“While the headline numbers are positive, we have not yet fully recovered from the pandemic and margins are thin,” he says. “European airlines face some major challenges and remain in a fragile state. The market is highly competitive and is now focused on what Europeans clearly want: affordable and sustainable. Now more than ever, we need the right policies to provide affordable air travel.”
Last year's increase in demand supports this view. In 2023, European air travel increased by more than 20%. This will generate an estimated profit of 7.2 billion euros ($7.7 billion), with both traffic and profits expected to rise modestly in 2024.
However, demand is inconsistent across the region. Overall, the Mediterranean market was strong in 2023, but Eastern Europe is still suffering from the effects of the Ukraine war. There are also spillover effects from various conflict zones in the Middle East.
infrastructure issues
December 2023 figures for Europe are encouraging, showing a slight increase in load factors. It was also the first month since the pandemic to record more growth than the same month in 2019.
However, tight labor markets in certain countries are exacerbating the problem of ground and air capacity. Europe has approximately 50% of all airports with slot constraints, and no significant capacity increases are planned in the short term. Indeed, in the case of Schiphol Airport, the government is proposing to reduce capacity. Furthermore, over the long term, few airport projects result in innovative capacity improvements.
Airlines are also looking to improve efficiency in the skies. Air traffic management in Europe continues to suffer from fragmented skies and a lack of investment, with delays particularly common during the peak summer period. Although the disruption caused by the Ukraine war is well managed and the skies are safe, the latest performance targets based on the Single European Skies (SES) are inadequate. Even though prices are going up, service levels are going down.
“The SES continues to suffer from a lack of political will,” Schwartzman said. “This could triple airspace capacity and reduce carbon emissions by up to 10%, but politicians have left these significant benefits off the table for more than 20 years. ”
sustainability
In fact, sustainability is another major challenge facing European airlines in 2024 and beyond. Sustainable aviation fuel (SAF) is a big-ticket commodity. The industry buys all the drops available, but supply is limited and SAF only accounts for about 3% of total renewable energy production.
Despite this, and despite evidence from the US that incentives are working, Europe is leaning toward mandating the use of SAF. The immediate goal as part of the “Fit for 55” program is to make at least 2% of all aviation fuel his SAF after 2025. The Net Zero Industry Act requires Europe to produce cleaner technologies within its borders. It will help, but the impact will likely be years away.
“We need better incentives for SAF production and deployment in Europe,” Schwarzman suggests. “We also need a recognized SAF accounting system to ensure production takes place where it makes economic sense and airlines can control costs.”
SAF accounting systems (also known as books and billing) are particularly important as they track SAF from production to consumption and enable achieved emissions reductions. This is a complex process, and for SAF Accounting to work, governments and the entire value chain must agree on a globally harmonized approach.
“Airlines are not fuel producers, so everyone needs to do their part,” Schwarzman advises. “Airlines will be happy to have a plentiful supply of his affordable SAF.Governments should punish them and their customers if they don’t create the conditions to make that possible.” isn't it.”
Further complicating matters, Europe is reportedly considering extending its emissions trading scheme to include all flights to and from the European Union. This conflicts with the globally recognized Carbon Offset Reduction Scheme for International Aviation (CORSIA).
Additionally, countries in the region are seeing an increasing trend in green taxes.
Europe has some of the world's toughest sustainability targets, but Schwarzman said mandates and patchwork measures would only make European airlines less competitive and free up funds to invest in decarbonization efforts. He said that this would result in a decrease.
“Incentives are the best way to move forward,” he says. “This will increase SAF volumes and encourage the right behavior. With a green tax, you have no idea where the money is going. People want to travel, and they want sustainable travel. So they're counterproductive. Green taxes are bad for the economy and don't support the healthy, sustainable industries we all want.”
He also pointed out that a lack of consistency between countries regarding taxes could lead to the risk of escalation and retaliatory measures.
noise
Noise issues are also making headlines, a trend that is likely to continue into 2024. A clear example is Amsterdam Schiphol, whose capacity was cut purportedly to address noise issues before IATA and other partners successfully appealed.
“We understand the noise concerns, but there are agreed steps to address noise, known as the balanced approach,” Schwarzman says. “This has been agreed at ICAO level by all member states, and operational constraints have been placed last on the list of potential solutions. There are various opportunities to get to that stage. We remain committed to working with airports and local communities to limit noise without restricting flights.”
Similarly, trying to reduce CO2 emissions at individual airports will not work. It simply displaces emissions elsewhere, even though the focus should be on creating opportunities for everyone to fly as sustainably as possible.
Ensuring accessibility
Other notable European milestones in 2024 include the Automated Entry and Exit System (EES) in the Schengen Area for third countries. Passport stamps will be a thing of the past, but travelers will need to register their fingerprints and facial biometrics. The project has been postponed multiple times, but is scheduled to take effect in the fourth quarter of 2024. The concern is that border delays could further raise capacity concerns, at least in the short term, as the system overcomes early problems.
Schwarzman also highlights the work being done around accessibility. “Capacity is an issue, but that makes accessibility even more important,” he says. “We want to create a better experience for passengers with disabilities.”
IATA's RVP for Europe concludes that this year could be a transitional period for the airline industry. A number of elections are being held across Europe that could mean the airline industry gets the policies it needs to foster sustainable growth.
“Europe values the benefits of connectivity, and aviation is no different,” concludes Schwarzman. “The benefits will be even greater if we have the right framework to make aviation connectivity more efficient and sustainable.”
