Airline and airport network managers come together in Marseille for Routes Europe at a time of renewed optimism for the financial health of the continent's air transport sector.
While projected profits and growth rates may be moderate compared with some other parts of the market, Europe's airline sector as a whole is at least returning to the black.
Quarterly figures for eight European airline groups show a collective operating profit of $83 million for the last quarter of 2013. This marks a big swing from the $1.15 billion these carriers lost at the same stage last year – in a large part reflecting the strong improvement by British Airways and Iberia parent IAG.
This contributed to a turnaround among European carriers' financial performance across 2013 as a whole. Collective operating profits jumped from nearly $600 million to almost $3.1 billion in 2013. Lufthansa and Turkish Airlines also enjoyed strong financial performances on an operating level.
But the financial picture at a net level serves as a reminder of the difficult journey many European network carriers have been on. Net losses reached around $1.2 billion during the year, double the figure for 2012.
IATA in its latest industry outlook sees European airlines posting collective net profits of $3.1 billion over the next 12 months. If that level of profitability feels a little underwhelming, it still marks positive ground for a region that has eked out just $3.8 million over the previous four years combined.
European network carriers increased passenger numbers 1.6% in 2013, but the figures from the Association of European Airlines (AEA) also indicate another year of poor revenue yield development.
Growth on long-haul flights outpaced that on intra-European services, reflecting network carriers continued overhaul of their short-haul networks. Passenger numbers on long-haul flights rose 3.5% and only 1% on intra-European services. AEA carrier load factors continued to climb to a new high of 79.9%.
"This is an encouraging result in an economic climate that remains stubbornly downbeat," AEA says of the traffic. "Nonetheless, preliminary data points to another year of poor revenue-yield development, creating another hurdle to be surmounted in the long-awaited recovery in the industry's bottom line."
Low-cost carriers have continued to expand rapidly. While the maturing Ryanair and EasyJet have grown more slowly in the last couple of years, newer players in the sector like Pegasus, Wizz Air, Norwegian and Vueling are growing fast and, with an increasingly pan-European perspective, expanding outside of their home markets. But it's not plain sailing for this sector either, as evident in Ryanair's lower profit expectations for its current financial year.
Higher load factors are helping passenger levels increase at Europe's airports, even if aircraft movements are not returning at the same rate. "Things got better after the summer," notes ACI Europe director general Olivier Jankovec. While this been driven by the passenger side, there is also some sign of a pick-up in the sluggish air cargo market. "Freight volumes are still below 2010 levels so there is still a long way to go," says Jankovec.
He underlines the two-speed growth markets in the region. Passenger numbers among EU airports were just 1% higher, while rising 10% at non-EU airports – which now account for more than a fifth of all European passengers. "That's led by Turkey and Russia, but also Iceland," he says. He also notes improvements in previously struggling markets like Portugal and Ireland.
"We have seen a significant improvement so we are more positive than last year. We see the economic recovery is gathering pace. It's still a jobless recovery, but it's better than before," Jankovec says. But he cautions: "Where we are more concerned is, emerging markets are slowing down and we see Turkey and Russia slowing down."
IATA in its recent outlook says: "While there is optimism over the end of the eurozone recession and the winding down of austerity measures, major structural issues remain. The region's carriers are heavily impacted by high taxation, onerous regulation and infrastructure bottlenecks such as the failure of the Single European Sky. The region also faces the greatest exposure to the geopolitical conflict in Ukraine."
There has at least been some respite in air travel taxes. Ireland unwound its travel tax and Ryanair has continued its expansion from the country's airports by unveiling a further splurge of new routes from Dublin this winter to go with the new routes it began this month. Even the UK has taken steps to moderate its contentious air passenger duty, by scrapping the two highest bands of the charge.
Revised European rules around state-aid guidelines provide some near-term certainty and smaller airports have been given some respite for up airports handling up to 700,000 passengers annually. But ACI Europe retains concerns for the long-term fate of these smaller airport and notes that many of Europe's airports remain loss-making. ACI Europe figures show 42% of European airports are loss-making – though this is less than the 49% that were losing money in 2009.
Other airports in Europe are facing the challenges of some traditional routes that previously operated through Europe beginning to bypass the continent. "There are direct routes between emerging markets which did not exist five years ago," Jankovec notes.
Likewise, European carrier route plans are set for further evolution as the influence of the big Gulf carriers shows no sign of abating. Traditional European routes to Down Under have been turned upside down by Emirates' partnership Qantas and the resulting changes in partnerships on the kangaroo routes, while Etihad – which is already increasing traffic flows through Abu Dhabi through its numerous partnerships – shows no sign of of stopping its interests in Europe as Alitalia investment talks continue.
Source: Cirium Dashboard
