The weather in the United Kingdom may be below average this summer, but the market between North America and Western Europe has never been hotter. The year 2024 is set to break records with nearly 140,000 scheduled flights, marking a 6% increase from last year and an 8.5% rise compared to 2019 levels, before the pandemic impacted global markets. The transatlantic market has shown remarkable resilience, with airlines adding new destinations and low-cost carriers (LCCs) coming and going. This begs the question: what is driving this growth, and can we expect more next year?
Travel demand is closely linked to economic activity and growth. Historically, there was a classic “multiplier” effect of demand to GDP between countries. In recent years, this linkage has been tested by various external factors, yet exchange rates still have a powerful influence, capable of swiftly shifting market demand. Europe has been inundated with US visitors for the second consecutive year, driven by favourable exchange rates and the strength of the US dollar against both the Euro and Pound Sterling. In December 2020, 1 USD bought 0.82 Euros; today, it’s worth around 0.92 Euros, a 12% increase in purchasing power. Similarly, in 2021, 1 USD equalled £0.70, compared to £0.78 today—a 10% improvement, equating to one free hotel room every ten nights. Airlines have noted that exchange rate fluctuations can quickly affect sales demand. Consequently, the Atlantic is brimming with US tourists taking advantage of the strong dollar, benefiting markets like Italy, Spain, and France.
Airlines meticulously plan their networks and fleet orders years in advance but must remain flexible to respond to changing geopolitical circumstances. Many airlines are currently evolving their long-haul fleets, increasingly employing new generation aircraft across the Atlantic. This summer, 62% of all scheduled airline services will be operated by three main aircraft types: the A330, B777, and B787. Ten years ago, these three aircraft accounted for just 20% of all flights, with the B767 being the second most popular aircraft in 2014. Classic aircraft such as the B747 now represent a mere 1% of all transatlantic services, operated solely by Lufthansa. The A380 is used only by British Airways, Lufthansa, and Emirates, who run interesting 5th Freedom flights from Southern Europe to the USA. Lufthansa remains a “classic” transatlantic operator, using A340s, A380s, and B747s alongside more modern A350s and B787s.
The adoption of next-generation wide-bodied aircraft offers airlines lower operating costs and, often, slightly less capacity per flight than historically operated. This combination of cost savings and the potential for higher yields makes transatlantic flights increasingly attractive to airlines, prompting the addition of new destinations each year.
This summer, approximately 445 different airport pairs will be operated across the Atlantic, ranging from major routes like JFK to LHR, CDG to JFK, and LAX to LHR, to unique services like CPH to MIA and MIA to MUC. This highlights the significant route churn within the transatlantic market, which varies from season to season. Compared to last summer, the 445 airport pairs represent an increase of sixteen new routes but remain below the peak summer 2017 season, which saw 488 airport pairs. New routes this summer include services from Boston to Funchal and Oporto by SATA International, and Frankfurt to Raleigh Durham by American Airlines. Conversely, British Airways has dropped its Heathrow to San Jose service, and Westjet has ceased its London Gatwick to Calgary route. Network churn is common for airlines, especially with the influence of LCCs in the market.
This summer marks a record year for LCCs operating across the Atlantic, with a 5.3% frequency share, totalling over 7,300 flights scheduled. However, their capacity share is just 4.6%, as these airlines typically operate lower capacity flights than the market average. With such a small market share, LCCs’ ability to disrupt the market is limited, particularly when considering access to major hub airports. Network experimentation is crucial for LCCs. This year, 47 airport pairs are operated by the low-cost sector, compared to 36 last year, with new routes like Athens to New York JFK by Norse Atlantic Airways.
While the UK’s weather might be less than ideal this summer, the transatlantic flight market is thriving, driven by economic factors, fleet evolution, and a dynamic route network. As airlines continue to adapt, the future looks promising for even more growth and new destinations in the coming years.
Avation PLC (LON:AVAP) is a commercial passenger aircraft leasing company owning a fleet of aircraft which it leases to airlines across the world. Avation’s future focus are new technology low CO2 emission aircraft.
