Industry Monitor. Issue 186. 09/09/2016 Page 1 © EUROCONTROL 2016

European flights grew at a sustained rate of 2.3% in July and 2.6% in August 2016 compared with respective 2015 months.

International arrival/departure flow in Turkey continued to decline in August (-18% on August 2015) after a sharp decline in tourism.

Amsterdam Schiphol became the busiest airport in terms of IFR movements in the 2016 second quarter.

Euro area GDP rose by 1.6% during the 2016 second quarter.

Oil prices drop down to €41 per barrel in August.

EUROCONTROL Statistics and Forecasts 1

Other Statistics and Forecasts 3

Passenger Airlines 4

Airports 6

Cargo 7

Aircraft manufacturing 7

Environment 8

Oil 8

Regulation 8

Economy 9

Fares 9

EUROCONTROL Statistics and Forecasts European flights (ECAC – European Civil Aviation Conference area) grew at a rate of 1.3% in June, 2.3% in July and 2.6% in August 2016 compared with respective 2015 months. These growth rates were within the forecast interval (dark grey band in Figure 1). Growth in June was at the low-end of the forecast range, affected by several industrial actions, whereas July and August growth were at the high end of the forecast range. Over the June to August period, the majority of states contributed to the growth of local traffic (excluding overflights) in Europe and together added 1,765 daily flights to the network. UK and Spain were the top contributors, adding respectively ~350 and ~300 extra daily flights (excluding overflights) to the network compared to the same period last year. They both recorded a solid increase in their international arrivals/departures, in line with recent trends. Italy, Portugal, Greece and Canary Islands were amongst the fastest growing States as well, as these were preferred destinations since the start of the summer schedules. On the opposite, the number of daily flights (excluding overflights) in Turkey was reduced by 11% (350 less flights) mainly due to its international arrival/departure flow which went down 18% in August after a sharp decline in tourism, following terrorist attacks and political events (Figure 2).

Industry Monitor The EUROCONTROL bulletin on air transport trends

Issue N°186. 09/09/2016

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Over the same period, the top three extra-European partners in average daily flights on flows in both directions were the United States (1,115 flights, up 6%), the Russian Federation (855 flights, down 21%) and Israel (350 flights, up 8%). Even if Russian traffic remains low, some flows (eg Russia from/to Cyprus, Russia from/to Tunisia) have recently increased. Flows between Europe and Morocco remain below last year’s levels with 315 flights per day, a decrease of 3%. The size of the decrease of traffic flows between Europe and Tunisia reduced (from an average of -25% in January to -3% in August) as the last disruptive event took place more than one ago. Over the last three months, traffic between Europe and Tunisia accounts for ~140 flights per day (excluding overflights). Lastly flows between Europe and Egypt (~130 flights per day) remained 38% below last year’s levels. Comprehensive statistics on flights are available from the STATFOR dashboard1 (EUROCONTROL, August).

1 www.eurocontrol.int/statfor/sid

Figure 1: Monthly European Traffic and Forecast (based on the 7-year forecast Feb16).

Figure 2: Main changes to traffic on the European network over Jun-Aug 2016

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Based on data from airlines for delays from all causes, the average departure delay per flight in June-July 2016 rose to 15.8 minutes, an increase of 3.8 minutes per flight compared with the same period last year. Notable increases were reactionary delays (up by 2.15 minutes per flight) and ATFCM en-route (up by 0.77 minute per flight) compared with June-July 2015. The percentage of delayed flights (>=5 minutes) was 53%, an increase of 7 percentage points when compared with the same period in 2015 (Figure 3) ATC industrial action in France during six days in June & July generated airport ATFM delay and en-route ATFM delays. Industrial action by Air France pilots on 27 July and Alitalia flight crew on the 5 July resulted in 1,400 and 142 flights being cancelled respectively. Seasonal weather impacted operations particularly at Istanbul/Sabiha Gökçen, Frankfurt, London/Heathrow, London/Gatwick, Amsterdam/Schiphol and Zurich airports. Aerodrome capacity issues generated delays at Istanbul/Sabiha Gökçen, Istanbul/Ataturk, Barcelona, Zurich, Amsterdam/Schiphol, Paris/Orly and London/Gatwick airports (EUROCONTROL, August).

