While Europe’s air transport industry prepares for a bumper summer, the risks to a smooth season are multiplying as delegates at Routes Europe in Norway heard. Mark Pilling reports from Bergen
The timing of Routes Europe 2022 could not have been better. Most delegates arrived in Bergen, Norway’s second-largest city, on 17 May and were met with celebrations marking Norwegian Constitution Day.
The pent-up joy of locals marking the signing of their country’s constitution on that day in 1814 was there for all to see. “Two to three years of energy was being released in the streets of Bergen yesterday,” joked Abraham Foss, the head of Avinor, Norway’s airport and air traffic management provider and event host.
The joyful mood extended to Routes delegates, who flocked to the first post-Covid regional Routes event on the continent. (Visitors from Asia were notably scarce, given the Covid restrictions still in place in that region.)
The network development priorities were obvious as all players seek to restore revenues. For airports, the priority is to re-build destinations and traffic to 2019 levels. For airlines, the urgency is to re-establish and adjust networks to take advantage of a booming summer market.
While the meeting halls hummed to the familiar chatter of pitches and negotiations, the theme from the conference floor reflected the relief that traffic is returning – tempered by several headwinds that are making the recovery a bumpy one. SAS chief executive Anko Van der Werff described managing the ramp-up in operations as a “tremendous challenge”.
“You don’t underestimate it. Every time you think you’re there, something happens,” he told delegates. Although SAS had a strong spring and capacity this summer will reach 80% of its 2019 schedule, the stresses in the airline’s system mean it has trimmed back its planned capacity growth for the summer. “I would rather take the decision to reduce capacity now so we can fly what we have planned,” said Van der Werff. “It is an ecosystem challenge we have to face.”
Recovery by 2024
Morgan Foulkes, deputy director general at ACI Europe, put the traffic recovery into perspective. While 2021 did see a rebound compared to the depths of 2020, Europe’s airports only returned to 58% of 2019 levels, equivalent to a loss of 3.1 billion passengers across the network.
Still, although the Omicron variant of Covid dulled the recovery in January and February of this year, the nearly blanket lifting of travel restrictions in Europe means a “bullish summer ahead” with many markets offering capacity almost back to 2019 levels, said Foulkes. Intra-European Union travel and visiting friends and relations (VFR) travel is returning fastest and in airline terms it is “Ryanair and Wizz primarily driving the recovery”.
Russia’s invasion of Ukraine in March meant Europe “entered uncharted territory” in several dimensions, not least with the spike in fuel costs that followed and will make airlines more risk adverse, said Foulkes.
Despite the headwinds, ACI Europe’s traffic forecast for European airports predicts full recovery to 2019 levels in 2024. The forecast for this year anticipates traffic at 31% below 2019 levels, though.
There is a “systematic financial weakness” across Europe’s airports, with a handful of regional ones having gone bust during Covid, and debt having risen by 200% in just three years, explained Foulkes. Such financial pressure will impact the ability of airports to invest in coming years. He also highlighted the increasing dominance of airlines, especially low-cost carriers, which puts more cost pressure on airports as they compete to secure service.
At Airlines For Europe (A4E), the European airline lobby group, a top priority is warding off or influencing European Union regulations, charges and taxes that it believes are unfair for its members, especially in the field of sustainability.
There is a package of measures being discussed around the EU’s ‘Fit for 55’ target of reducing greenhouse gas emissions by at least 55% by 2030. Thomas Reynaert, A4E’s managing director, said that while airlines are on board with the mission to reduce emissions, as it stands Fit for 55 “will have a huge impact” on airlines in cost terms, in addition to the burdens of high inflation and high fuel prices.
“The question for politicians is do they want less connectivity, less competition, and higher prices [when it comes to air travel],” said Reynaert.
The familiar chatter around airport charges has resumed in the past few months. “It is almost natural after a crisis that the system will try to recoup losses… but [airports] need to be smart and careful when raising charges, and consultation is not always happening [between airlines and airports],” stated Reynaert. “This is not the time to raise airport charges by 10-20-30%.”
