seven year flights service units forecast 2013 2019

7/27/2019 Seven Year Flights Service Units Forecast 2013 2019

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Flight Movements and Service Units 2013 - 2019

EUROCONTROL Seven-Year ForecastFebruary 2013

EUROCONTROL

Network Managernominated bythe European Commission


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EUROCONTROL 7-year IFR Flight Movements and Service Units Forecast: 2013-2019

EXECUTIVE SUMMARY

This report presents the February 2013 update of the EUROCONTROL seven-year flight and

service units forecast. This update uses the most-recent available traffic statistics andeconomic forecasts, and more up-to-date information in terms of traffic trends and recent air-industry-related events.

IFR movements

Traffic growth in 2012 was marked by economic weakness in much of Europe and by severalairline failures locally adding to the general traffic decline, in particular of domestic traffic.

Looking ahead, the weakness of the economic outlook in Europe, very high oil prices,slower-than-expected recovery from the Arab Spring and the financial difficulties of the air traffic industry are reflected in the new flight forecast that has been revised downwards

compared to the last one (Ref. 1 ). 2013 is forecast to see a flight decline of 1.3%. However,considering the uncertainty around the European economy, we also draw attention to the lowforecast which has a decline of 2.9% in 2013.

In the following years, economic growth is expected to return and flight growth is expected tostabilise at around 3% per year, a value little change compared to the September 2012forecast, though lower than long-term historic trends. However, due to the weak 2012 thegrowth will apply to lower traffic volumes. Consequently, the 2008 peak of traffic is nowexpected to be passed only in 2016, a year later than expected in the September 2012forecast, when traffic reaches 10.3 million flights ( 0.6 million).

By 2019, traffic is expected to reach 11.2 million IFR movements (1 million) in Europe, 17%more than in 2012.

Growth at a State level shows a very wide variation, even amongst States with high volumesof traffic. By 2019, the annual average flight growth rates tend to increase towards the Eastof Europe: 1.4% in Spain, 2% in Germany and Italy, around 3% in Poland, 4.5% in Ukraineand 7% in Turkey.

Figure 1. Summary of fligh t forecast fo r Europe (ESRA08).

AAGRESRA08 2019/

20092008 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2012

H 3.4%. . . . . 9,559 9,924 10,358 10,835 11,222 11,658 12,079B 10,083 9,413 9,493 9,784 9,548 9,424 9,689 9,975 10,298 10,576 10,885 11,195 2.3%

IFR Flight Movements(Thousands)

L 0.9%. . . . . 9,276 9,409 9,517 9,690 9,815 9,969 10,132

H 3.4%. . . . . 0.1% 3.8% 4.4% 4.6% 3.6% 3.9% 3.6%

B 0.4% -6.6% 0.8% 3.1% -2.4% -1.3% 2.8% 3.0% 3.2% 2.7% 2.9% 2.8% 2.3%

Annual Gr owth(compared toprevious year)

L 0.9%. . . . . -2.9% 1.4% 1.2% 1.8% 1.3% 1.6% 1.6%

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Figure 2. Average annual f light g rowth 2012-2019 per State.

En-route Service Units

Though average weight and distance continue to grow, the economic weakness continues todepress service unit growth too. In 2012, 121.6 million service units (TSU) were produced.This represents a drop of 1.3% compared to 2011, a second decline since the 2009 dip after

growth figures of about 3.5% and 5% for 2010 and 2011. Overall TSU declined in a lesser extent than flights: for the ESRA08 region flights decreased by 2.4%. TSU remain linked tothe evolution of the flights.

Following the flight forecast, the forecast for 2013 TSU is revised downwards by 1.5percentage points to now remain almost unchanged with a slight decline by 0.1% and reacharound 121.5 million. In the current fragile economic outlook, the low forecast is alsorelevant: we expect a decline of 1.7% in 2013 to 119.6 million TSU.

Based on these lower numbers for 2013 and a revised medium-term flight forecast, the TSUare forecasted to be about 22% higher in 2019 than in 2012, reaching in total around 147.7million, representing a baseline scenario average growth of 2.8% per year, implying anannual growth of 3.3% as of 2014 onwards.

Figure 3. Summary of service unit s fo recast for EUROCONTROL Member States(CRCO11).

CRCO11 Forecast Feb 2013Forecast May12 Forecast Sep12

Service Units forecast TSUTSU TSU GrowthGrowth Growth (million) (million) (million)

Actu al 2012 vs.2011 121.6 -1.3%121.6 121.6

Forecast 2013 vs.2012 121.5 -0.1%125.6 2.4% 124.4 1.4%

Forecast 2014 vs.2013 125.7 3.4%129.7 3.2% 128.2 3.0%

Forecast 2017 vs.2011 138.6 12%143.1 16.1% 141.9 15.2%

Forecast 2019 vs. 2012 147.7 22%NA NA

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Any user of these seven-year forecasts is strongly advised to use the forecast range (low-growth to high-growth) as an indicator of risk. This forecast includes downside risks (eg. thisforecast is prepared in the context of an economic downturn which could further deteriorate)and upside risks (eg. current high load factors could result in quicker-than-expected trafficrecovery when it finally arrives). These are discussed later in Section 6. For the flights, by2019, the high-growth scenario has 0.9 million more and low-growth scenario 1 million fewer flights than the base scenario (+1.1% and -1.4% in terms of growth respectively).

A two-year flight forecast 2013-2014 will next be published in May 2013 at the same time asan update of the seven-year service-units forecast for 2013-2019. Parts of the seven-year flight forecast will be refreshed in September.

Comments are welcome at [email protected] .

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DOCUMENT CHARACTERISTICS

TITLE

EUROCONTROL 7-year IFR Flight Movements and ServiceUnits Forecast: 2013-2019

Reference Number: 28/02/13

Document Identifier Edition Number: v1.0STATFOR Doc493 Edition Date: 28/02/2013

Abst rac t This report presents the 2013 EUROCONTROL forecast of both instrument flight rules (IFR) flightsand Total en-route Service Units in Europe in 2013-2019. It has been prepared by EUROCONTROLStatistics and Forecast Service (STATFOR) in December 2012-February 2013 and it replaces theseven-year flight and service units forecast of September 2012.

This document contains a description and discussion of the main results as well as a comparisonwith previously published results.

Keywords STATFOR Air Traffic Forecast Medium-TermMovements Flight Movements Trends Traffic FlowService Units Short-term

Contact Person(s) Tel Unit

An De Bondt X3209 DNM/FTA STATFORElsa Freville X5085 DNM/FTA STATFOR

STATUS, AUDIENCE AND ACCESSIBILITYStatus Intended for Accessible via

Working Draft General Public Intranet Draft EATMP Stakeholders Extranet Proposed Issue Restricted Audience Internet (www.eurocontrol.int) Released Issue Printed & electronic copies of the document can be obtained from

the Publications (see page iii)

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Host System Software SizeWindows_NT Microsoft Word 10.0 6550 Kb


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Publications EUROCONTROL Headquarters 96 Rue de la FuseB-1130 BRUSSELS

Tel: +32 (0)2 729 4715Fax: +32 (0)2 729 5149

[email protected]:

Open on 08:00 - 15:00 UTC from Monday to Thursday, incl.

DOCUMENT APPROVAL

The following table identifies all management authorities who have successively approvedthe present issue of this document.

AUTHORITY NAME AND SIGNATURE DATE

D. MarshHead of Forecasting &

Traffic Analysis

B. FlynnHead of Operational

Monitoring & Reporting

J. SultanaChief Operating

OfficerDirectorate Network

Management

J. DopagneDirector Network

Management

2013 The European Organisation for the Safety of Air Navigation (EUROCONTROL).This document is published by EUROCONTROL for information purposes. It may be copied in wholeor in part, provided that EUROCONTROL is mentioned as the source and to the extent justified by thenon-commercial use (not for sale). The information in this document may not be modified without prior written permission from EUROCONTROL.

The use of the document is at the users sole risk and responsibility. EUROCONTROL expresslydisclaims any and all warranties with respect to any content within the document, express or implied.

The Statist ics and Forecast s Service (STATFOR) is ISO 9001:2008 certi fied.

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DOCUMENT CHANGE RECORD

The following table records the complete history of the successive editions of the presentdocument.

