Aviation creates exceptional value for Europe, supporting nearly 12 million jobs and helping to add some $860 billion to the European Union economy.

The European aviation framework, however, is a hindrance and not a help to the industry. If air transport is to develop those figures to their full potential, connectivity must be allowed to flourish [see Figure 1]. Several bottlenecks to growth must be overcome, starting with Europe’s airspace.

Wasted capacity

A recent study by SEO Economic Research, commissioned by IATA, reveals the extent to which airspace capacity is wasted. Flight trajectories in Europe are on average about 50 kilometres longer than necessary and delays amount to about 10 minutes per flight. Further costs are incurred as Europe loses itself in a maze of 38 air navigation service providers (ANSPs) in an airspace similar in complexity to the United States, which has just a single ANSP. If left unchecked, by 2035 these inefficiencies will cost Europe €245 billion ($280 billion) annually, and some one million jobs will go unrealized.

The modernization benefits in cost savings and therefore potential ticket price cuts are substantial [See Figure 2]. Forty three euros could be the saving per passenger with the full benefits of modernisation.

“Air traffic management inefficiency  is not just a burden for airlines,” says Tony Tyler, IATA’s Director General and Chief Executive Officer. “Travelers suffer wasted time from delays. The environment suffers from avoidable emissions. And businesses face reduced productivity. Combined, all of this has a cost on Europe’s competitiveness. And the cost is shared broadly. Every European—individual or business—has a stake in this issue.”

The big modernization idea is the Single European Sky (SES). Progress on SES has been slow and many ANSPs have not achieved even the watered-down targets. Between 2012 and 2014, en-route air traffic flow management delays increased while the cost per flight was higher than targeted, at €54.13 vs €53.92, according to the Performance Review Body Annual Monitoring Report 2014.

“Europe has failed in achieving the SES goals,” affirms Tyler. “Despite a strong European Commission vision and push for SES, misguided national interests have prevailed.”

IATA, the Association for European Airlines, and the European Regions Airlines Association developed an airline blueprint for SES that highlights three key reforms:

A binding performance scheme. This should be established through an independent European regulator for air navigation charges, which could set targets for each country or functional airspace block and demand appropriate corrective measures when necessary.

The rationalization of ATM structures. Services should be opened to competition, the number of air traffic control centers across Europe cut from 68 to not more than 40, and the ratio of back-office staff to ATCOs reduced from 2.4 to 1.6.  

A more efficient network. Significant progress on SES is unlikely to be achieved without an independent economic regulator for air navigation charges. Though the SESII+ package was supported by the EU Parliament, it is opposed by most of the larger EU member states. SES has high-level goals, including a three-fold increase in capacity, a reduction in environmental impact of 10% and a 50% reduction in the cost of providing ATM services to airlines. But, so far, the project has achieved only low-level success.

No room to grow

There is room for improvement on the ground, but too little room to grow. The interminable saga of London Heathrow’s third runway illustrates the problem. A firm decision has yet to be taken and, even assuming a positive answer, a third runway is likely a decade or more away. Yet Heathrow operates in excess of 99% capacity already.

There are similar capacity crunches—and similar expansion difficulties—at other European hubs. Berlin Brandenburg, not due to open for another 18 months is the prime example while Munich’s new runway is subject to an approval process that has lasted a decade already.

In its 2012 baseline year, Eurocontrol identified six airports that operated at 80% or more of their capacity for more than three hours per day. In 2035, the organization reports that 30 airports will have reached that point. It argues in its Challenges to Growth study that “with this future level of congestion, it becomes difficult to accommodate minor deviations from plan, and delays begin to accumulate rapidly.”

Eurocontrol estimates unaccommodated demand in Europe will reach 1.9 million flights by 2035, assuming moderate levels of growth. A high growth scenario sees that figure soar to 4.4 million.

There are airport development plans to alleviate the problem. Notably, a new airport should come online in Istanbul in early 2017 to support the success of Turkish Airlines, while Frankfurt will benefit from a new terminal due to open in 2022. The industry is also eking out every opportunity in the existing infrastructure. Of the 168 slot-constrained airports in the world, 101 are in Europe. IATA’s Worldwide Slot Guidelines are accepted best practice in managing access to congested airports. And such projects as IATA’s Fast Travel are embracing the latest technology to enhance automated processes and increase passenger throughput without increasing an airport’s footprint. But these tweaks, impressive as they are, are no substitute for more gates and more runways. The ship of unaccommodated demand may already have sailed. “We do see some efforts in Europe to address the capacity issue,” says David Stewart, Head of Airport Development. “In general however, these efforts are sporadic and are missing a perspective on both immediate and future industry needs. In addition, a lack of political will results in stagnant European hub airports which make resolution of capacity issues even more complex and expensive.”

Without hub capacity, the European network structure could fracture as regional flights are squeezed out in favor of more profitable flights that handle a bigger number of passengers.