Other Statistics and Forecasts

ACI released its traffic report statistics:

in May: passenger traffic across the European airports network increased by 3.6% (vs May 2015). The growth is attributed to the EU market; passengers at EU airports grew by 5.5% while the non-EU airports experienced a drop of 2.5%, the first decline in passengers since 2009 – negative effects of the geopolitical tensions (ACI, 7 July),

for the first half of 2016: European passenger traffic grew by 4.9% (vs the first half of 2015). The pace of growth was limited during the second quarter partly due to the Brussels terrorist attacks (ACI, 9 August).

IATA released the global passenger traffic data for June. European carriers demand rose 2.1%, the smallest increase among all regions, reflecting the negative impact of recent threats and events related to terrorism. Capacity increased by 3.4% and load factor decreased by 1.1 percentage points to 83.3% (IATA, 4 August). In addition, IATA released data for global air freight demand in June. European airlines saw a 5.1% increase in freight volumes and a 4.9% increase in capacity. The performance was driven by an increase in export orders in Germany over the last few months (IATA, 3 August).

Figure 3: Delay statistics (all-causes, airline-reported delay)

Percentage of flights delayed on departure Breakdown of all-causes delay per flight

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Passenger Airlines

Capacity, strikes, costs

Given the outcome of the UK referendum, EasyJet is looking for an Air Operator Certificate (AOC) in an EU country in order to benefit of the same flying rights over Europe as today (EasyJet, 1 July). Austrian Airlines cancelled 300 flights on short notice between July and August due to lack of pilots crew for the scheduled flights. This unavailability is partly explained by the fact some pilots had to follow some extensive trainings needed to integrate Embraer’s jets into the flag carrier’s fleet (Austrian Airlines, 1 July). Vueling cancelled dozens of flights at Barcelona-El Prat airport at the end of June and beginning of July, reportedly leaving at least 8,000 passengers stranded. The Spanish low-cost deplored “operational problems” while Spanish government officials reported inadequate planning considering the real capacity at the start of the summer vacations (IAG, 29 July, ElPais, 4 July) EasyJet opened the recruitment of 1,200 cabin crew. It is the largest cabin crew intake in EasyJet’s twenty-year history (EasyJet, 25 July). In July, Qatar Airways increased its stakes in International Airlines Group (IAG) from 15.67% to 20.01% following good market evaluations (Qatar Airways, 1 August). Air France cabin crew called for a seven-day strike from July 27 to August 2, 2016. Roughly 1,400 flights were cancelled and 180,000 customers were affected during the 7-day of strike action. Air France estimates the direct cost of the strike at over €90 million (Air France, 2 August). Ryanair announced July as a record month: the no-frills airline carried over 11 million passengers in one month, with a load factor of 96% ; 10% more passengers compared to July last year (Ryanair, 3 August). At the 2016 Farnborough International Airshow:

Air Europa placed an order for twenty 737 MAX (Boeing, 13 July).

TUI Group placed an order for ten 737 MAXs and one 787-9 Dreamliner at the 2016 Farnborough International Airshow (Boeing, 12 July).

Norwegian placed an order of 30 Airbus 321 Long Range aircraft (Norwegian, 14 July).

Germania Group placed an order for 25 Airbus A320neos (Airbus, 12 July).

Jet2.com inaugurated its eighth UK airport base in Birmingham (Jet2.com, 7 July). Flexjet Ltd announced the acquisition of FlairJet Ltd. from Marshall of Cambridge Aerospace Limited. Deal includes Air Operator’s Certificate allowing Flexjet Owners to travel point-to-point within Europe, the Middle East and Africa (Flexjet Ltd, 3 August).

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Traffic Statistics: July update

Figure 4 and Figure 5 compare July 2016 figures with July 2015 figures for the European carriers. In addition to the number of passengers (PAX), passenger capacity is measured in available seat kilometers (ASK), traffic is measured in revenue passenger kilometers (RPK) and load factor as a percentage (%).

