The Most Fascinating Part of the World for Airlines So Far This Year

There’s never a dull moment in the airline industry, and there’s never really a dull region. At Skift Airline Weekly, we took a hard look at how the first half of this year treated the airline industry in each region of the world. But if we had to pick a region of the world that was the most interesting in the first half of 2019, we’d pick Europe. Why? Several airlines went under, and established players couldn’t figure out how to make money on short-haul flights. That’s the bad news.

The good news? Strong transatlantic demand to North America and strong trans-Siberian demand to northeast Asia, supporting carriers like IAG, Air France/KLM, Lufthansa, Finnair, Virgin Atlantic, SAS, and TAP Air Portugal.

On the flip side of the coin, short-haul, intra-European markets are grossly oversupplied, most importantly in Germany and Austria. This even caused Ryanair to report uncharacteristically rough winter losses.  It was too much for the smallish Germania to handle. Wow Air perished as well, unable to take advantage of benign transatlantic conditions. Flybe was headed for the same fate before being rescued by a group led by Virgin Atlantic. Air France closed Joon, an ill-defined short- and long-haul unit.

Giving up on its airline business, Thomas Cook decided to put the unit up for sale. Alitalia, also up for sale, can’t seem to attract enough willing takers. Norwegian abandoned its aggressive growth plans. Lufthansa is taking a similar approach with Eurowings.

Will this lead to the short-haul capacity correction Lufthansa for one is hoping for? Maybe, but Air France is looking to expand Transavia and the Ryanair-easyJet-Wizz Air triumvirate is still expanding aggressively — Wizz is even adding more planes in places like London (Brexit be damned) and Vienna (a market that resembles the final scene of the latest “Avengers” movie).

That said, industry capacity growth within Europe is indeed muted, to some degree influenced by Boeing 737 Max unavailability at carriers like Norwegian, TUI, and Icelandair. But even as the supply outlook brightens, carriers like Lufthansa fret over the demand implications of a slowing exports (already affecting cargo markets) and the emerging phenomenon of flight shaming. That’s already a problem for SAS, whose Nordic markets are most affected by a social movement against flying, viewed as an enemy in the struggle to stop climate change.

The rest of the industry hopes it’s not another ABBA in the making: a Swedish phenomenon, like the 1970s-era band, that quickly spreads abroad. SAS, for its part, isn’t as close to its Waterloo as Norwegian. But a first-half pilot strike hurt badly.

Don’t cry for Ryanair. It will be fine. But one of its current problems is heavy exposure to the U.K.-Spain market, where it vies with easyJet and Jet2 as the largest player. With Brexit woes, pound weakness, and a revival of leisure demand to North Africa and Turkey, that Spanish tourist market is hurting. Ryanair has unions to deal with now too. How is it grappling with that challenge? In part, by following the IAG playbook and amassing a collection of different operating units based in different countries, i.e. Ireland, the UK, Austria, Poland, and most recently Malta. In assembling its collection, Ryanair showed it’s willing to buy other small airlines.

For our take on more regions of the world in the first half of 2019, sign up here for Skift Airline Weekly.