug-2016, and this year alone accounts for almost half of the growth that this market has undergone over the past three years. More broadly, many airlines operating in Spain have commented that there is a surplus of capacity in short haul markets, exacerbating the downward yield pressure in the market.

See related report: Spain aviation and LCCs: 2016 traffic above pre-crisis levels, but capacity surplus unsustainable

Fastest growth rate in Greece since summer 2013

Among its biggest destination countries is Greece, where Jet2.com has grown the most rapidly over the past three years and its seat numbers in the first week of Aug-2016 are 148% higher than in the equivalent week of summer 2013 (source: CAPA analysis of data from OAG and Innovata). However, this has lagged the total UK-Greece market, which has increased by 207% over this period.

In Portugal, Jet2.com's 53% capacity increase since summer 2013 is slightly faster than overall UK-Portugal growth of 41%. Over the past three years Jet2.com has also grown rapidly in Cyprus (up 66%), Hungary (up 43%) and Croatia (up 28%), but more slowly than the overall market from the UK to each of these countries.

Jet2.com's summer 2016 capacity is lower than in summer 2013 in Italy (down by 1%), Turkey (by 4%), France (by 55%) and the Czech Republic (by 23%). Portugal is the only one of its leading destination countries where its seat growth since summer 2013 has been more than that of the overall market from the UK to that country (see table below).

Jet2.com: seat growth in its biggest destination countries from UK, summer 2016 versus summer 2013*

Country

Jet2.com seat capacity: summer 2016 vs summer 2013

Market seat capacity from UK: summer 2016 vs summer 2013

Spain

41%

54%

Portugal

53%

41%

Greece

148%

207%

Italy

-1%

39%

Turkey

-4%

55%

Cyprus

66%

100%

Croatia

28%

59%

France

-55%

21%

Czech

-23%

49%

Hungary

43%

65%

Malta

n/a**

19%

All UK-Europe

32%

14%

Spain accounts for nine out of top 10 Jet2.com routes

Nine out of Jet2.com's top 10 routes by seats feature destinations in Spain (the other being Faro in Portugal, served from Manchester). Palma de Mallorca and Alicante each appear three times in the list (from Manchester, Leeds Bradford and Newcastle).

These two Spanish airports are, respectively, its fourth and seventh largest airports by seat numbers. Malaga appears twice (from Leeds Bradford and Manchester), and Ibiza once (Manchester).

Jet2.com top 10 international routes by seats: 1-Aug-2016 to 7-Aug-2016

Jet2.com is biggest airline on nine of top 10 routes, but competition is high and growing

Jet2.com is the biggest airline by seats on nine of its top 10 routes, the single exception being Manchester-Malaga (its smallest route in this list). This compares with seven out of 10 three years ago.

Nevertheless, these routes are all highly competitive, with at least two other airlines competing in every case. Three years ago its top 10 routes included only six with two or more other competitors.

On eight of the 10 routes there are now at least three other competitors, compared with only three routes in summer 2013. On one route – Manchester-Alicante – the number of airlines operating has doubled from four in 2013 to eight in 2016. There have been three new entrants on this route this summer alone (Vueling, Norwegian and Thomas Cook Airlines), while one (Thomson Airways) entered in late summer 2014.

One route in Jet2.com's top 10 (Manchester-Palma) has six other competing airlines and two routes (Manchester to Ibiza and Malaga) have five other airlines.

Europe's largest and lowest cost LCC, Ryanair, competes on nine of Jet2.com's top 10 routes and easyJet, Europe's number two LCC, competes on five. Monarch, another UK leisure LCC, competes on eight of Jet2.com's top 10 routes.

See related reports:

Jet2.com’s market position on its top 10 routes by seat capacity: 1-Aug-2016 to 7-Aug-2016

Route

Jet2.com rank by seats

Competitors on route

Jet2.com seat capacity summer 2016 vs summer 2013

Total seat capacity summer 2016 vs summer 2013

Manchester-Palma de Mallorca

1

1 Jet2.com, 2 Thomson, 3 Ryanair, 4 Monarch, 5 Thomas Cook, 6 easyJet, 7 Condor

80%

67%

Manchester-Alicante

1

1 Jet2.com, 2 Ryanair, 3 Monarch, 4 easyJet, 5 Thomson, 6 Vueling, 7 Norwegian, 8 Thomas Cook

40%

54%

Manchester-Faro

1

1 Jet2.com, 2 Ryanair, 3 Monarch, 4 Thomas Cook, 5 Thomson

52%

48%

Leeds Bradford-Palma de Mallorca

1

1 Jet2.com, 2 Ryanair, 3 Thomson, 4 Monarch

-4%

23%

Leeds Bradford-Alicante

1

1 Jet2.com, 2 Ryanair, 3 Monarch

3%

23%

Manchester-Ibiza

1

1 Jet2.com, 2 Thomson, 3 Ryanair 4 Monarch, 5 Thomas Cook, 6 Condor

75%

94%

Leeds Bradford-Malaga

1

1 Jet2.com, 2 Ryanair, 3 Monarch

-2%

17%

Newcastle-Palma de Mallorca

1

1 Jet2.com, 2 easyJet, 3 Thomas Cook, 4 Thomson

21%

77%

Newcastle-Alicante

1

1 Jet2.com, 2 easyJet, 3 Ryanair, 4 Thomson

30%

67%

Manchester-Malaga

3

1 Ryanair, 2 Monarch, 3 Jet2.com, 4 Thomson, 5 easyJet, 6 Norwegian

51%

62%

Thomson Airways, Thomas Cook and Norwegian are changing the competitive landscape