EDITIONNUMBER

EDITIONDATE

INFOCENTREREFERENCE REASON FOR CHANGE

PAGES AFFECTED

v0.1 26/02/13 Draft for internal review All

v1.0 28/02/13 Final version All


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CONTENTS

1. INTRODUCTION...................................................................................................1

1.1 General......................................................................................................................................1 1.2 Summary of Forecast Methods.................................................................................................1

2. FLIGHT AND SERVICE UNITS TRENDS IN 2012...............................................3

3. FORECAST INPUTS AND ASSUMPTIONS ......................................................10

4. GROWTH IN IFR FLIGHTS TO 2019 .................................................................13

4.1 Short-term outlook (2013 & 2014)...........................................................................................13

4.2

Medium-term outlook (up to 2019)..........................................................................................16

4.3 Comparison with previous forecast .........................................................................................20 4.4 Airport Constraints ..................................................................................................................21 4.5 High-Speed Train ....................................................................................................................22

5. SERVICE UNITS GROWTH TO 2019.................................................................24

5.1 Short-term outlook (2013 & 2014)...........................................................................................24 5.2 Medium-term outlook (2015 to 2019)......................................................................................25

6. RISK TO THE FORECAST GROWTH................................................................28

7. GLOSSARY ........................................................................................................30

Annex A. FORECAST METHODS.........................................................................31

A.1 Flight Forecast ........................................................................................................................31 A.2 Service Units Forecast ............................................................................................................35

Annex B. TRAFFIC REGION DEFINITONS ..........................................................37

B.1 ESRA08...................................................................................................................................37 B.2 Traffic regions .........................................................................................................................38

B.3

Functional Airspace Blocks .....................................................................................................40

Annex C. SUMMARY OF FORECAST ASSUMPTIONS .......................................42

C.1 Economic growth.....................................................................................................................42 C.2 Events and Trends ..................................................................................................................45 C.3 Low-Cost Carrier Growth ........................................................................................................48 C.4 Load Factors ...........................................................................................................................50 C.5 High-Speed train Network Development.................................................................................52 C.6 Airport Capacity.......................................................................................................................53 C.7 Airport Traffic Switch...............................................................................................................54

C.8 Airline schedules .....................................................................................................................54


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Annex D. SUMMARY OF IFR MOVEMENTS FORECAST FOR EUROPE...........56

Annex E. FUTURE TRAFFIC AND GROWTH.......................................................59

Annex F. STATE BY STATE TWO-YEAR SERVICE UNITS FORECAST............69

Annex G. SEVEN-YEAR SERVICE UNITS FORECAST PER STATE ..................72

Annex H. REFERENCES .......................................................................................79


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List of Figures.Figure 1. Summary of flight forecast for Europe (ESRA08). .......................... ........................... i Figure 2. Average annual flight growth 2012-2019 per State. ............................. ..................... ii Figure 3. Summary of service units forecast for EUROCONTROL Member States (CRCO11).

.......................... .............................. ............................. .............................. ....................... ii Figure 4. EU GDP forecasts for 2012 have seen strong downward revisions. ........................ 3 Figure 5. Fuel Prices have remained high throughout 2012. .......................... ......................... 4 Figure 6. Load factors of European cross-border and international traffic have reached record

high values........................................................................................................................4 Figure 7. Actual traffic of 2012 compared with the forecast of February 2012.........................5 Figure 8. Traffic losses have reduced over the summer for the main contributors to European

traffic. ........................... .............................. ............................. .............................. ............5 Figure 9. Turkey remains main contributor and fast grower and Poland and Ukraine traffic

was boosted by EURO2012..............................................................................................6 Figure 10. Russia is the first non-European destination adding flights. .......................... .........7 Figure 11. Low-cost is back to growth since this summer and Charter is recovering from the

Arab Spring. ............................ ............................. .............................. ............................. ..8 Figure 12. Market share of the Low-Cost segment increased by 1 percentage point in 2012. 8 Figure 13. Evolution of total service units recorded in CRCO11 area in 2009-2012................9 Figure 14. EU GDP forecasts have seen strong downward revisions for 2013. ................... 10 Figure 15. Since the last forecast, the economic growth outlook for EU27 has been revised

downwards and remains lower in the later years by 0.6 pp. ......................... ..................11 Figure 16. Summary of forecast for Europe. ............................. ............................. ................13 Figure 17. States forecast detail for 2013. .......................... .............................. ..................... 15 Figure 18. States forecast detail for 2014. .......................... .............................. ..................... 16 Figure 19. Average Annual Growth per State, 2019 v 2012.......................................... .........17 Figure 20. Number of additional movements per day for each state (2019 v 2012). .............18 Figure 21. Flows adding the most movements, 2019 v 2012.......... ............................. .........18 Figure 22. IFR flight growth in Europe will stay persistently below pre-2009 long-term trend.

........................................................................................................................................19 Figure 23. Average annual growth rates for FABs, 2019 v 2012. ............................. .............19 Figure 24. For Europe, current forecast stands below the low-scenario of the MTF12b in

2013 and will remain lower than the previous baseline................................ ...................20 Figure 25. Forecast revision for 2018 per State (Source: EUROCONTROL). ....................... 21 Figure 26. Impact of airport constraints..................................................................................22

Figure 27. Impact of high-speed train: reduction in IFR departures for ESRA08 (top) andmost affected States (bottom).........................................................................................23 Figure 28: Summary of forecast of total service units in Europe............................................26 Figure 29: Comparison 2012-2017 of the forecast between the current forecast and

September 2012 for CRCO11 Area. ............................ .............................. ..................... 26 Figure 30. Average annual growth of service units between 2012 and 2019.................. .......27 Figure 31. Summary of short-term forecast method...............................................................31 Figure 32. Preparation process of the Medium-Term Forecast....................... ....................... 33 Figure 33. Service units forecast method...............................................................................35 Figure 34. The EUROCONTROL Statistical Reference Area. ............................ ...................37

Figure 35. Regions used in flow statistics as of 31 August 2012. ............................. .............38 Figure 36. Map of the Traffic Regions used in flow statistics as of 31 August 2012. .............39


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Figure 37. Map of the Traffic Regions used in flow statistics before 31 August 2012............40 Figure 38. FAB initiatives as of August 2012. ........................... .............................. ...............41 Figure 39. Since the last forecast, the economic growth outlook for EU27 has been revised

downwards for 2013 and remains lower in the later years............................ ..................42 Figure 40. Summary of changes in GDP forecasts for 2012-2014 for EU27: constant

downward revisions from end 2011. ............................ .............................. ..................... 43 Figure 41. GDP Growth by Traffic Zone.................................................................................44 Figure 42. GDP growth by Origin-Destination Zone...............................................................45 Figure 43. GDP growth by Traffic Region. .......................... .............................. ..................... 45 Figure 44. Events and Trends assumptions by Traffic Zone..................................................47 Figure 45. Low-cost effects by Traffic Zone. ............................. ............................. ................49 Figure 46. European load factors reached record highs during the whole year 2012 (source

data: AEA.)......................................................................................................................51 Figure 47. Load factors by Traffic Region. .......................... .............................. ..................... 52 Figure 48. High Speed Train times evolution as from 2013 to 2019. ............................ ........52

Figure 49. The schedule expects a monthly decline of around -3% to -4% for Europe until theend of the Winter schedule. ......................... .............................. ............................. ........54 Figure 50. Growth in Europe .......................... .............................. ............................. .............56 Figure 51. Flights on main flow categories in Europe .......................... ............................. .....57 Figure 52. Flights and growth on biggest region-to-region flows in Europe ......................... ..58 Figure 53. Forecast Summary: Annual IFR Movements 2008-2019......................... .............59 Figure 54. Forecast Summary: Annual traffic growth rates 2008-2019....... ........................... 64 Figure 55. Forecast Summary: Annual total en-route service units 2013-2014. .................... 69 Figure 56. Forecast Summary: Annual chargeable en-route service units 2013-2014. .........71 Figure 57. Forecast Summary: Annual total en-route service units 2008-2019. .................... 72

Figure 58. Forecast Summary: Annual total en-route service units growth 2008-2019. ........75


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1. INTRODUCTION

1.1 General

This report presents the forecast of annual numbers of instrument flight rules (IFR)flight movements and of total service units (TSU) for 2013 to 2019 prepared by theEUROCONTROL Statistics and Forecast Service (STATFOR) in December 2012-February 2013. This replaces the previous forecasts, such as those issued inSeptember 2012 (Ref. 1 and Ref. 2 ) and December 2012.

