Prospects of Regional Aviation in Europe and CEE Max Oldorf – Chief Commercial Officer CEE Aviation Conference Budapest 2015
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05 Data: Layover Analysis Creation of Algorithms and Analysis of Airline Crew Hotel Requirements Airline Crew Layover Analysis Creation of Algorithms and Analysis of Airline Crew Hotel Requirements at several airports in Europe, Asia, North and Latin America including research of Airline Crew Sizes by Aircraft Type/Routing. The customer approached us with a specific question in mind. How many crew members overnight every day at a specific airport where the customer operates properties nearby. With our analysis the customer was able to focus sales & marketing activities specifically on airlines that are potential clients and was able to save precious resources by ruling out carriers that are not. Client: Starwood Hotels & Resorts Country: United States of America Industry: Hospitality
06 Introduction Regional Airlines in Europe and CEE Important for local economies and majors Regional aviation is in a state of decline We see a major transformation going on with independent regional carriers being fairly weak players in comparison to major legacy carriers or growing low-cost carriers. Several new business models have also been developed in recent years redefining what a regional airline is and how it operates. Grab some coffee, We’ll be back in 20min
07 Introduction Regional Airlines in Europe and CEE Over the course of the last 10 years, regional airlines in Europe and the CEE have seen many ups and downs being part of an industry described as generally less profitable than the wider economy as well as most of the industry’s suppliers. 33% of all EU Regional Airlines went out of Business between 2008 and 2013 Factors for the Market Situation • Rise of Low-Cost Carriers • High Speed Rail Services • Consolidation of Major Carriers • New legislation by the EU (Emissions Trading Scheme) • Environmental Taxes in EU countries • Increasing costs due to jet fuel prices Client: Revenue Management Systems Country: United States of America Industry: Airline IT
08 Business Model: Subsidiary Wholly or majority owned regional subsidiary as capacity provider Characteristics • Selling all of its Capacity to Legacy/Mainline Carriers like Lufthansa Group, Air France-KLM, IAG. • Depending on one client Purpose • Feeding an Legacy Airline of Airlines Group Hub and Spoke network
09 Business Model: Independent Capacity provider US phenomenon - not owned by a Legacy but also designed as capacity provider Characteristics • Selling all of its Capacity to multiple Legacy/Mainline Carriers like American, Delta, United • Depending on more than one client • Act as outsourcing partners to for the legacy carriers offering to operate regional routes with regional aircraft at a lower cost. Purpose • Feeding multiple Legacy Airline’s Hub and Spoke networks
10 Business Model: Independent Regional Airline Serve point-to-point markets, but can cooperate with Legacy Carriers Characteristics • They sell their seats by themselves • However they can opt to cooperate with Legacy Carriers via Interline or Codeshare agreements • Might operate under a Franchise Agreement Purpose • Serve point-to-point markets that are either because of a lack of demand or for other reasons (i.e. technical limitations of airports)
11 General EU Market Development General market based on the third week of June in 2005, 2010 and 2015 FLIGHTS PER WEEK 123.849 121.989 118.321 Table: Number of flights and seats offered per week and average number of seats per flight for all flights between two airports in the EU-28/Iceland/Norway/Switzerland area for the 3 rd week of June in 2005, 2010 and 2015. Source: OAG Analyser (OAG Aviation Worldwide, 2015).
12 General EU Market Development General market based on the third week of June in 2005, 2010 and 2015 SEATS PER WEEK 17.109.539 15.404.067 13.195.787 Table: Number of flights and seats offered per week and average number of seats per flight for all flights between two airports in the EU-28/Iceland/Norway/Switzerland area for the 3 rd week of June in 2005, 2010 and 2015. Source: OAG Analyser (OAG Aviation Worldwide, 2015).
13 General EU Market Development General market based on the third week of June in 2005, 2010 and 2015 AVERAGE AVAILABLE SEATS PER FLIGHT 140,25 124,38 111,53 Table: Number of flights and seats offered per week and average number of seats per flight for all flights between two airports in the EU-28/Iceland/Norway/Switzerland area for the 3 rd week of June in 2005, 2010 and 2015. Source: OAG Analyser (OAG Aviation Worldwide, 2015).
14 General EU Market Development General market based on the third week of June in 2005, 2010 and 2015 Week starting # of Flights # of Seats Avg. # of Seats 13.06.2005 118‘321 13‘195‘787 111.53 14.06.2010 123‘849 15‘404‘067 124.38 15.06.2015 121‘989 17‘109‘539 140.25 The general trend including the total market (including all aircraft types, not just regional aircraft) shows that while the number of flights in Europe has remained relatively stable according to OAG schedule data (3.1% growth between 2005 and 2015 from 118’321 to 121’989 weekly flights), the available seat capacity has increased much faster by 29.7% (from 13’195’787 to 17’109’539 weekly seats). This increase has therefore been achieved by the usage of larger airplanes with the average seat capacity per flight increasing from 111.53 in 2005 to 140.25 in 2015.
15 a EU Regional Fleet Development EU Regional market based on the third week of June in 2005 and 2015 Aircraft Size 2005 2015 % Change Smaller than 19 seats 15'846 2'714 -82.87% 19 seat turboprops 36'030 18'002 -50.04% Jets < 50 seats 23'303 9'470 -59.36% Turboprops < 50 seats 175'864 134'593 -23.47% 50 seat jets 502'676 87'134 -82.67% 50 seat turboprops 522'953 128'842 -75.36% 70 seat jets 131'424 238'939 81.81% 70 seat turboprops 659'214 895'751 35.88% Larger regional jets 928'143 1'300'449 40.11% Grand Total 2'995'453 2'815'894 -5.99% Table: Weekly EU-28 (plus Norway, Switzerland, Iceland) seat capacity in sample week starting June 15, 2015 compared to sample week starting June 13, 2005 categorized by aircraft size category (regional aircraft only). Source: OAG Analyser and own categorization of aircraft (OAG Aviation Worldwide, 2015).
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