A significant competitive change in Jet2.com's top 10 routes now is the presence of airlines owned by the major leisure groups TUI and Thomas Cook. Three years ago they were not operating scheduled services on any of Jet2.com's top 10. Now TUI's Thomson Airways, which entered the UK-Spain scheduled market in Sep-2014, is present on eight and Thomas Cook Airlines is on five of the Jet2.com top 10 routes.

Thomas Cook Airlines had a small presence on UK-Spain scheduled routes in 2013 but has ramped this up considerably since then. Moreover, the Thomas Cook Group's German airline Condor is now operating on two of these routes, having entered UK-Spain in summer 2014.

The leisure groups' airlines always had a significant charter presence in Spain and other holiday markets from the UK, but historically their capacity was integrated with the package holidays sold by their parents' tour operators. In recent years they have aggressively grown their scheduled seat-only business in response to competition for package holidays from the 'build your own' proposal offered by LCCs.

At the same time Jet2.com has moved in the opposite direction, increasing the proportion of seats sold by the airline to its parent's holiday company from 17% in FY2013 to 40% in FY2016 (see the above referenced Jul-2016 CAPA report for more on this development by Jet2.com).

Norwegian's entry into the leisure markets from the UK, particularly Spain, has also been a significant development over the past three years. Norwegian only competes on two of Jet2.com's top 10 routes, but it was on none of them three years ago. Norwegian now has seven bases in Spain and seems likely to target more growth on UK-Spain (the world's biggest country pair by scheduled airline seats from a major UK base this summer (source: OAG, week of 1-Aug-2016).

Jet2.com's seat growth since summer 2013 has been slower than the market on eight of its top 10 routes

In spite of strong growth on many of its top 10 routes since the peak period of summer 2013, Jet2.com's seat growth has been slower than that of the total number of seats on eight of these routes (see table above), due to the new entrants noted earlier and growth from incumbents.

The two routes where it has outpaced the market are its number one route Manchester-Palma de Mallorca – where Jet2.com has increased by 80% and total capacity has grown by 67% – and Manchester-Faro – where its 52% increase compares with 48% for the market.

19 new Jet2.com routes in summer 2016: competition slightly less fierce, but Thomson a consistent presence

According to data from OAG, Jet2.com has 19 new routes this summer. As might be expected, all of the new routes are outside its top 50, since new routes often need time to grow to maturity. Indeed, all but two of them are outside its top 100 routes (out of a total of 203 for the week of 1-Aug-2016).

Nevertheless, although six of these new routes are Jet2.com monopolies and it is the biggest airline by seats on a further five, there are still plenty of competitors on the 13 competitive routes. Ryanair is not quite so ubiquitous as it is on Jet2.com's top 10 routes, appearing in only five of the new routes, and easyJet is only on four of them.

However, TUI's Thomson Airways competes on 10 of Jet2.com's new routes this summer, further underlining the growing importance of airlines owned by the big leisure groups in its markets.

Jet2.com new routes: summer 2016

Route (listed in order of weekly seat numbers)

Jet2.com rank by seats

Competitors on route

Edinburgh-Tenerife Sur

2

1 Ryanair, 2 Jet2.com, 3 easyJet, 4 Norwegian, 5 Thomson

Manchester-Girona

2

1 Ryanair, 2 Jet2.com, 3 Thomson

Edinburgh-Heraklion

1

1 Jet2.com, 2 easyJet

Edinburgh-Lanzarote

2

1 Ryanair, 2 Jet2.com, 3 Thomson

Manchester-Naples

4

1 Monarch, 2 Thomson, 3 Thomas Cook, 4 Jet2.com

Glasgow-Girona

1

1 Jet2.com, 2 Thomson

Newcastle-Girona

1

Monopoly

Edinburgh-Zakinthos

1

Monopoly

Manchester-Krakow

2

1 Ryanair, 2 Jet2.com

Edinburgh-Vienna

2

1 easyJet, 2 Jet2.com

Nottingham East Midlands-Kefallinia

1=

1= Thomson, Jet2.com

Edinburgh-Paphos

1=

1= Jet2.com, Thomson

Edinburgh-Rhodes

1

Monopoly

Edinburgh-Dalaman

3

1 Thomson, 2 easyJet, 3 Jet2.com

Edinburgh-Larnaca

1=

1= Jet2.com, Thomson

Edinburgh-Gran Canaria Las Palmas

2

1 Ryanair, 2 Jet2.com, 3 Thomson

Belfast International-Fuerteventura

1

Monopoly

Edinburgh-Kefallinia

1

Monopoly

Nottingham East Midlands-Verona

1

Monopoly

Four new routes in winter 2016/2017

According to CAPA's route changes table, Jet2.com will launch four new routes in the coming winter season (see table below). Only one of these will be a monopoly, although the other three will be duopolies, according to OAG data.