ACI Europe refutes the charge on consultation, and Foulkes pointed out that the “vast majority [of European airports] are offering rebates on their charges to attract carriers. In normal times more than 85% offer formal incentive and rebate schemes, and during Covid (as of September 2021), around two-thirds of all airports offered new incentives or ‘re-start’ support that lowered effective charges and offered free or rebated long-term parking fees. With the start of the IATA summer season, many airports have updated and revised incentive schemes.
“The reality is airlines come and go faster than before. They are more agile and are very good at repositioning assets quickly” to target the most profitable routes, said Foulkes.
This feature of the recovery is common. Another is that traffic patterns have changed in the post-Covid market. Whereas pre-Covid there were five daily peaks in Europe, there are now three daily peaks, and those peaks are higher than in 2019, said Foulkes. “With more people in the peaks it makes it even more difficult to handle this concentration of volume,” he said. This exacerbates the issues the service providers are having in coping with the ramp-up.
Restoring an airport’s long-haul network is a top priority in addition to restoring overall traffic levels. “A lot of airports market themselves to attract foreign long-haul carriers, which are important for their connectivity,” said Foulkes. A service from the likes of Emirates or Qatar Airways does wonders for an airport.
For now, growth opportunities from Asian players are limited so the advance of US players like United, Delta and American into Europe is very welcome.
Scandinavia’s flag carrier SAS has suffered from reduced access to Asia. It did have five widebodies dedicated to this market and is looking for other destinations to deploy this capacity, said Van der Werff. “We’ve got too many widebodies – the world is stuck with finding solutions for them.” SAS is looking at routes to the US, Latin America and East Asia.
A more useful tool for SAS is its three-strong fleet of Airbus A321LRs, which can tackle thin routes such as Stockholm and Copenhagen to Toronto, said Van der Werff. “I’d like to have more A321LRs over the years,” he added.
Norwegian chief executive Geir Karlsen was in Bergen presenting an airline that is in reset mode, with a strong balance sheet and committed shareholders. Its restructuring in 2019 involved taking out 80 routes and exiting the long-haul market.
The carrier has refocused on a fleet of some 70 narrowbodies for this summer and a “network we know… and one that has been profitable over the years”, said Karlsen. Another 15 Boeing 737 Max aircraft will arrive by Spring 2023, and Norwegian announced an order with Boeing after Routes Europe for a further 50 737 Max 8s for delivery between 2025 and 2028.
Asked about over-expanding, which was a criticism of the carrier a few years ago, Karlsen said: “This time we have the luxury of growing with demand… We will do it the proper way this time.” Long-haul routes are “not on the agenda”, he added.
At Widerøe the growth strategy is that of a “core regional carrier” operating a network with aircraft of 78 to 110 seats on suitable short-haul routes and a publicly subsidised network with De Havilland Dash 8s to smaller communities up and down the length of Norway, explained chief executive Stein Nilsen.
The airline is adding two Dash 8-400s this year with one or two of the type being added a year after that in a cautious expansion strategy that follows market demand, he said.
A more ambitious target at Widerøe is the hope that by 2030, and even as early as 2026/27, the airline will be able to take the first deliveries of zero-emission aircraft from 10 seats up to 70 seats in size.
With some restructuring done and some still to do, Scandinavia’s airline fraternity is in reasonable shape to take advantage of the traffic bonanza this summer. The talk at Routes was of extracting maximum advantage from leisure travel over this period – and deal with the worries about an uncertain winter season later.
United flies to the fjords
It is said that timing is everything. In that case, Norwegian airport operator Avinor, the host of Routes Europe, got it just right with the launch of its first transatlantic service by a US-based carrier literally two days after the event ended.
The US carrier in question is United Airlines. On 22 May the carrier began a three times weekly service with a 169-seat Boeing 757-200 between New York Newark and Bergen for the summer.
Avinor had been talking with United prior to the pandemic about a service to Bergen, said Ulv Elbirk, director traffic development, Asia & Americas at Avinor. The route has never been served by a US carrier, although Norwegian did operate a service from Bergen to Stewart International Airport to the north of the New York metropolis in the mid-2010s.