Secondary airports would not necessarily be the panacea, relying largely on links to the local hub. And as by definition they serve secondary markets, they cannot greatly affect demand for capacity at hub airports.

Regulatory burdens

Any solutions to loosening bottlenecks need complementary regulations. “It is important to note that due to the many regulatory burdens imposed on airlines and operating restrictions imposed on airports, the existing physical capacity cannot always be used efficiently,” says Krešimir Kuko, Croatia Airlines’ President and CEO.

Night curfews and the delay in approving self-printed baggage tags for departures from the EU are clear obstacles. But, regulations are dampening connectivity in other ways too.

A proposed revision to EU261 indirectly affects regional connectivity. Putting the onus on the first carrier in an interline journey that suffers delays or missed connections will naturally make that carrier think twice about entering such an agreement. As that first carrier is often a smaller, regional business and as the compensation could be many times the ticket price, the likely outcome is that regional services will be reduced, affecting customer convenience.

IATA calls for a smarter regulation approach that is aimed at solving real problems, aligned with global standards, and implemented efficiently. The best way to achieve this is through consultation with key stakeholders and a rigorous cost-benefit analysis. The smarter regulation formula is all too rarely followed,” says Tyler. “As a result, we spend as much time trying to amend ill-conceived regulations as we do trying to build useful ones.

“We see this in Regulation 261. Once a regulation is on the books, it becomes very difficult to control, let alone amend.”

Closing the gap

Tyler accepts that predicting the future for European aviation is fraught with uncertainty. He notes, however, that the present, “already shows a clear gap,” in terms of aviation benefits—between what could be and what is.

Reducing that gap as much as possible, as quickly as possible, would produce real value for the air traveler and for European economies.

“Aviation is important to Europe,” concludes Tyler. “I believe that governments will gain tremendously by recognizing our common interests and paying even more attention to the sector’s needs. And by addressing infrastructure challenges, building a smarter regulatory framework, and earning a license to grow from achieving its sustainability targets, there is nowhere to go but up for aviation—in Europe and globally.”

Germany Case Study

Aviation supports 1.12 million German jobs and contributes €77 billion to German gross domestic product. But these benefits are under pressure from airport infrastructure challenges, the overall inefficiency of European airspace, and onerous taxes.

Berlin Brandenburg Airport has suffered years of delay and cost overruns, for example, and is unlikely to open for full operations until the end of 2017 at the earliest. Meanwhile, a 2010 ban on night flights at Frankfurt has pushed cargo on to the road network, resulting in higher costs and more carbon emissions.

And if European airspace isn’t modernized, Germany would lose out on 158,000 jobs and €45 million by 2035.

The €1 billion German departure tax compounds these problems. “Adding €1 billion to the cost of connectivity with the departure tax is counter-productive,” says Tony Tyler, IATA’s Director General and CEO. “Removing it would support job creation, boost trade, and make Germany a more attractive destination for both tourism and business.”

European PNR

The EU PNR directive states the required format for passenger information should be the globally agreed common data format recognised by ICAO Doc 9944 and by the World Customs Organization. This alignment with global rules is a positive move by the EU, but going forward, it is essential that the European Commission ensures that member countries follow this directive and indeed develop harmonised systems.

Recognizing aviation’s benefits

The EU Aviation Strategy has been broadly welcomed, illustrating that, from a political point of view, the European Commission has recognized the importance of aviation. The overall tone of the document clearly mirrors the industry’s campaign on the benefits of aviation and overall it provides a fair assessment of the challenges the aviation industry is facing.

“This is a crucial moment for the European airline industry as it is now being recognized as a priority by the EU institutions”, says Athar Husain Khan, CEO of the Association of European Airlines (AEA). “AEA will continue to engage with the Commission and the European decision makers to promote concrete solutions to the challenges of European airlines.” He adds that now, “it is important to move forward and turn the proposals into concrete, ambitious actions.”

There are issues with the EU Aviation Strategy, such as the weaker regulatory environment for airport charges. Airlines argue that airports are failing to match their efforts to reduce costs and provide better value for money for consumers. Since 2000, the price of air tickets has fallen by 37% whereas airport costs per passenger have risen more than 30%, both in real terms.

“Airports and airlines are partners,” says Tony Tyler, IATA’s Director General and CEO. “The best relationships are where we consult transparently to agree on what kind of infrastructure needs to be built, at what cost and at what service levels. But it is not a partnership of equals. Airports are monopoly providers. With a few rare exceptions where market power assessments reveal that there is competition between airports, an independent regulator is needed to balance the airline/airport relationship.”

What does airspace inefficiency cost an airline?

According to the University of Westminster a 30-minute delay of a Boeing 737-800 costs approximately €1,170. This increases to €28,390 for a three-hour delay. SESAR suggests that airspace modernization could reduce delays 10%–30% by 2035, resulting in substantial airline cost savings and passenger benefits too.