This report contains a summary and discussion of the forecast, starting with adiscussion of traffic in 2012 (Section 2), the assumptions made in the forecastscenarios (Section 3), some highlights from first the flight forecast then the serviceunits forecast (Section 4 and 5), and the risks going with this forecast (Section 6).More details are provided in the annexes: forecast methods ( Annex A ), geographical

definitions ( Annex B ), forecast assumptions ( Annex C ), flight forecast details for Europe as a whole ( Annex D ) then flight forecast totals per State ( Annex E ), two-year forecast of service units per state ( Annex F ) and finally the seven-year forecast per state of service units ( Annex G ). The detail of the flight forecast for each State) isprovided on STATFOR website (Ref. 3 ).

STATFOR also prepares a 20-year forecast to be published in June 2013 and will beavailable on the STATFOR web pages (Ref. 4 ). An update of the first two years of this flight forecast will be published in May 2013 along with an updated of the seven-year service units forecast. Both forecasts for the all seven years will be refreshed inSeptember, taking into account the latest traffic and economic conditions.

1.2 Summary of Forecast MethodsThe EUROCONTROL seven-year flight forecast grows airport-pair traffic usingmodels of recent trends, and of future economi c and industry developments.

The seven-year flight forecast is a blend of two forecasting methods: time-seriesmodelling of recent traffic trends; and a model of future flight demand based oneconomic growth and other developments. The trend-based modelling provides better accuracy in the first years, so is more influential in the blend in the first two years. Theeconomic and industry modelling has more influence on the results for the later years.

The time-series modelling looks at recent and longer-term patterns of growth andseasonality , taking into account information about one-off events , about economic

growth and available data on the airline schedules for the coming months.The economic model is developed by growing baseline traffic (all IFR flightmovements for the last calendar year) taking into account factors such as economicgrowth , past patterns of supply , the growth of low-cost carriers, and the influenceof high-speed trains .

The results of these processes are then constrained by annual airport capacities and converted from airport-to-airport counts into flights through airspace volumesusing the flight patterns in the last 12 months and recent trends in how these patternsare changing. No account of future route network changes is made (see section 6).More detail of the method is given in Annex A.1 .


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2. FLIGHT AND SERVICE UNITS TRENDS IN 2012

Traffic growth in 2012 has been marked by economic weakness in much of Europe and by several airline failures locally adding to the general traffic decline,in particular of domestic traffic.

As 2011 drew to a close, any optimism faded away that 2012 might prove to bestronger economically. The economic forecasts for 2012 had been revised sharplydownwards during 2011, and lost further ground during 2012 itself (see Figure 4 ), evenif central bank intervention helped to reduce the risk of a Eurozone breakup.

Figure 4. EU GDP forecasts for 2012 have seen st rong downward revisions.

During much of 2011, fuel prices had been stable, albeit painfully high but in the firstquarter of 2012 they saw a sharp climb, then a brief dip before returning to around

750 per tonne (see Figure 5 ). The weakness of the euro, in the first half of the year atleast, exacerbated the situation.

Load factors, on the other hand, continued to record levels (see Figure 6 ) while trafficwas weak, indicating that their increase was sufficient to absorb demand and thusbecame part of air-carriers strategy to increase the profitability of flights in lessfavourable economic environment as well as pushing flight growth down.

A number of airlines were also successful in increasing yields, by increasing prices or by focusing on longer haul. So the summer profitability was better than it might havebeen. This came too late, however, to save a number of airlines, including Malev andSpanair. While some of the remaining airlines continue to expand, the main themes inthe news from airlines were cost-cutting, including cutting back of fleets, andoutsourcing of shorthaul operations.

Meanwhile the political situation in North Africa, particularly Egypt, remained unstablewhich meant that the expected recovery was postponed and is likely to further be.



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Figure 5. Fuel Prices have remained high throughout 2012.

Figure 6. Load factors of European cross-border and international traffic havereached record high values.

As a result of this economic context, traffic growth in 2012 was lower than what wasexpected in STATFOR February 2012 forecast (see Figure 7 ). Total flights for the year declined by 2.4% in Europe in 2012 compared to 2011 with the greater part of thisdecline happening for intra-European flights, which decreased by 3.5% compared to2011.

After a weak winter season in 2011-2012, even if the summer schedule showed somesigns of improvement, it was not sustained and the beginning of winter 2012-2013showed far more rapid decline than in the same period in 2011 with an average declineof 3.7% over Europe in November 2012 with the beginning of the Winter schedulecompared to the decline of 1% registered in November 2011.

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As shown in Figure 10 , Russia has remained since the beginning of the year thenumber one destination from Europe adding traffic to the network. However, its growthhas weakened compared to that of 2011: it has added around 100/120 flights/day inboth directions compared to a year ago, a figure that is 35% less than the 160/180flights/day observed in the summer of 2011. Strong traffic growth from Russia towards

Western Europe and the Mediterranean (eg. to Spain +24%, to France +10.5%, toNorway +29% and Greece +21%) as well as towards Tunisia, Egypt and the MiddleEast has contributed to the growth of flights in Eastern European States. Together withTurkey, Russia has taken nearly 20% of all aircraft deliveries in 2012 in Europe, afigure that is expected to reach 30% in 2013 showing the potential for traffic growtharound these two countries. This effect will be the more noticeable since deliveries toEuropean carriers are reaching a cyclical low-point in 2013.

On the other hand of Figure 10 , traffic to the United States has constantly declinedthroughout the year to become since October the flow losing the most flights withlosses of around 45 flights/day compared to last year.

In Figure 10 , we can also see that flights to Egypt have stopped recovering sinceOctober and remain stable. They remain below 2010 levels that are now not expectedto be back before the return of a stable political situation in the country. Traffic toMorocco remains declining although it tends to stabilise since the beginning of theWinter Schedule.

Traffic to the United Arab Emirates has remained constantly growing by around 20flights/day both ways despite the weaker economic context and traffic to Israel is nowback to growth since the summer after a weak winter 2011-2012 season.

Figure 10. Russia is the first non-European destination adding fligh ts.

Figure 11 shows that all market segments started the year in decline. Since then, over the whole 2012 year, the charter segment (non-scheduled) has grown by 2.8% in 2012compared to last year as a consequence of the recovery to traffic to North Africa. Low-cost traffic also stands in 2012 on the positive side of the growth with 1.6% thanks inparticular to a strong summer that saw a growth of more than 5% in July and August.



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In Figure 12 , we can also see that the market share of the low-cost segment grew by1 percentage point in 2012 compared to 2011, a growth mainly taken from thetraditional segment. This change can be associated both to the failure of traditionalairlines (eg. Malev and Spanair) whose traffic has been partially taken over by low-costcompanies (eg. Wizzair for Spanair and Ryanair for Malev) and to the fact that some

traditional airlines have also opened low-cost subsidiaries like Iberia that createdIberia-Express.

The other main segments, traditional, business aviation and all-cargo flights also sawsteady decline during the year of around 4%, in flights compared to 2011.

Figure 11. Low-cost is back to g rowth since this s ummer and Charter isrecovering from the Arab Spring.

Figure 12. Market share of the Low-Cost segment increased by 1 percentagepoint in 2012.



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Figure 13 presents the monthly evolution of the total service units (TSU) recorded inthe member states of EUROCONTROL in 2012 (CRCO11) that is used as our reference region.

In 2012, subject to the same difficult economic conditions as the flights, 121.6 millionservice units (TSU) were produced. This was a drop of 1.3% compared to the peakyear of 2011; and only the second year of decline, the other being 2009. Overall TSUdeclined to a lesser extent than flights resulting from increases in both average weightand average distance flown..

It was the Summer that came nearest in 2012 to growing beyond 2011 values,buoyed by stronger flights. TSU just reached levels of the peak 2011 numbers after the 2009 dip. Lower growth rates were then again observed from the start of theweaker winter schedule with TSU falling back to 2010 numbers.

Higher February growth rates can be explained by the 2012 leap year effect as TSUare expressed in monthly totals.

Figure 13. Evolution of total service units recorded in CRCO11 area in 2009-2012.