The attraction for Americans coming to Norway is to use Bergen as a gateway to the beautiful fjords. “In this region the biggest inbound market is American [tourists]. This is a destination with nature and space. It brings something new into their [United’s] system,” said Elbirk. “Visitors typically do several destinations in Norway and always end up in Bergen to visit this UNESCO listed city and the fjords.”
“It is a big scoop for Bergen. It’s been on a wish list for a very long time and it’s gratifying to see it happen,” said Elbirk.
For Elbirk, the focus is on transatlantic service for Avinor and Norway as the Asian market is subdued. Avinor is supporting the launch of start-up Norwegian long-haul player Norse Atlantic with its services from Oslo to New York, Fort Lauderdale, Orlando and Los Angeles to be served with 787-9s.
During the pandemic, the domestic market, which is so important in keeping this large country connected, stayed strong. This summer the traffic outlook is very strong, said Elbirk.
Loganair’s return to Norway
Scottish regional carrier Loganair is pleased to be resuming its Norwegian routes bringing a welcome return to a market that has benefitted from historic World War II links between the two countries, in addition to a common focus on oil and gas markets.
There is a new service from Newcastle to Bergen, a resumption of Newcastle to Stavanger and the restart of flights to both Norwegian cities from Edinburgh, said Jonathan Hinkles, chief executive of Loganair told ARGS.
Activity levels are increasing as the industry comes out of the pandemic with growth opportunities for Loganair coming from a combination of routes left unserved after the failure of Flybe and bmi Regional, a return to charter operations and increased cargo flying, he said.
The airline has taken delivery of two ATR72-600 freighters with a fleet of five planned by year-end, said Hinkles. Its ageing Saab 340 freighters will be retired in the coming 12-18 months. The airline will grow to a fleet of 43 aircraft this summer, a significant growth from its pre-Covid level of 22 units.
Although there are business opportunities coming out of the pandemic, it has been a turbulent six months, said Hinkles. “We are still having to move fast and adapt capacity to meet demand. Network planning really has become an art form,” he said. There are substantial extra costs to be considered too, he said, with European Trading Scheme (ETS) costs and spiking fuel prices to be dealt with and taken into account when evaluating the profitability of individual routes.
Icelandair serves North Carolina
After a gestation period of five years, Icelandair has finally launched service to Raleigh-Durham International Airport, adding a new US city to its lengthy roster of 14 transatlantic destinations served from Keflavik.
The seasonal flight, which started in mid-May, is remarkable because it marks the return of European service for this North Carolina hub. Connections to London and Paris were suspended soon after the pandemic emerged in early 2020.
“It has been on our list for quite some time. We first went for a visit in 2018,” Asdis Sveinsdottir, director network planning & scheduling at Icelandair told ARGS. The airline is attracted by a region that has seen an influx of people during the pandemic, it has a range of good universities, a strong technology business base and a booming city, which are among the market characteristics that Icelandair looks for.
The carrier hopes the four times weekly Boeing 737 Max 8 service will lure travellers keen to sample Icelandair’s competitively priced stopover product, said Sveinsdottir. The 737 Max 8 has been a good tool for the airline’s North Atlantic operation, with its low fuel consumption making for an economic product. “It has far exceeded our expectations,” she added.
The carrier now has 12 Max 8 and 9s, with another two coming later this year. It also has three 767s and 12 757s. It will operate 83% of its pre-Covid capacity this year. Apart from Raleigh-Durham, other new routes have seen Icelandair start up Rome and Nice, while service to Montreal has resumed too.
Sveinsdottir and the Icelandair team are planning the 2023 network, which will focus on the current destinations plus a few additions depending on how much capacity is added.
Athens summer re-boot
With a rueful smile, borne of joy and a little exhaustion, the Athens International Airport (AIA) marketing team have been running hard to keep up with the resumption of service in recent months. “We have been having almost an event a day, sometimes, two. There has been press events, trade events, and inaugurals,” said Ioanna Papadopoulou, director communications & marketing at AIA.
But nobody is complaining. Athens is going full tilt to help publicise the re-start of operations by airlines as it looks forward to a bumper summer. In terms of flights, the airport is expecting a 2022 schedule some 95% of 2019’s level, said Papadopoulou. Its major markets, such as the USA, UK, Germany, and France, are in fact exceeding 2019 levels.
