BrazilEastern European countries lead growth in Europe’s aviation industry
The global commercial aviation fleet capacity is projected to see strong growth in the coming decades, on the back of rising demand in Asia and the fast-growth region of Eastern Europe.
In its latest comprehensive economic analysis of the aviation sector, global management consultancy Oliver Wyman has delved into international capacity trends – considered a reliable indicator of the strength of airlines within a region.
While Asia led the way in growth as a measure of available seat miles (ASMs) over the last year with a 10% rise, the European market demonstrated solid growth of 8.1% to follow closely behind. Europe is the world’s third largest market with a 22% share of the global ASMs. Eastern Europe is pegged by the report as one of the fastest growth regions around the globe and is looking to add to its fleet.
After a period of comparatively flat growth against the global norm from 2011, the European market sprung back to life in 2015, with the 8.1% boost last year, seeing European capacity rate growth exceed the worldwide average. However, Oliver Wyman’s so-called ‘Capacity Index’ shows that European growth still sits below the world average in the long term.
Across the continent, departures rose by 2.1% and the average distance traveled by an aircraft from takeoff to landing grew 2% to 1,338 kilometers. Departure growth, however, was a fraction below the world-wide average of 5% – an average inflated by Asia’s departure growth of 9.1% and only otherwise eclipsed by the Middle East region at 6.5%.
East versus the West
Yet, these figures hide disparities between Western and Eastern Europe, with the latter market exceeding world averages to double capacity since 2008 (an increase of ~103% at a CAGR of 6.6%). The more mature market of Western Europe saw much more conservative growth of 33.6% over the same period at a CAGR of 3%. Altogether, Eastern Europe’s share of the European region’s capacity is now 13.6%, rising 4.2 percentage points from 9.4% over the decade since 2008.
Long-term projected fleet growth, however, still favours the West of Europe, with the predicted growth rate of 2.8% in the coming decade slightly shading the 2.4% expected in Eastern Europe. Still, the East is gaining momentum in fleet growth, with the second five-year bracket of the forecast period from 2023-2028 seeing growth of 2.5% against 2.1% in the West. Altogether, this will see an additional 1,835 aircraft in European fleet numbers by 2028.
Eastern Europe however will have one of the oldest fleets in the world by 2028, at an average aircraft age of 12.1 years to rival North America and sit just below Africa. This figure, though, is a drop on the Eastern region’s current fleet age of 12.3 years, which will see a small short-term spike to 12.5 over the coming five years prior to retirements. For Western Europe, the current age of 11.6 will also drop to 11.2 in the next ten years.
The report states; “Historically, Africa and other developing nations acquired most of their fleets through migrations of older aircraft from mature regions such as North America and Western Europe. That trend appears to be changing as new aircraft orders have become the dominant source of growth. The surge of newer aircraft has driven a dramatic shift in migrations between the regions, fuelled by new low-cost acquisition options through aircraft lessors and export credit financing.”
Cheaper long-haul flights
Low cost carriers such as Norwegian and Air Asia X contributed to the increase in long-haul trans-Atlantic crossings. Weekly departures between Europe and the US grew in the past year by 58.6%, a rate much higher than the global average of 19.7%. The trans-Atlantic flight path was only behind Latin America to/from the US which grew by a staggering 74.4%.
Flights between Europe and the US, however, had the highest number of trans-continental long-haul, low-cost weekly departures at 276, adding over 100 in the past 12 months to December 2017. This is in part due to the addition of recent flights by both Norwegian, Primera Air and Wow Air, which are now servicing the US via Oslo, Stockholm, London, Birmingham, Paris, Amsterdam, Copenhagen and Reykjavik.
Whilst these low-cost long-haul flights represent a small fragment of the total long-haul travel figure, they are disrupting the industry in favour of budget travel. The availability of the new narrow-body fleet types is driving prices down due to comparatively less fuel consumption than the older models. The report’s authors highlight that low-cost carrier airlines are shaking up travel and that there is likely to be future growth in this segment. However, they stated that it may be a while before low-cost long-haul carriers begin to make a dint in the traditional market.
“These low-cost services represent only 3.4 percent of all long-haul departures. Even at the current growth rate, it will be years before the low-cost airlines will impact the overall long-haul market. It will be interesting to see how these services will compete over the next few years.”
Oliver Wyman is a management consulting firm with offices in over 50 cities spread across 26 countries. The firm provides services in several sectors including the aviation industry, through its Oliver Wyman brand and Cavok subsidiary.
