Summary
- Sustainable Aviation Fuel (SAF) demand is growing in Europe, with airlines investing in SAF plants to secure future operations.
- Business travel decline continues, with longer trips and reduced first-class supply, while VFR and leisure demand rebounded.
- European carriers are placing record orders for newer aircraft, and the market is consolidating with acquisitions and partnerships.
2023 has been an eventful year in European aviation, to say the least. As the region continues to come back from COVID while weathering supply chain issues and the impacts of various conflicts, there are a few defining trends that have shaped aviation in Europe in 2023.
Sustainability
Photo: Virgin Atlantic
Sustainable Aviation Fuel (SAF) has been at the center of attention in 2023. Airlines are making moves to secure their future with growing SAF demand anticipated as regulators in Europe, including the EU Committee, drive up future SAF mandate. Air France-KLM made significant investments in DG fuels plants to secure SAF for its operations for years to come, while Ryanair made its own purchase with Austrian OMV.
How Airlines Will Meet SAF Demand Over The Next 15 Years
An industry expert shares her key insights.
However, aviation sustainability has also been a hotly contested topic in Europe during 2023. We saw the saga of Amsterdam Schiphol Airport playing out, where flight caps and proposed taxes failed to materialize under internal and external pressures. Many questions were also asked about the feasibility of SAF in the future of aviation and the effectiveness of various aviation policies in the EU.
Amsterdam Schiphol Forced To Drop Summer Flight Cap Plans Following Pressure From US, EU
The news will undoubtedly be welcomed by airlines on both sides of the Atlantic.
Travel rebound, but purposes shift
The decline of business travel continues into 2023. Such a trend had already been shaping up pre-COVID, but the pandemic drastically accelerated the change. The decline is especially notable in short-haul markets where business travelers previously took same-day trips between financial centers. In 2023, business trips are less frequent and are getting longer, with video conferencing replacing many physical trips.
The decline of business travel, however, does not equal the decline of business class demand. The cabin class that is experiencing the biggest decline in terms of supply is the first class cabin. European airlines today offer significantly fewer first class seats compared to 2019, and the number will continue to drop.
On the other hand, VFR and leisure demand are experiencing an uptick and have become one of the main factors driving the recovery. Airlines are adjusting to the new environment by moving their resources around. For example, British Airways started operating holiday flights from Edinburgh and will return to London Stansted using BA CityFlyer planes and crews. The question will be whether the trend will continue into the coming seasons or if demand will soften.
Fleet renewal
A record number of aircraft orders have been placed by European carriers to secure the new generation of airplanes that are more environmentally friendly and efficient. The seven biggest airline groups in Europe have all ordered new planes during 2023.
Photo: Airbus
European manufacturer Airbus won some big orders this year, including Air France-KLM’s massive order for 50 A350s and 4 A350 Freighters, with 40 more options. easyJet also ordered 157 Airbus A320 family aircraft from Airbus, and Wizz got itself on the order book with 75 A321neos. However, the biggest customer this year is Turkish Airlines, clocking up two orders totaling a whopping 234 aircraft, including A350s and A320s. Here is a table of the orders placed by seven of Europe’s biggest airlines by revenue:
Airlines | Order Details | Total Firm Order |
|---|---|---|
Lufthansa Group | 21 A350s, 7 B787s, 40 B737 MAXs & 40 A220. (options for A320neos) | 108 |
Air France-KLM | 50 A350s & 4 A350Fs | 54 |
IAG | 6 B787-10s, 1 A350, 1 A320neo | 8* |
Turkish Airlines | 84 A350s & 150 A321s | 234 |
Ryanair | 150 B737MAX-10s (150 options) | 150 |
EasyJet | 157 A320neos/A321neos | 157 |
Wizz | 75 A321neos | 75 |
*All orders from IAG are converted from options into firm orders. International Airlines Group (IAG) has been the quietest of all major European airlines.
Other European carriers also placed sizable orders for expansion and renewing fleets, including SunExpress’s firm order of 45 Boeing 737 MAXs and airBaltic’s order for 30 A220-300s from Airbus.
Continued consolidation
The market is continuing to consolidate, a trend that has been ongoing for the past few years. Coming out of the pandemic, smaller airlines are seeking new ways to survive while bigger carriers look for ways to grow in the increasingly constrained European airports.
Photo: Vincenzo Pace | Simple Flying
This year, we saw the acquisition of a minority SAS stake by Air France-KLM, which sees another legacy carrier joining one of the ‘big three’ aviation groups in Europe. The investment has been approved by a US court, and the move will eventually see SAS leaving Star Alliance.
Lufthansa Group has been working through the process to acquire a stake in ITA Airways, with an Italian court approving the purchase this year and the EU Commission expected to give its decision in 2024. On the other hand, International Airlines Group, or IAG, was also progressing towards acquiring Spanish carrier Air Europa by buying its remaining 80% stake.
The trend of consolidation is expected to continue into 2024 as TAP Portugal is still without an owner, with the national government very much desiring its privatization. Its extensive South American network could be an invaluable asset for any airline group and, unsurprisingly, many airlines have signaled their interest, including Air France-KLM and IAG.
Looking ahead, many of the trends will carry through into 2024, which is set to be another year full of drama and excitement in European aviation. Things to watch out for? Interesting merger cases and multiple environmental law rulings will face their verdicts, and Europe will continue to feel the impact of the conflicts on and around the continent.
What are your predictions for European aviation in 2024? Let us know in the comments.
