European airlines’ capacity set to rise during H1
A new report by Bloomberg Intelligence (BI) has revealed that European airlines’ capacity looks set to rise in every market during H1 2024, with all but Asia-Pacific above 2019 levels.
European airlines’ capacity set to rise during H1, says Bloomberg Intelligence
European airlines’ capacity looks set to rise in every market during H1 this year, with all but Asia-Pacific above 2019 levels, according to a new sector report by Bloomberg Intelligence (BI). Transatlantic leads at 8.4% higher, having surpassed 2019 offerings in Q4, with fares under less pressure as US and European airline joint ventures prevent unbridled competition. Intra-Europe competition could heat up, posing the largest risk, with budget carriers most exposed as operators like Ryanair and Wizz look to take share.
Asia and Australasia fares are likely to slip on more competition, though gains trail most markets, keeping fares from sliding too dramatically. Capacity increases by Middle East carriers will add to pressure on leisure fares. South American markets are small, but large capacity boosts, especially from carriers like IAG and Turkish, will pressure yields.
George Ferguson, Senior Industry Analyst (Aerospace) at Bloomberg Intelligence, said: “European airlines may see increasing competition in all markets in H1 as capacity returns at strong growth rates, which will likely pressure fares and profits. Intra-Europe and North American routes are critical for the carriers and could see 7-10% more seats than last year. Asia-Pacific increases are higher, though capacity could remain below 2019 levels, stemming the slide in yields.”
Europe, North America Are Most Important Markets
European airline market share by seats shows the importance of intra-Europe and trans-Atlantic markets to financial results. Though South America and Asia/Australasia have among the highest fares, they’re a relatively small portion of total seats offered. Turkish has the most exposure to Asia/Australasia, with about 13% of seats, followed by Air France-KLM and Lufthansa Group (4-7% of seats). Air France-KLM and IAG have the most routes into South America at 3-4%.
European fares are most important, notes BI, with Air France-KLM showing the lowest exposure at 78%. North American routes have a significant impact on the three largest full-service carrier groups, Air France-KLM, IAG and Lufthansa. Market shares have largely returned to 2019 levels. Most in the region are within one or two percentage points of where they were that year.
Lufthansa, Air France Growth Pressures European Fares
Intra-Europe fares may be most pressured by capacity increases in H1 2024 as carriers add back 7.2 points of seat capacity since Q2 2023, led by Lufthansa (11.6 points) and Air France (8.4). Seats are growing faster than flights as larger aircraft are used to blunt rising wages, especially for pilots.
Ferguson added: “This increase in aircraft size likely intensifies competition as route diversification dwindles, since larger aircraft can’t serve smaller markets without overly depressing fares. Low-cost carriers are further along in restoring 2019 capacity, led by Wizz Air, which was small pre-pandemic and Ryanair, which was among the largest. Turkish Air isn’t a direct competitor as intra-Europe flights must hub through Turkey.”
