The summer period will be critical for airlines as they continue to focus on restoring operations.

Europe's three big airline groups are benefiting from high demand heading into summer and want to capitalise any opportunities for market share.

International Airlines Group (IAG), Air France-KLM and the Lufthansa Group have forecasted strong third quarter available seat kilometres (capacity) in their quest to close the gap with 2019 levels, and also to gain market share.

IAG
IAG continues to restore operations and route networks to match pent-up demand and the Group’s capacity is expected to be around 65% of 2019 levels in the first quarter of this year.

By the third quarter of 2022, IAG is planning approximately 90% of 2019 capacity, including almost 100% on North Atlantic routes.

For the full year the group anticipates around 85% capacity of 2019 levels, assuming no further negative developments related to Covid-19.

Aer Lingus' capacity plan forecasts circa 90% of 2019 levels for the full year. The Irish subsidiary plans to end the first quarter at approximately 70% of its 2019 levels.

Aer Lingus is making progress to restore its North Atlantic network and plans to achieve 90% of 2019 levels by the third quarter. It is preparing its Manchester base for the peak summer season and has started its regional airline franchise through its agreement with Emerald Airlines since February.

British Airways hope to end the first quarter at 60% of 2019 levels in terms of available seat kilometres. For the full year the UK carrier’s forecast is 80% of 2019 levels, with a strong emphasis on restoring its North Atlantic network to almost 100% by the third quarter.

British Airways is also working on restoring its short-haul network by the second quarter and plans to re-start operations from London-Gatwick airport with a more efficient operating platform.
Spanish subsidiary Iberia is less exposed than British Airways on key recovering markets, notably Asia and North America, and expects to end the year at circa 90% of its 2019 levels.

In 2022 the Madrid-based carrier has prioritised the restoration of its Latin American network to maintain increased market share by the fourth quarter. Iberia is also pushing capacity domestically.

Vueling Airlines plans 70% capacity in the first quarter but has outlined a series of measures to target 95% capacity of its 2019 levels for the full year. The Barcelona-based low-cost carrier will push for expansion at two of its key European airports, Paris-Orly and London-Gatwick, as well as reactivating all aircraft. It aims to achieve 100% operations domestically by the second quarter and internationally by the fourth quarter.

IAG said Capex in 2022 will be around €3.9 billion, reflecting the need to rebuild capacity towards pre-pandemic levels, the delay of aircraft deliveries from 2021 and certain pre-delivery payments deferred from previous years.

The group anticipates an operating loss in the first quarter due to normal seasonality, the impact of Omicron on near-term bookings and the impact on operating cost of rebuilding capacity. However it expects to be profitable from the second quarter onwards.

Lufthansa Group
The Lufthansa Group reported 60% capacity on its network in the fourth quarter versus the 2019 quarter. For the whole year of 2021, group capacity was 40% of 2019 levels.

In Europe Lufthansa Group's capacity was 72% in the fourth quarter versus the 2019 quarter. For the whole year, group capacity was 47% of 2019 levels on its European network.

Lufthansa has focused on costs in its capacity analysis for 2022 to drive a reduction in unit costs. It said that regional and leisure-focused group airlines offer significant cost and productivity advantages over its network airlines like Austrian Airlines, Brussels Airlines, Swiss and Lufthansa.
As a result, regional airlines will take over more short-haul routes and leisure-focused airlines more touristic routes from network carriers in 2022 as part of plans to significantly reduce unit costs by 2024.

In the first quarter the group anticipated capacity at circa 60% of its 2019 levels but plans are in place to ramp up capacity to around 85% of 2019 levels in the third quarter or summer period.

Lufthansa Cityline and Air Dolomiti will operate at 110% capacity levels in July compared with 2019. Leisure carriers Eurowings and Edelweiss will be close to 100% capacity levels, while network carrier scheduled flights for July will represent 80% of 2019 levels.

For the full year the group has targeted approximately 70% of its 2019 levels on its network including 85% on its short-haul network. Lufthansa Group said plans to ramp-up its capacity plans depend on the return of demand.

Air France-KLM Group
Air France-KLM plans to operate at full capacity in 2024. In 2021 network passenger capacity improved to 72% of 2019 levels by year-end, from 48% in the first quarter.

In the first quarter of this year, Air France-KLM anticipates capacity at 73-78% of 2019 levels. No guidance has been provided for the full year.

A detailed analysis on the first quarter shows the impact of the Omicron variant in January when domestic capacity represented 36% of 2019 levels. This has gradually improved to mid-50% since.

The group said 2022 is still affected by the health situation, but the trend is now positive again, driven by small- and medium-sized company travel.

“Several major multinational companies are starting (or planning) to resume travels following their internal partial travel freeze after two months,” it said. “We continue to strengthen our relationship with the accounts to gain market shares and prepare the future with a focus groups with top accounts.”

The Transavia and Transavia France low-cost subsidiaries have recovered quickly. Air France-KLM said capacity in the second half of 2021 was close to 2019 levels thanks to Transavia France’s growth.

Fuel hedging policy
All three airline groups had relatively solid fuel hedging policies in place at the end of February.
Lufthansa has hedged slightly less than two third of its fuel requirements this year while IAG is at 60%.

Air France-KLM hedged 72% (at $749/metric tonne) of its fuel requirement for the quarter, while IAG and Lufthansa Group were at 70% ($690/mt) and 74%, respectively. 

In the second quarter all three carriers are in the 63-65% hedging zone.

However Air France-KLM has low hedging for the remaining year with 42% and 28% (at between $837-847/mt) in the third and fourth quarter. In comparison, Lufthansa Group has hedged 61% and 55% of its fuel requirements.

IAG's second half hedging is 56% ($845/mt) and 45% ($870/mt) for the third and fourth quarters.