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3. FORECAST INPUTS AND ASSUMPTIONS

The main influencing factors for both flight and service unit forecasts are: cutsin forecast economic growth (notably in 2013) followed by a weak recovery;weak traffic since the beginning of the Winter schedule; airline weaknessstruggling to finance their operations and keep them profitable, including fleetreductions. These and other factors have been built into the set of scenarioassumptions (see Annex C ) used for the flight for ecast.

Figure 14 . EU GDP forecasts have seen st rong downward revisions for 2013.

Source : Oxford Economics

Firstly GDP forecasts : We continue to see cuts in forecasts of economic growth, for 2013 and also for 2014. According to Oxford Economics, European real GDP willgrow by 0.1% in 2013 (a 1.5 percentage point downward revision on the GDPforecast dated January 2012 as shown in Figure 14 ). More importantly, the updatedeconomic forecast shows also a downward re vision in the medium-term (see Figure15 ): the GDP growth trend is now cut by 0.6 percentage point (pp) compared to whatwas expected in September 2012. More details on this are provided in Annex C.1 .

As far as the recent tr affic growth is concerned, after a reduction in traffic losses inthe Summer, notably for busiest States, as shown in Figure 7 , traffic is now

decreasing again by amounts lower than the nadir observed in the winter last year.Consequently, this will influence the traffic forecast downwards, which is confirmed bythe 3 to 4% decline showed in the current outlook of the airline schedules until theend of March 2013.

The trend is also to weakness of national airlines that have announced fleetreductions in 2013 such as in Spain and the Canary Islands but also in Poland,Germany and the United Kingdom, which are likely to impact traffic downwards: thishas been considered (see Annex C.2 ). In 2012, around 10 European airlines haveceased to exist including one national carrier, sometimes generating significant gapsin the traffic of the country where they were based, often at a domestic level andinternational level. Considering the current weak economy it is not impossible that



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economic downturn, plans to develop high-speed train in Portugal have beenstopped and are now no longer included into our inputs.

Ai rport Capacity: These numbers have been refreshed based on inputs fromthe Challenges of Growth 2013 study, via a EUROCONTROL project called the

Airport Corner that collects directly from airports information about their futuredevelopment and capacity plans. Not as many airports contributed to this datacollection compared to 2012.

Events and Trends : We have assumed scenarios to forecast the impact on air-traffic growth in Croatia and Iceland when they join the EU. As fleet reductionshave been considered, for balance, information about fleet increase in Turkeyhas also been taken into account in a similar way to get closer to the reality of flight growth there, far stronger than the economic growth would just suggest.

Emissions trading : The aviation industry has joined the EU ETS in 2012.However, the scope of its application has been reduced to intra Europeanflights, reducing its impact. Considering the uncertainty around its scope of

application in the medium-term, and the fact that carbon prices are now very low(around 5 euros/tonne, see Ref. 5 ), we have estimated that its impact on flightdemand would not be significant for this forecast. This component has thusbeen de-activated.

More information about these inputs and assumptions can be found in Annex C .



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4. GROWTH IN IFR FLIGHTS TO 2019

The weakness of the economic situation in Europe and the financial difficulties

of the air traffic industry are reflected with the new forecast that is for 11.2million IFR movements (1 million) in Europe in 2019, 17% more than in 2012.The first year of the forecast expects a flight decline of 1.3%. However,considering the uncertainty around the European economy, we also drawattention to the low fo recast which has a decline of 2.9% in 2013.

In the following years, growth is expected to be back at around 3% per year.The 2008 peak of traffic of 10.1 million flights is now expected to be passedonly in 2016, thus a year later than expected in the September 2012 forecast,when traffic reaches 10.3 million fligh ts ( 0.6 million).

Figure 16. Summary of forecast for Europe .

ESRA082009 2010 2011 2012 2013 2014 2015 2016 2017

AAGR2019/

2018 2019 2012

H 3.4%. . . . 9,559 9,924 10,358 10,835 11,222 11,658 12,079

B 9,413 9,493 9,784 9,548 9,424 9,689 9,975 10,298 10,576 10,885 11,195 2.3%

IFR Flight Mo vements(Thousands)

L 0.9%. . . . 9,276 9,409 9,517 9,690 9,815 9,969 10,132

H 3.4%. . . . 0.1% 3.8% 4.4% 4.6% 3.6% 3.9% 3.6%

B -6.6% 0.8% 3.1% -2.4% -1.3% 2.8% 3.0% 3.2% 2.7% 2.9% 2.8% 2.3%

Annual Growth(compared toprevious year)

L 0.9%. . . . -2.9% 1.4% 1.2% 1.8% 1.3% 1.6% 1.6%

4.1 Short-term out look (2013 & 2014)

In the short-term, following a 0.5% cut in economic growth for 2013 and the recentweak traffic trends since the beginning of the Winter schedule, the 2013 forecast hasbeen revised downwards compared to the September 2012 forecast by 1.3percentage points to -1.3% (see Figure 17 ). This revision adds to the low outturn in2012 that saw traffic decline by 2.4% below 2011 traffic levels and thus now places2013 traffic hardly above the minimum of traffic observed in 2009.

This forecast is provided with a low scenario expecting a 2.9% decline in traffic thatmust be taken seriously considering the current uncertainty surrounding the economyof the Eurozone and the possibility that other airlines fail. The forecast also includes ahigh growth scenario that just scrapes a 0.1% increase in traffic: such an outcomecould be possible only if traffic trends were to improve significantly during the summer and were maintained with the beginning of next Winter schedule.

In regional terms, there is still declining traffic expected for 2013 in the ESRAMediterranean region (Spain, Canary Islands, Italy, Portugal and Greecearrivals/departures and internals all declining). The climate for leisure travel in theseStates remains soft. There are however two exceptions in the region that are stillexpected to see their traffic grow in 2013.

The first exception is Turkey whose traffic is expected to grow by +9.8% in 2013notably thanks to its strong domestic traffic growth but also to the traffic from/to



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Middle East, North Africa and Russia. The forecast of its domestic traffic andinternational arrivals/departures is also expected to be boosted as a consequence of its fleet expansion and this explains why, amongst all the other states in the region, itis one of the few forecasts that have been revised upwards. Growth of turkish traffic,of course, through network effects also increases traffic particularly in neighbouringStates.

Malta is also expected to grow by +8.4% in 2013 but this will be more linked to thegrowth of its overflights that should still catch up during the first few months of theyear from the losses linked to the Libyan exclusion area that was still active at thebeginning of 2012. Since the re-opening of the Libyan airspace, Maltese overflightshave grown more strongly than expected figures and the forecast has also beenconsequently revised upwards. Nevertheless, after the strong disruption in 2011 andwith the situation in North Africa remaining changeable, the traffic outlook remainsparticularly uncertain for Malta.

In the ESRA North West region, mainly as a consequence of significant downward

revisions of the GDP forecast of most states there, all forecasts have been reviseddownwards compared to the September 2012 forecast. All countries are nowexpected to see their traffic decline, except Norway whose forecast has nonethelessbeen revised downwards but should see its traffic grow by 0.8% in 2013 (instead of +1.6% expected in the September 2012 forecast). The traffic growths in other countries of the ESRA North West region have all been revised downwards by atleast 1 percentage point with extreme revisions in Finland (from +0.5% in theSeptember 2012 forecast to -4.7% expected in 2013, in part because of weakdomestic and international traffic departing of landing in Finland), Switzerland (from+2.1% to -2.5% in 2013) and in Austria (-3.3% from +1.4% to a -1.9% expected in2013).

If most revisions are a consequence of significant downward updates of the GDPforecast, the situation is slightly different for Switzerland and Austria whose GDPforecasts have not been revised significantly but whose recent traffic trends havebeen much lower than expected in the September 2012 forecast, in particular sincethe beginning of the Winter schedule. Part of this trend is linked to airline restructuringthat has already and will further cut traffic on routes around the area. For example,

Austrian overflights have been affected by a reduction of flights leaving or departingfrom Germany. As for Switzerland, the lower traffic trends might also be linked to therelatively high unit rate of the country compared to the other states in the area.

The forecasts in France (-1.6%) and Germany (-1.7%) have both been reduced by 2percentage points whereas the UK forecast (-1.4%) has been revised downwards by1 percentage point.

