Bloomberg Intelligence predicts rise in European airlines’ capacity in 2024
The research analysis company observed that capacity looks set to rise in every market in H1
According to a new Bloomberg Intelligence (BI) sector report, European airlines’ capacity looks set to rise internationally, with all but Asia Pacific above 2019 levels. Transatlantic leads at 8.4% higher, having surpassed 2019 offerings in Q1, with fares under less pressure as US and European airline joint ventures prevent unbridled competition. The report goes on to warn that intra-Europe competition could rise, 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 according to BI, though gains trail most markets, keeping fares from sliding too dramatically. The report observes that capacity increases by Middle East carriers will add to pressure on leisure fares. Adding that while South American markets are small, large capacity boosts, especially from carriers like IAG and Turkish Airlines, will pressure yields.
Europe and North America are most important markets
European airline market share by seats shows the importance of intra-Europe and transatlantic 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, noted 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 and 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.
George Ferguson, Senior Industry Analyst (Aerospace) at Bloomberg Intelligencecommented: “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.”
Earlier this year, the International Air Transport Association (IATA) released data for November 2023 air travel performance indicating that air travel demand topped 99% of 2019 levels.