The US market has roared back because the Greek government declared early on that it was going to be easy to travel to the country with no travel restrictions. “This gave US carriers the confidence to come to Greece,” said Papadopoulou. “Our US flights have very high load factors. It is going to be the success story of this summer.”
There are also new US destinations for Athens coming on stream. In late May, Delta Air Lines launched the first link between the Greek capital and Boston with a three times weekly Airbus A330-300 service.
The airport introduced an incentive scheme in summer 2021 to support the re-start of service with discounts offered on parking charges and landing fees. This is extended to this summer. “We enriched our incentive programme to help with the resumption of service. The focus is on the growth of existing routes as well as the development of new ones. We understood we needed something different, and it has worked,” said Papadopoulou.
The help extends to marketing support which is where Papadopoulou’s team comes in.
Cyprus fills the gap
Armed with a revamped airline incentive scheme, a pool of online marketing campaigns to show off its beautiful island attributes, and with a coalition of players including Hermes Airports working in tandem, the Cypriot tourism sector is determined that this summer will be a successful one for the Mediterranean destination.
Its work has been made harder however by the loss of significant Russian traffic following that country’s invasion of Ukraine. The UK and Russia have been the two largest inbound markets for Cyprus making up for almost half of traffic to Hermes airports pre-pandemic, Maria Kouroupi, senior manager, aviation development, marketing & communications at Hermes Airports, told ARGS.
The plan for this summer was already pretty much set when the invasion occurred, which has caused 13 Russian carriers to exit the market. Hermes airports together with the Cypriot ministry of tourism reacted quickly bringing together hoteliers and other travel players with a “co-ordinated action plan with everybody contributing” to promote the island and boost demand to help fill the shortfall, she said.
“Having such co-ordinated planning was extremely important during Covid and it has been critical during this period too,” said Kouroupi. The airports group has been able to attract carriers that had aircraft availability and were seeking to add capacity to a leisure destination that can stimulate demand on a year round basis and has had considerable success.
There will be 50 carriers operating 140 routes from 95 destinations in 38 countries serving Cyprus this summer. Hermes operates Larnaka and Pafos, the two airports on the island. The new destinations added this summer are Pisa, Salzburg, Bern, Nuremberg, and Paris Charles de Gaulle.
Since Hermes began offering incentives to airlines in 2010 the airports saw traffic growth of over 65% up to 2019. “Our schemes have borne fruit and made a difference in the start-up phase,” said Kouroupi.
However, in response to a changing market Hermes is planning to re-adjust its strategy and “with a focus on market penetration and year round flying both on new and existing routes,” she said.
When ARGS spoke to Kouroupi at Routes Europe in mid-May Hermes estimated that traffic will reach 75% of 2019 levels this summer.
Lodz: Poland’s best-kept secret
A draw to win a weekend trip to the city, being announced as the host venue for Routes Europe 2023, and giveaway socks in the colours of Ukraine’s flag, Lodz Airport is going all out to get noticed.
Located 90-120 minutes’ drive to the south-west of capital Warsaw, Lodz (pronounced “woodz”) is underserved for a city with a population of 600,000. It is the third-largest city in Poland after Warsaw and Krakow and yet today only counts Ryanair (serving London Stansted and Dublin) as a scheduled airline customer, in addition to a handful of outbound charter services to Bulgaria, Greece and Turkey.
It is airport president Anna Midera’s job to grow Lodz. “We are Europe’s last undiscovered city,” she said. It has a rich history dating back to the 15th Century with a once-thriving textile industry, which is still active today.
“We are becoming a host [for Routes Europe] because we want people to see the real picture of Lodz. Airlines will see there is real potential here, a good market opportunity,” said Midera.
The airport has been on an airline recruitment drive since 2017 and had attracted SkyUp Airlines of Ukraine and Greek carrier Lumiwings with Italian routes, but these have gone for now. “Our aims are London Luton, Paris, Amsterdam, Eindhoven and Stockholm,” said Midera.