Most of the forecasts for ESRA Eastern States have been revised downwards.Reduced levels of arrival/departure traffic after airline failures and restructuring(Czech Republic and Hungary) have impacted the traffic trends downwards. Manyeconomies are also weak in the area, which has generated traffic decline for arrivalsand departures in many cases (eg. Bulgaria and Romania). These trends haveconsequently led to a revision downwards of the forecast. Nevertheless, overflightsare still expected to grow in the area and this growth will compensate for the loss of local traffic.

Poland and Ukraine are also expected to see lower growth in 2013 than expected inSeptember 2012. In part, this is the counter effect of the boost in traffic they had in2012 because of the EURO2012, but the traffic is also expected to be reduced as a



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consequence of weaknesses of local airlines: LOT Polish Airlines is expected toreduce by about a third its fleet in 2013, and Aerosvit has ceased its operations inUkraine, at least for the moment. These two companies had a significant marketshare in 2012 (around 20% of international arrivals/departures) and the amount of their consequent traffic cuts is expected to be significant. This has been considered inthe assumptions of the forecast (see Annex C.2 ).

Northern Adriatic States are expected to see almost no additional traffic in 2013compared to 2012, in their most important flow which is overflights. The forecaststhere have been revised downwards mostly as part of the slower-than-expected trafficrecovery from North Africa 2011 disruptions. The forecast no longer includes anybounce back from these disruptions, just organic growth.

Estonian traffic has been significantly revised downwards after a strong growth in2012 mainly linked to its international departures that have grown by 25%. These arenow expected to significantly decline as the national airline plans to cut half of itsfleet, which will also impact the overall forecast.

Figure 17. States forecast detail for 2013.

With a 1.6% growth in GDP expected in 2014 (see Section 3), Figure 18 shows thatyear 2014 is expected to see traffic growth back (+2.8%, with a range between +1.4%and +3.8%). This is equivalent in terms of growth to what was expected in theSeptember 2012 forecast (+0.1 pp), except that the lower traffic expected in 2013 willgenerate consequently lower traffic levels than in the previous forecast.



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Figure 18. States forecast detail for 2014.

3.2%Morocco

4.2 Medium-term outlook (up to 2019)

After 2014, the traffic growth in Europe stabilises at around a 2.9% increase per year slowing somewhat from 2017 mainly as the airport capacity constraints become anissue (see Section 4.4 ). In 2019, traffic is expected to reach 11.2 million IFRmovements ( 1 million flights). The 2008 peak of traffic of 10.1 million flights is nowexpected to be passed only in 2016, thus a year later than expected in the September 2012 forecast, when traffic reaches 10.3 million flights ( 0.6 million). As Figure 22 shows, flight growth is expected to remain well below the pre-2009 long-term trendand is expected to remain below that trend. There are upside and downside risks tothis forecast which are detailed in Section 6.

Figure 19 and Figure 20 As show, the growth is not uniform across Europe. While thegrowth in percentage terms is clearly stronger in the East (more growth potential thanin the more mature Western markets), the busiest Western States (eg. Germany, UK)will see the highest number of additional movements between now and 2019 as wellas Turkey ( Figure 19 ). Turkey will remain the fastest grower and main contributor toEuropean traffic growth with turkish internals, in particular, being the flow adding themost flights over the next 7 years (see Figure 21 ). Flows from Turkey towards Russia,Germany, the Middle-East and Asia-Pacific are also expected to stand amongst thefastest growing in Europe.



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Figure 19. Average Annual Growth per State, 2019 v 2012.

Figure 23 shows the corresponding Figure 19 at functional airspace block (FAB) level.The Danube FAB is expected to have the highest average annual growth rate(+4.7%) followed by the Baltic FAB (+3.5%) over the next 7 years. FABEC (thebusiest European FAB with more than 15,000 flights per day in 2012), will experiencemore limited average annual growth rate of around 1.8%. In terms of additional traffic,FABEC is likely to add around 13% more flights in 2019 than in 2012, correspondingto around 2,000 more flights per day on average. Danube FAB is expected to bringnearly 38% more flights in 2019 than in 2012, adding some 770 flights a day. South-West FAB traffic growth is expected to remain the weakest of the FAB (+1.5%) over the 7 years (adding around 500 flights per day, on average). However this forecasthas been revised upwards by nearly 1% because of a stronger economic forecast for Spain (eg. increased by 0.7 percentage point in 2013). NEFABs average annualgrowth rate between 2012 and 2019 is around 1.8% per year on average,corresponding to around 350 flights per day, a revision downwards in particular linkedto weaker growth perspective in Finland.

Annex E gives the details of forecast traffic and growth per State and areas and

illustrate s the imbalance in growth.



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Figure 20. Number of additional movements per day for each state (2019 v2012).

Figure 21. Flows adding the most movements , 2019 v 2012.



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Figure 22. IFR flight growth in Europe will st ay persistently below pre-2009long-term trend.

-5

0

5

10

15

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020-10%

-5%

0%

5%

10%

15%

20%

25%

30%

AnnualGrowth

Long-TermAverageGrowth

ActualTraffic

Long-Term TrendBefore 2009

ForecastTraffic

F l i g h t s i n E u r o p e

( M i l l i o n

)

A n n u a

l G r o w

t h

IFR traffi c in Europe1960-2012 historical figures

2013-2019 forecast

EUROCONTROL 2013. w w w .eurocontrol.int/statfor

Figure 23. Average annual growth rates for FABs, 2019 v 2012.


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4.3 Comparison with previous forecast

Figure 24 illustrates that the current forecast (MTF13) for total Europe starts lower than the low scenario of the seven-year forecast released in September 2012(MTF12b). Over the first two years, the current base scenario (dark blue solid line) isnow following the low scenario issued in September (light blue dashed line). Indeed,following the deterioration of the economic outlook in 2013, the flight forecast is nowmuch lower for next year. With a further flight decline expected in 2013 andcomparable rates of growth in later years the forecast now expects for 2019 only aslightly higher forecast than the one for 2018 in MTF12b. In 2018, the forecast isexpected to be lower in MTF13 by 2.3%. We have thus nearly lost a year of traffic.

Figure 24. For Europe, current forecast stands below the low-scenario of theMTF12b in 2013 and will remain lower than the previous baseline.

Figure 25 depicts the size of the revisions in this forecast compared to the September 2012 forecast for total traffic per State in 2018, the last common year of these twoforecasts. Most of the forecast have been revised downwards except for Turkey andHungary. In the short-term, Maltese and Azerbaijan traffic have also been revisedupwards thanks to stronger recent traffic trends but this will not last after 2016 as their

economic growths have both been revised downwards.



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Figure 25. Forecast revision fo r 2018 per State (Sourc e: EUROCONTROL) .

4.4 Airport Constraints

Constraints at airports mean that demand for some 135,000 flights cannot beaccommodated by 2019, which means a 1.2% reduction in growth over 2012-2019. Just as traffic has been postponed by a year, the levels of unaccommodated demand have also been postponed by year. The location of the constrained airports sometimes also differs, as the set of airports withfuture capacity l imit s has been fully revisit ed for the Challenges of Growth 2013study.

This forecast uses a fully refreshed set of airport capacity figures covering some 105airports, building on:

The systematic work done for the update of the Challenges of Growth 2013study (Ref. 6 ), that is to say using a homogeneous source of data compiled bythe EUROCONTROL Airport unit from submissions from around 70 airports.The additional data received from STATFOR User Group members, especiallythe Navigation Service Providers who helped completing the above mentionedsample when the data was missing.

In the baseline scenario in 2019, demand for around 135,500 departures will not beaccommodated due to airport congestion ( Figure 26 , mainly in Norway, UK, France,Switzerland and Germany). This will reduce the growth in departures by 1.2% acrossEurope as a whole between 2012 and 2019. The reduction in growth will, of course,be more marked in the States with congested airports, and is more significant in thehigh-growth scenario.



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Compared to last year, there has been both a temporal and a geographical shiftlocation of the most constrained airports. Firstly, in the current forecast release, theairports in Europe will see an unaccommodated demand of around 50,000 departuresfrom 2017 whereas it was previously forecast between 2 and 3 years earlier in lastyears release.

Overall, a lower traffic forecast, and a complete revision of the capacity figures lead toa number of unaccommodated flights lower than the one in the previous seven-year forecast (excess demand of around 134,000 departures in 2018 in MTF12, see Ref. 7 compared to 88,000 in this forecast).

