A competitive market and growing costs are impeding on European airline growth, said Cirium Ascend Consultancy global head of consultancy Rob Morris at Airline Economics’ Growth Frontiers London.
“Not good, but not bad” was Morris described airline’s growth in Europe. In comparison to other regions, European growth is lagging behind.
European airline traffic in July this year was up 12.6% over 2023 and is projected to be 14% this year. “Please don’t mistake double digit for a bounce back,” warned Morris. “We have lost three years’ worth of growth in this cycle as we return to growth this year over 2019.”
He added that European traffic, while up over last year, has yet to surpass 2019 levels. Capacity constraints have restricted airlines’ growth, he added. New aircraft delivery deficit in Europe is estimated to be around 560 aircraft. The capacity shortage is exacerbated further by the GTF engine issues. However, with inspections taking around 12 months, there has been improvements made to combat the issue. “We are seeing more capacity being provided for inspections,” Morris added, “but it’s going to persist through 2026. He estimated approximately 540 aircraft will return to service.
In addition, the firm order backlog in Europe is estimated to be around 2,400 units at estimated value of $180bn. This means a “significant amount of aircraft that needs financing”, Morris said. He added that he heard one OEM say the aircraft supply and demand lag will persist into the 2030s.
Cirium data indicates that yields in Europe are only around 1% over 2019 and only 1% down from 2023. However, Morris said, in real terms and considering inflation since 2019, “those yields are possible as much as 20% down.” He added: “Yield are up over 2019, but trending down at the present time”.
Geopolitical issues place European airlines at a “competitive disadvantage” what with being unable to overfly Russia. “It’s a competitive issue and a cost issue because although we are seeing airlines flying the same number of hours on their widebody aircraft in Europe, many of those aircraft are producing less ASKs because they are flying the same route in more time,” explained Morris.
He added that “fuel price is the one positive” for European airlines, as well as labour being less of a headwind in Europe compared to North American carriers.
Aside from overflying Russia, Morris said geopolitical and macroeconomic headwinds have “not exerted significant influence”. However, these may prove a more pointed concern for next year and is something Cirium is monitoring.