Figure 5: Main carriers’ load factors.

Figure 4: Main carriers’ passenger traffic statistics.

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Routes, Alliances, Codeshares

This summer, Lufthansa and British Airways respectively reopened their routes to Tehran from Munich (three times per week) and London (six times per week) (Lufthansa, 4 July and British Airways, 1 September). Qatar Airways signed an agreement in order to buy 49% of Meridiana. The agreement is subject to the fulfilment of certain conditions, before the closing which is planned for early October (Meridiana, 14 July). The Federal Aviation Administration reportedly restricted temporarily the US commercial flights to and from Turkey, following the attempted military coup in Turkey on 15 July. The ban was in place from 16 to 18 July. The only carrier operating between Turkey and USA is Turkish Airlines. Restrictions were lifted on 18 July (Flightglobal, 18 July) On August 27, Russia lifted the ban on charter flights between Russia and Turkey. Russia’s air communication with Turkey was closed since November 2015 after a Turkish fighter jet shot down a Russian bomber (Russian Government, 27 August). As from March 2017, Brussels Airlines will connect Brussels to Mumbai. The flights will take place from Brussels airport 5 times per week (Brussels Airlines, 11 August). Ryanair announced a growth plan for Italy in 2017. It will invest $1 billion for 10 new aircraft and will open 44 new routes in Italy with the aim of increasing the Italian air traffic by 10% (Ryanair, 17 August). Vueling and Qatar Airways launched a code-share partnership covering 67 European routes (Vueling, 17 August). Singapore Airlines and Eurowings reportedly signed a cooperation agreement. Passengers flying Singapore Airlines will soon be able to connect with Eurowings flights at Dusseldorf and Munich (ch-aviation, 2 August).

Airports London City Airport received planning permission for expansion from the UK Government. The City Airport Development Programme (CADP) is a £344 million privately funded investment which includes plans for 7 new aircraft stands, a parallel taxiway and passenger terminal extension. The increase in capacity is expected to be in place by 2019 (London City Airport, 27 July). The French government announced the privatisation of Nice Cote d’Azur Airport assigned to Azzura consortium (65.01% of shares) until 2044, and Lyon Saint-Exupéry Airport assigned to Vinci (51% of shares) until 2047 (French government, 28 July). Rome Ciampino will be closed from the 14 to the 29 October for maintenance work. Flights are to be rescheduled to/from Rome Fiumicino (Aeroporti di Roma, 31 August). East Midlands’ runway will be closed at weekends from November 5 to December 19 for resurfacing (eastmidlandsairport.com, April 2016). Amsterdam Schiphol recorded the highest level of aircraft movements and becomes the busiest European airport in the second quarter of 2016 (vs same quarter 2015). This is notably attributable to the introduction of roughly 20 new routes as of March 2016, and/or the operation of three airlines new to the airport: Ryanair started operations in January, Jet Airways started operations in April and AeroMexico started the operations in June.

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Aircraft movements and passenger traffic in the second quarter of 2016 at top five European airports (based on the number of flight departures) were as follows (growth on second quarter 2015): Aircraft movements Passenger traffic 1. Amsterdam Schiphol 125.6K (+5.8%) 16.7 million (+8.2%) 2. Paris CDG 122.1K (+1.3%) 17.0 million ( -1.1%) 3. Frankfurt 121.3K ( -2.8%) 15.7 million ( -4.1%) 4. London Heathrow 120.9K ( -0.7%) 18.9 million ( -1.1%) 5. Istanbul Atatürk 114.4K (+0.7%) 15.2 million ( -3.5%)

(source: airport reports).

Cargo Lufthansa Cargo takes full ownership of Time Matters– the German “same-day” delivery company (Lufthansa Cargo, 9 August). Lufthansa Cargo cut capacity in its all all-cargo activity to cope with the decline in demand in 2016. The plan is intended to reduce the annual costs of staff and service providers by €80 million (Lufthansa Cargo, 2 August).