Figure 26. Impact of airport c onstraints.Unit: Reduction in IFR Departures when airport constraints are taken into account

Change in IFR Departur es (000s) Percentag e Change

2013 2014 2015 2016 2017 2018 2019 2013 2014 2015 2016 2017 2018 2019

High 3.9 32.3 87.4 101.9 166.8 253.1 372.5 0.0% 0.3% 0.8% 0.9% 1.4% 2.1% 3.0%Base 0.6 6.9 21.0 36.2 57.7 87.9 135.5 0.0% 0.1% 0.2% 0.3% 0.5% 0.8% 1.2%

Low . . . 0.8 8.2 18.8 31.1 . . . 0.0% 0.1% 0.2% 0.3%

4.5 High-Speed Train

Expansion of the high-speed train network reduces flight growth by just 0.4%over 7 years, though the local effects are more significant. In flight terms, thisis a slightly smaller impact than in the previous forecast over the wholehorizon.

In the forecast model, an improvement in travel times for rail leads to a reduction indemand for air travel. Figure 27 summarises the number of IFR departures that arelost to rail because of improvements in the high speed train (HST) network. The effectis around 0.4% in total over the 7 years of the forecast; which is small on the scale of the network as a whole. However, on specific city-pairs, the effect can be quite large,especially at the end of the horizon. A good part of the HST projects have beendelayed (postponed from 1 to 5 years and even not in the scope of this forecastanymore), not only due to the economic crisis but for some of them, because of environmental and political issues. Some others have been cancelled (eg. the Lisbonto Madrid link withdrawn in 2012). For these reasons and owing to the lower levels of traffic, the current reduction in traffic is smaller than in the MTF12 results (see Ref. 7)in which around 47,000 IFR departures were assessed to be removed in 2018 fromthe network. It is now expected that a reduction of 34,600 IFR departures only willhappen in 2018. The HST network is assumed to grow more slowly in the high flight-growth scenario, hence lower values for the High in the Figure 27 .

As far as States are concerned, Germany and Turkey will see the largest impacts interms of departures: reduction of nearly 14,000 and 25,000 IFR departuresrespectively in 2019 which correspond to around 1% and almost 3% of traffic(respectively) in the States. The effects are mainly due to the Nrnberg-Berlin andFrankfurt-Stuttgart lines in Germany and Istanbul-Ankara-Sivas and Istanbul-Konyafor Turkey. France and Netherlands are less affected with around 4,000 fewer IFR



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departures (each). Spain, where some of the projects have been affected by seriousdelays or even cancelled sees now a reduction of 0.3% of its IFR departures by 2018due to HST where the latter was estimated to remove around 2.2% in the MTF12results (same year of comparison).

Figure 27. Impact of high-speed train: reduction in IFR departures for ESRA08(top) and most affected States (bottom).Unit: Reduction in IFR Departures when airport High-Speed train network development in Europe istaken into account

Change in IFR Departur es (000s) Percent age Change

2013 2014 2015 2016 2017 2018 2019 2013 2014 2015 2016 2017 2018 2019

High . 0.9 2.7 10.7 22.0 19.1 29.7 . 0.0% 0.0% 0.1% 0.2% 0.2% 0.2%

Base 2.4 6.1 10.0 23.1 28.9 34.6 44.9 0.0% 0.1% 0.1% 0.2% 0.3% 0.3% 0.4%

Low 2.4 5.9 13.5 22.5 28.2 42.9 54.7 0.0% 0.1% 0.1% 0.2% 0.3% 0.4% 0.5%

Change in IFR Departur es (000s) Percentag e Change

2013 2014 2015 2016 2017 2018 2019 2013 2014 2015 2016 2017 2018 2019

France 0.9 2.4 0.2 2.2 4.4 3.0 3.7 0.1% 0.2% 0.0% 0.2% 0.4% 0.3% 0.3%

Germany . 0.1 0.1 0.6 2.0 7.7 13.8 . 0.0% 0.0% 0.1% 0.2% 0.6% 1.1%

Netherlands 0.9 2.0 2.0 2.8 3.6 3.6 3.7 0.3% 0.7% 0.7% 1.0% 1.2% 1.2% 1.2%

Spain . 0.3 1.6 2.7 2.6 2.2 2.1 . 0.0% 0.2% 0.4% 0.4% 0.3% 0.3%

Switzerland 0.2 0.3 0.3 0.2 0.1 0.3 . 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% .

Turkey . . 6.1 13.7 15.4 20.2 24.9 . . 0.9% 1.9% 1.9% 2.4% 2.7%

Base

UK . . . 0.5 0.9 0.7 0.7 . . . 0.0% 0.1% 0.1% 0.1%


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Figure 28: Summary of forecast of tot al service units in Europe.

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

2019/2012

Growth

H 123,438 129,108 135,243 142,077 147,783 154,155 160,305 32%

B 119,521 113,434 117,393 123,211 121,589 121,527 125,682 129,834 134,498 138,595 143,178 147,733 22%Total service units

(thousands)

CRCO11*L 119,576 122,018 123,888 126,531 128,540 130,960 133,479 10%

H 104,347 108,581 113,382 118,812 123,221 128,091 132,688 28%

B 104,941 98,057 100,579 105,126 103,572 102,768 105,722 108,934 112,558 115,644 119,120 122,526 18%Total service units

(thousands)

PScheme **L 101,153 102,659 103,971 105,942 107,330 109,063 110,864 7%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

2019/2012

AAGR

H 1.5% 4.6% 4.8% 5.1% 4.0% 4.3% 4.0% 4.0%

B 6.1% -5.1% 3.5% 5.0% -1.3% -0.1% 3.4% 3.3% 3.6% 3.0% 3.3% 3.2% 2.8% Annual growth

CRCO11

L -1.7% 2.0% 1.5% 2.1% 1.6% 1.9% 1.9% 1.3%

H 0.7% 4.1% 4.4% 4.8% 3.7% 4.0% 3.6% 3.6%

B 5.3% -6.6% 2.6% 4.5% -1.5% -0.8% 2.9% 3.0% 3.3% 2.7% 3.0% 2.9% 2.4% Annual growth

PScheme

L -2.3% 1.5% 1.3% 1.9% 1.3% 1.6% 1.7% 1.0%

* CRCO11 designates the sum over all the states participating in the Multilateral Route Charges System in 2012 of all TSUeither measured or forecasted for the corresponding year.** PScheme stands for the sum over all the 29 states that are currently involved in the EU-wide performance target setting (27EU member states plus Norway and Switzerland)

Figure 29: Comparison 2012-2017 of the forecast between the current forecastand September 2012 for CRCO11 Area.


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Figure 30. Average annual growth of serv ice uni ts between 2012 and 2019

Average Annual Growth Rates 2019 v 2012



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6. RISK TO THE FORECAST GROWTH

Users of the forecasts are strongly advised to use the forecast range (low-growth to

high-growth) as an indicator of risk. These flight and service units forecasts areprepared in the conditions of unstable economic situation with serious risk of further aggravation and downside effects on traffic development.

The main sources of uncertainty in the forecast are:

C.1The economic forecasts (Annex ) used here were updated in January 2013.The economic outlook remains uncertain and the return to growth has beendelayed. Experience of recent years suggests that we could still see further downward revisions in growth, and further delay of the recovery . The lowscenario provides some guidance here.Despite actions to ensure the stability of the Eurozone banking system, thepotential for some States to leave the Euro has not gone completely. Even apartial eurozone break-up has the potential to take traffic below the low forecast.Along with the actual uncertainty in economic growth, severe cuts in spending andtax hikes have been put in place by European States to balance their budgets (eg.Spain, France). Such state control measures might lead to industrial unrest . Thesame applies for the private sector where air industry operators might have tohandle protest from the workforce against saving plans (day-to-day flightdisruption). These represent a downside risk for future traffic development aspresented in this report.

Load factors remain at or near record highs. When traffic begins to grow again,this means that load factors will be able to absorb less of the passenger growththan they have in past years. The forecast includes assumptions about the futuredevelopment of load factors, but from the present position, the eventual recoverycould come more rapidly than anticipated.Network changes and the route choice of airlines have a large influence on thenumber of overflights. The events of 2011 in North Africa have had an importantimpact on overflights particularly for Italy and Malta. There remains the possibilityof additional network disruption , for example around Syria.More generally, future network changes (eg. new routes) are not modeled by theforecast. The possible opening of Kosovo airspace is an up-side risk for someStates, but a downside risk for others.

