As we enter the second century of commercial aviation, after the first commercial flight on January 1, 1914 between St Petersburg, Florida and Tampa, there are signs that in Europe the aviation market is about to enter a period of sustained growth, with not only positive capacity increases, but also respectable levels of traffic growth.
According to Nigel Mayes, senior vice president consulting and product development, ASM – the World Route Development Consultants, there is good reason to be optimistic for 2014, a view that has been supported by latest industry data. According to IATA, total airline revenue passenger kilometres (RPK) in January 2014 grew by 7.8 per cent, a substantial increase on the growth rate for 2013 which was 5.2 per cent. There were already signs of recovery towards the end of the year when RPKs for October, November and December 2013 were up 6.5 per cent, 4.1 per cent and 6 .8 per cent, respectively.
In global standards, Europe was the third fastest growing region, with 6.4 per cent RPK growth (higher than the 5.9 per cent increase in capacity). The two fastest growing regions were the Middle East 18.1 per cent and Asia 8.0 per cent whilst Europe outperformed the emerging economies of Africa 2.7 per cent and Latin America 4.4 per cent respectively.
According to the former Routes executive, schedules data for the summer also reflects the renewed optimism in Europe, with European seats for a representative week in June, up 2.7 per cent over the same week in 2013. Interestingly, over 75 per cent of the volume growth in seats are intra-Europe (400,000 additional seats), which, according to Mayes is testament ”to the growth of the low cost carriers that continue to stimulate and grow the intra-European market”.
After a number of years of consolidation in the European to North American market, this market has a larger number of volume seats than the European to Asian market. According to the data, the top five airlines generating the growth on the transatlantic market are Lufthansa, US Airways (now merged with American Airlines), British Airways, Air Canada and the new kid on the bolck, Norwegian.
So, why is there renewed optimism? ”It’s predominantly a result of the overall recovery in the European economy. Despite there being regional variations, the overall economic outlook is good with the economic output of Euro Area (GDP) forecast to reach 1.0 per cent in 2014 and 1.4 per cent in 2015, compared with the contracting economies of the last two years -0.7 per cent and -0.4 per cent in 2012 and 2013, respectively,” said Mayes highlighting EU Commission data.
Germany, France, Italy, Spain and the UK are all expecting stronger growth than the last two years with 1.0 per cent, 0.9 per cent, 0.6 per cent, 0.6 per cent and 2.4 per cent forecast respectively, while Central and Eastern Europe is forecast to grow at a far greater rate of 2.8 per cent, according to Mayes.
As well as the recovery in the European economy, there are other reasons to remain optimistic for 2014, we have seen the European employment markets of Romania and Bulgaria join the EU,” said Mayes. As a result capacity to Romania has increased 19 per cent, but seat capacity to Bulgaria has actually fallen 3 per cent for 2014.
Furthermore Israel and theUkraine were both due to join the EU Common Aviation Area this year, although the political situation in the Ukraine has led to a deferral in the process. ”If the experience of Morocco is repeated for Israel, where traffic grew over 20 per cent, Israel could experience a considerable uplift in traffic,” said Mayes.
Studying the seat capacity for 2014 by country, the real opportunities for growth appear to be in Spain, Italy and Greece. ”There is renewed confidence in the holdiay market returning in strength in these destination markets and it is the familiar brands of Vueling, Ryanair, Norwegian and Germanwings that is driving the scheduled capacity growth,” said Mayes.
Our analysis shows the three largest carriers growing capacity into Spain are Vueling (even accounting for Iberia shrinking), Norwegian and Air Europa; in Italy it is Ryanair, Vueling and Germanwings and in Greece it is Aegean (including Olympic Airlines) and Ryanair leading the way.
Despite the rosy outlook for Europe there is the dark cloud of political unrest in Ukraine hanging over the market, particularly for potential impact on fuel prices which always appear to jump up at any sign of political unrest in the world. ”The ’relative’ slowdown in the Chinese economy may also slow traffic growth out of Europe, but Asia is a relatively small proportion (five per cent) of the capacity when including the size of the intra-European flows,” said Mayes.
”So, as we enter the second century of commercial aviation there is cause for optimism, stable economic growth across Europe should ensure the aviation industry will experience a strong 2014 and potentially an even stronger 2015,” he added.
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