Aircraft manufacturing Airbus decided to cut the production rate of the A380 to just 1 aircraft per month from 2018 as the superjumbo’s sales are slowing down. The manufacturer achieved product break-even last year, delivering 27 A380 in 2015 (Airbus Group, 12 July). ATR unveiled its 20-year Market Forecast at the 2016 Farnborough International Airshow. Over the coming 20 years, ATR anticipates an average growth rate in annual regional traffic of around 3.9%, which they link to 2,800 turboprop aircraft needed worldwide (ATR, 12 July). Boeing published its Current Market Outlook 2016-2035. Over the next 20 years, they forecast a global need for over 39,600 new airplanes (passenger and freighter) valued at more than $5.9 trillion. The manufacturer assumes the passenger growth to be on average at 4% per year over the next 20 years and the total fleet to be 45,240 aircraft. In Europe, the expected number of new deliveries accounts for 7,570 airplanes (Boeing, 22 July). Airbus published its Global Market Forecast 2016-2035. The expected fleet2 (passenger and freighter) in 2035 reaches some 33,000 new aircraft at a value of $ 5.2 trillion. This new forecast anticipates that air passenger will grow at 4.5% per year and the total fleet will represent 39,819 aircraft in 20 years In Europe, the expected number of new deliveries accounts for 6,587 airplanes (Airbus, July). Rolls-Royce won a $1.5 billion order from China Eastern Airlines for Trent 700 engines to power 15 Airbus A330 aircraft (Rolls-Royce 24 August).

2 Airbus forecast covers aircraft from 100 seats and above.

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Environment The US and China ratified the Paris Agreement on Climate Change (COP21). Recognising the important role of international aviation in addressing climate change, both States support the ICAO Assembly to reach consensus on a global market-based measure expected for this October in order to reduce carbon emissions (The White House, 3 September).

Oil

Average Oil prices drop to €41 per barrel, €4 less than the average price in June. Converted indices for Kerosene and Brent are shown in Figure 6.

In its August short-term energy outlook, EIA forecast Brent crude oil prices to average €38 per barrel ($42) in 2016 and €47 ($52) in 2017 (EIA, 7 September).

Regulation The European Commission published a new Commission Implementing Regulation (EU) 2016/1185 of 20 July 2016 amending Implementing Regulation (EU) No 923/2012 as regards the update and completion of the common rules of the air and operational provisions regarding services and procedures in air navigation (SERA Part C) and repealing Regulation (EC) No 730/2006 (EC, 20 July). The European Commission published a new Commission Regulation (EU) 2016/1199 of 22 July 2016 amending Regulation (EU) No 965/2012 as regards operational approval of performance-based navigation, certification and oversight of data services providers and helicopter offshore operations, and correcting that Regulation (EC, 22 July). EASA published a set of proposals to the European Commission for an update of the rules concerning pilots’ medical fitness (EASA, 15 August).

Figure 6: Brent and kerosene prices.

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Economy The Italian government privatised 47% of ENAV in July (ENAV, 2 August). Euro area economy indicators updates:

Annual inflation was 0.2% in July 2016 as it was in July 2015; Unemployment rate was 10.1% in July 2016 compared with 10.8% in July 2015; GDP rose by 1.6% during the second quarter of 2016 compared with the same

quarter of 2015 (EUROSTAT, 12 and 31 August).

Fares

Ticket prices in Europe decreased by 2.3% in July year-on-year. This is below the trend (12-month trailing average) shown in Figure 7 (Eurostat, 18 August). Note: to eliminate the influence of inflation on euro figures, the ticket price is deflated with a price index. The STATFOR deflated ticket prices are estimated in 2015 constant euros. A detailed explanation of the mechanism can be found here.

Figure 7: Ticket Prices in Europe.

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© 2016 European Organisation for the Safety of Air Navigation (EUROCONTROL) This document is published by EUROCONTROL for information purposes. It may be copied in whole or in part, provided that EUROCONTROL is mentioned as the source and it is not used for commercial purposes (i.e. for financial gain). The information in this document may not be modified without prior written permission from EUROCONTROL. STATFOR, the EUROCONTROL Statistics and Forecast Service statfor.info@eurocontrol.int www.eurocontrol.int/statfor