Tourism trends are quite variable. The medium-term forecast aims to beaccurate over the seven-year period, rather than identifying which will be the newholiday destination of preference in a given year. The recent political instability inboth Egypt and Tunisia has led to more variability in tourism destinations.

Oil prices remain changeable with oil being increasingly an item of speculationand investment. With fuel accounting for 25-35% or even more of costs of theairlines, this can have an effect on fares and cost of travel for customer.Participation of aviation in the Emission Trading Scheme , currently under intense debate, was not integrated into this forecast. However, such regulatorymeasures (eg. new tax regimes or further environmental limits) contribute to theuncertainty of air transport growth, can be introduced rapidly and change the localoutlook for flight growth.



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Terrorist attacks, wars and natural disasters . The last seven years have notbeen quiet ones for aviation. There is no reason to believe the next seven yearswill be uneventful, with the effects of a further volcano eruption or an H1N1 flupandemic being some of the risks. The impact on air traffic could be a temporary

one, or more significant.



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7. GLOSSARY

AAGR Average annual growth

ACC Area Control Centre AEA Association of European AirlinesB (in tables) Baseline ScenarioCFMU Central Flow Management Unit 2 CRCO11 Current states participating to the Multilateral Route Charges SystemESRA Eurocontrol Statistical Reference Area (see Annex B.1 )ETS Emission Trading SchemeEU27 European Union (27 States)FAB Functional Airspace BlockFIR Flight Information RegionGDP Gross Domestic ProductH (in tables) High-Growth ScenarioICAO International Civil Aviation OrganisationIFR Instrument Flight RulesL (in tables) Low-Growth ScenarioMTF Medium-Term ForecastMTF12 February 2012 publication of the MTFMTF13 February 2013 publication of the MTFMTF12b September 2012 publication of the MTFMTOW Maximum Take-Off WeightOE Oxford Economics Ltdpp percentage pointPScheme States involved in the Performance scheme first period of reference

(EU27, Norway and Switzerland)SES Single European SkySID STATFOR Interactive DashboardSTATFOR Eurocontrol Statistics and Forecast ServiceSTF Short-Term ForecastTR Traffic Region (a grouping of TZs)TSU Total Service UnitsTZ Traffic Zone ( State, except for Spain, Portugal, Belgium and

Luxembourg, Serbia and Montenegro)UIR Upper Flight Information Region

Detailed explanations of the above terms are available in EUROCONTROL Glossary

for Flight Statistics & Forecasts (Ref. 8 ).

2 Now Directorate Network Management but still referred to as CFMU for traffic data.


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ANNEX A. FORECAST METHODS

A.1 Flight ForecastThe forecast reported here combines the EUROCONTROL Short- and Medium-Term Forecast methods. The short-term forecast is strongly influenced byanalysis of recent trends. The medium-term forecast takes into account abroader range of economic and industry developments.

Short-Term Forecast Method: The short-term forecast focuses on time-seriesmodeling of traffic trends month-by-month. The final result is in terms of numbers of flights per month per pair of zones or regions: within Europe origin-destination zonesare used (groups of airports often smaller than States); outside of Europe, largeregions are used (groups of States). Four separate forecasts (with differing horizonsand time and geographical resolution) contribute to the forecast as a whole (seeFigure 31 ):

The State-flow method forecasts each State separately, and within the State,separate forecasts for a few main flows: internals, overflights andarrivals/departures.The zone or region-pair forecast is largely based on time-series methods for some 9000 series.The schedule method uses data from published schedules for future months, andcomparisons of previous schedules with actual flights.The first years of the medium-term forecast (see below) also contribute to thefinal view of future traffic for the first two years.

The combined forecast is then capped by airport capacities, using the same methodas used in the medium- and long-term forecasts. The result is then integrated into themedium-term forecast, as described in the next section.

Figure 31. Summary of short -term forecast method.

Historical Archive:Monthly Airport-Pair Data

Short-term Forecast Medium-Term Forecast(Parts of method only)

Zone/Region-Pair Forecast Method

ScheduleForecast Method

Historical Archive:Published Schedule

Combine

Supporting Data:-Events-Calendars

State-FlowForecast Method

Apply annualcapacities

Initial Airport-Pair Forecast

Aligned Airport-Pair Forecast

Final Airport-Pair Forecast

FinalForecast

ForecastOverflights



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Medium-Term Forecast Method

STATFOR produces medium-term (seven years ahead) forecasts of annual numbersof IFR flight movements for volumes of airspace called traffic zones. Traffic zonesare typically States, but Spain and Portugal are split into two, and Belgium &

Luxembourg and Serbia & Montenegro are combined. Larger aggregate regions,such as the 27 EU States, are also included. For each traffic zone, forecasts arepublished for the main region-to-region flows (Annex B.2 defines these traffic regions)on the STATFOR Interactive Dashboard (Ref. 9 ). Traffic flows are also categorisedas internals (within the traffic zone), arrival in or departure from the traffic zone, andoverflights (neither departing from nor landing in the traffic zone, but passing throughits airspace).

The forecast is published annually, at the beginning of the year and refreshedmid-year to support the capacity planning process. Key features of the method are:

Development of a core, airport-pair forecast which, at each update of themedium-term forecast, is shared by medium- and short-term forecasts;

The demand-side model focuses on economic growth and its influence ondemand from travellers and shippers;

A supply-side model is used to forecast growth directly on airport pairs, andreplaces the traditional demand-side model when appropriate;

Specific models for some market segments, such as business aviation and alow-cost effect;

The forecast is constrained by annual airport capacity.

The overflights are calculated using the airport-to-airport routing in thebaseline year, plus more recent trends captured by the short-term forecast

method.The forecast method is continuously being refined to improve the quality of theoutputs. For this forecast, the emissions trading scheme is integrated into theforecasting process, and the supply-side modeling has been adapted to handle better the recent cases of decline over several years for some flows. The forecast process issummarised in Figure 32 .

The review body for STATFOR is the STATFOR User Group. This has members fromcivil aviation authorities and air navigation service providers, and from other industryorganisations. Participants are typically actively involved in statistics or forecasting.The STATFOR User Group meets once or twice per year. It reviews the inputs to themedium-term forecast and the resulting draft forecast. The aim of the review process

is to produce a forecast which is consistent on a European level and acceptable tomember States. This does not necessarily mean the forecast is the same as thatproduced nationally.

The forecast is built from three main datasets.

A historical database of the STATFOR monthly statistics (derived from CRCO,Network Manager and National sources) for the last ten or more years atairport-pair level;

A baseline from Network Manager and National sources that includes routinginformation;

The set of scenario inputs.



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Figure 32. Preparation process of the Medium-Term Forecast.

The Medium-Term Forecast uses three scenarios which differ in terms of theassumptions. The low-growth and high-growth scenarios between them capture the

most-likely range of future growth in flight movements; the baseline scenario indicatesa likely position within this range. The main parts of the scenario data are:

Economic growth, summarised as GDP growth forecasts in real prices in localcurrency; (Annex C.1 )

Network change, a percentage adjustment to arrival and departuremovements per traffic zone, which can be used - given supporting data - torepresent in the model the effects of consolidation, irregularities in thebaseline, or local one-off effects; (Annex C.2 )

Low-cost growth, which adds additional flight movements, on top of economicgrowth to reflect new flight movements generated by low-cost airlines; (Annex

C.3 )Load factors, which are assumed to change linearly from a current level to afuture level that can vary with region and scenario; (Annex C.4 )

High-speed train network, summarised as changes in rail travel time on citypairs served by high-speed links, compared to the baseline year; (Annex C.5 )

C.6 )Airport capacity, in movements per year for major airports; (Annex

Demographic change, which has a very small impact in the demand-sidemodel. These data are derived from UN population forecasts.

Emission Trading Scheme characteristics, prices of CO 2 allowances, cap onhistorical CO 2 emissions and the level of auctioning in the ETS determine the



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A.2 Service Uni ts Forecast

The overall forecast method and tool have been finalised in the first half of 2010. Theforecasting methodology is in two parts (see Figure 33 ), the short-term forecast andmedium-term forecast being produced by two independent means. However; thesetwo forecasts are later realigned for the first 2-year look ahead period, the scope of the short-term forecast, to account for the fact that the short-term forecast, which isbased on time-series modelling of trends and seasonal and cyclical patterns in actualmonthly service units, is usually better in capturing latest developments and givingthe short-term outlook.