Jet2.com new routes: winter 2016/2017

 Route

Jet2.com rank by seats

Competitors on route

Edinburgh-Fuerteventura

1

1 Jet2.com, 2 Ryanair

Manchester-Sofia

2

1 easyJet, 2 Jet2.com

Nottingham East Midlands-Salzburg

2

1 Thomson, 2 Jet2.com

Edinburgh-Turin

1

Monopoly

Birmingham: all 15 of Jet2.com's routes from new base in summer 2017 will be competitive

In summer 2017 Jet2.com intends to launch 15 new routes from its planned eighth base at Birmingham (see table below). Its precise weekly seat capacity is not yet known, as it will depend not only on frequency (the CAPA route changes table currently indicates that each of these routes will have one weekly service), but also on aircraft gauge.

Spain, already a very competitive market, accounts for 10 of its 15 routes from Birmingham. There are three destinations in Greece and two in Portugal.

The table below indicates the existing airlines operating on these routes and shows that none of the routes will be a monopoly for Jet2.com. Moreover, it will face more than one competitor on all but two routes and at least three competitors on all but three of the new routes from Birmingham.

Jet2.com new routes planned from Birmingham Mar/Apr-2016

 Destination

Competitors on route

Alicante Elche Airport

Ryanair, Monarch, Thomson, Vueling

Palma de Mallorca Airport

Monarch, Ryanair, Thomson, Thomas Cook

Tenerife Sur Airport

Monarch, Thomas Cook, Thomson, Ryanair, Norwegian, Vueling

Malaga Airport

Monarch, Ryanair, Norwegian, Thomson

Lanzarote Airport

Monarch, Ryanair, Thomas Cook, Thomson

Paphos International Airport

Monarch, Thomson, Thomas Cook

Fuerteventura Airport

Monarch, Thomas Cook, Thomson, Ryanair

Faro Airport

Monarch, Ryanair, Thomson, Thomas Cook

Ibiza Airport

Thomson, Monarch, Ryanair, Thomas Cook

Rhodes Diagoras Airport

Thomson, Thomas Cook

Girona Costa Brava Airport

Thomson

Gran Canaria Airport

Monarch, Thomas Cook, Thomson, Ryanair, Norwegian

Reus Airport

Thomson

Menorca Mahon Airport

Thomas Cook, Monarch, Thomson

Herakilion Nikos Kazantzakis Airport

Thomson, Monarch, Thomas Cook

Nine new routes from other bases in summer 2017 include seven with no current competitor

According to news reports that have previously been published by CAPA, Jet2.com's route launch plans for summer 2017 indicate that it will focus on routes with little or no competition.

A combination of Routes Online and Jet2.com's Twitter account has indicated that the airline has plans for at least nine new routes, seven of which are not currently served by other airlines (see table below). The competitor currently operating on two of these planned routes (Nottingham East Midlands to Naples and Thessaloniki) is Thomson Airways, according to OAG.

Jet2.com new routes: summer 2017

Route

Competitors on route

Belfast International-Girona

Monopoly

Nottingham East Midlands-Girona

Monopoly

Nottingham East Midlands-Naples

Thomson

Nottingham East Midlands-Paris CDG

Monopoly

Nottingham East Midlands-Split

Monopoly

Nottingham East Midlands-Almeria

Monopoly

Nottingham East Midlands-Thessaloniki

Thomson

Edinburgh-Girona

Monopoly

Leeds Bradford-Girona

Monopoly

Risks are growing for an airline with little diversification

Jet2.com is operating in an increasingly competitive leisure-focused market with a strong summer bias. The growth in its seat capacity since summer 2013 has mainly been driven by routes from Manchester and to destinations in Spain, where an overcapacity situation has developed. It has also grown strongly at Nottingham East Midlands and to destinations in Portugal, Greece and Cyprus.

In addition to significant competition from Ryanair and other well-established pan European LCCs, Jet2.com has experienced a big increase in the threat from the seat-only business of airlines owned by integrated tour operators – most notably Thomson Airways.

Jet2.com's 19 summer 2016 route launches include six with no competitors, and it also currently has plans for seven monopoly routes from its existing bases in summer 2017. Nevertheless, it is becoming more difficult to find growth in routes that avoid competition: Jet2.com's planned new base at Birmingham in summer 2017 will feature a large number of Spanish routes and will encounter strong competition, including from Thomson.

Jet2.com and its sister company Jet2holidays enjoy a loyal customer base and generate strong advance sales. Nevertheless, the growing macroeconomic and geopolitical uncertainties facing the UK consumer, potentially weakening demand for European international travel in a post Brexit environment, provide risks to an airline with little diversification.

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