The short-term forecast is based on time series analysis, using actual monthly data of total service units recorded in the route charges system from January 1990 (or firstmonth of operation in the route charges system). The latest EUROCONTROL flightforecast and medium-term forecast of service units prepared are used as supportinginformation in developing this forecast of service units. The actual data for April andMay 2010 have been adjusted for the drop in service units due to flight cancellations

resulting from the eruption of the Eyjafjallajkull volcano. Some local corrections werealso introduced to compensate for some loss of service units that could be attributedto local strikes or bad weather disruptions. In doing so, we avoid some exceptionalevents to be captured as being part of the normal evolution pattern of the serviceunits.

Figure 33. Service units forecast method .

STF & MTF

Alignment

UnalignedSTF

UnalignedMTF

Short TermFlightForecasts(STF)

AlignedSTF

Short Term SUForecasts(ST-SUF)

UnalignedST-SUF

AlignedST-SUF

Medium TermFlightForecasts(MTF)

AlignedMTF

MediumTerm SUForecasts(MT-SUF)

UnalignedMT-SUF

AlignedMT-SUF

ST-SUF & MT-SUF

AlignmentHistoric averageaircraft weight

Historic averagedistance flown

Forecastweight factors

Historic TSU data

Forecast

SU data

Forecastdistance factors



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The method for the medium-term forecast of the service units adopts the structure for calculating the en route service units in reality: it combines forecasts of distancefactors and weight factors with the number of flights as forecast by the latestEUROCONTROL Medium-Term Forecast of flight movements, thus making these twoforecasts compatible. The future distance and weight factors are derived fromobserved historical trends in average flown distance and average MTOW of aircrafton arrivals, departures, internals and overflights in each charging area.

For managing risk related to future traffic uncertainty, in addition to a base centralfigure the medium-term forecast produces also high and low values. Overall, thefuture total service units can be expected to be between these about half of the time.The EUROCONTROL forecast of service units is impartial in that it uses the samemethod for all the States. However, users should note that for the medium-termforecasts, the forecast modelling as well as the results are based on a relatively shorthistory of data (starting mostly in January 2003) which did not allow full assessmentof the forecast performance for the complete five-year horizon and thus its resultsshould be treated with care.



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ANNEX B. TRAFFIC REGION DEFINITONS

B.1 ESRA08The EUROCONTROL Statistical Reference Area (ESRA) is designed to include asmuch as possible of the ECAC area for which data are available from a range of sources within the Agency. It is used for high-level reports from the Agency, whenreferring to 'total Europe'. The ESRA changes only slowly with time; a region is addedto the ESRA only when there is a full year's data from all sources, so that growthcalculations are possible. ESRA08 was introduced in the MTF09 report. It is nowused as a basis for comparison at European level in the forecasts. Note that theEUROCONTROL forecast includes also regions outside of the ESRA (eg. Armeniaand Latvia) though still within ECAC.

Figure 34. The EUROCONTROL Statistical Reference Area.

Traffic zones are represented by an aggregate of FIRs & UIR of States. These do nottake delegation of airspace into account. For individual States, the differencesbetween charging areas and ACCs can have a big impact on overflight counts (andthus on total counts where the total is dominated by overflights). For the ESRA as awhole, there is only a small proportion of overflights, so that the difference between aFIR and an ACC definition is small.



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Figure 36. Map of the Traffic Regions used in f low s tatistics as of 31 August2012.

The substantial changes brought by the new Traffic Region definition (compared tothe previous one, shown in Figure 37 ) are:

A large region named Asia/Pacific now covers the Far East and Australasiaregions. The old Former CIS region has been redistributed between Other Europe and Asia/Pacific. And the former Oceania region has disappearedbeing fully integrated into Asia/Pacific;

Other Europe stands for the complementary part of ESRA. Greenland andIceland have been integrated into this region and no longer contribute to theNorth American traffic;

Sudan and South Sudan have been moved to Southern Africa;

Afghanistan and Pakistan no longer belong to the Middle East; they nowbelong to Asia/Pacific.



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Figure 37. Map of the Traffic Regions used in f low st atistics before 31 August2012.

B.3 Functional Airspace Blocks

On top of the traffic zones, this report also presents the forecast of IFR movements from2013 to 2019 for the Functional Airspace Blocks (FAB). A FAB is a block of airspacebased on operational requirements regardless of the State boundaries ( Figure 38 ). FABinitiatives (definitions) are constantly evolving according to the targets defined to improve

the performance of the European air traffic management network. The FAB initiativeshave been updated in August 2012 along with the new definitions stipulated by theEuropean Commission. The following FAB modifications have been covered here:

UK-Ireland FABDanish-Swedish FAB, now out of North European FABBaltic FAB (Lithuania, Poland)BLUE MED FAB (Albania, Cyprus, Greece, Italy and Malta), now excludesTunisia and EgyptDanube FAB (Bulgaria, Romania)FAB CE (Austria, Bosnia & Herzegovina, Croatia, Czech Republic, Hungary,Slovak Republic, Slovenia)FABEC (Belgium, France, Germany, Luxembourg, the Netherlands andSwitzerland)North European FAB (Estonia, Finland, Latvia, and Norway)South West FAB (Portugal [Santa Maria FIR excluded], Spain).



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Figure 38. FAB ini tiatives as o f August 2012.Source: EUROCONTROL PRU



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Figure 40. Summary of changes in GDP forecast s for 2012-2014 for EU27:constant downward revisions from end 2011.

Source : Oxford Economics

The Euro crisis has strongly hit the economy of European countries in 2012 and 2013is no longer expected to bring signs of a significant recovery. Some states areexpected to remain in recession with the biggest contractions expected for Greece(-4.3%), Portugal (-2.6%), Cyprus (-2.3%), Slovenia (-1.5%), Spain (-1.3%) and Italy(-1.2%). However these falls are expected to be less strong than in 2012 and theeconomies of these countries are expected to stabilise in 2014 (except for Greecethat is expected to remain in recession in 2014) or slightly grow before coming backto moderate growth from 2015. On the plus side, Turkey is expected to grow by 4.3%in 2013 and by more than 5% in the following year. GDP growths in France (0%),

Germany (0.9%) and the UK (1%) for 2013 have also been revised downwards for 2013 since the last forecast.

Overall, 2013 is expected to see almost no growth in Europe, with a GDP growthexpected to stand at 0.1%. In the following years, the growth rates will increase toaround 1.4% in 2014, and stabilise around 2% towards 2019, well below the pre-2008levels (average annual growth typically around 3.5%-4%). This lasting revisiondownwards, even in the medium-term, is one of the main noticeable points for thisforecast.

The North Africa region, here, gives the GDP growth only for a limited number of states whose GDP is not provided explicitly to the forecast model.



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Actual Base

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Turkey 9.2% 8.5% 2.6% 4.3% 5.6% 5.3% 5.3% 5.3% 5.3% 5.3%

UK 1.8% 0.9% 0.1% 1.0% 2.1% 2.4% 2.5% 2.4% 2.5% 2.6%

Ukraine 4.1% 5.2% 0.6% 2.4% 4.6% 4.1% 3.9% 3.9% 4.2% 4.2%

Figure 42. GDP growth by Origin-Destination Zone.Source: 1993-2004 from STATFOR records. 2005 onwards from Oxford Economics Ltd, Jan 13.Comments: Real GDP Growth in local currency.Units: Growth per year. Data last updated: 15/01/2013

Actual Base

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Brazil 7.5% 2.7% 1.0% 3.9% 4.9% 4.8% 4.3% 4.3% 4.2% 3.9%

China 10% 9.3% 7.7% 8.3% 9.0% 8.5% 8.0% 7.5% 7.4% 7.2%

India 8.9% 7.5% 5.4% 6.0% 7.5% 7.9% 7.8% 7.7% 7.7% 7.7%

Israel 5.7% 4.6% 3.3% 3.0% 4.5% 4.3% 4.0% 3.6% 3.6% 3.6%South Africa 3.1% 3.5% 2.5% 3.0% 4.2% 4.4% 4.7% 4.6%