Row of Boeing aircraft.

The Importance of Aviation to Europe and the Current Market Outlook

Strong growth despite uncertainty

Europe's aviation market remained strong in 2015 despite significant economic uncertainties. Europe's GDP grew by 1.9 percent in 2015 and is forecast to grow by 1.8 percent annually through 2035. The Association of European Airlines reports that member airlines carried approximately 307 million passengers, 4.3 percent more passenger traffic in 2015 than in 2014. Members of the European Low Fares Airline Association reported an increase in passengers of about 12.3 percent over 2014. European airlines acquired more than 240 new airplanes in 2015, of which 67 percent were single aisle.

The European aviation market is expected to grow during the next 20 years, with airlines forecast to acquire more than 7,500 new airplanes valued at over $1.1 trillion. Single-aisle airplanes will comprise the majority of deliveries, representing a 78 percent share of total deliveries. Although European aviation growth is slower than aviation growth in emerging economies, the region's large installed base of more than 4.600 airplanes supports substantial demand for replacement airplanes. Replacement demand will account for 56 percent of Europe's total new airplane market.

Continued strategic evolution

Airline operations in Europe continue to evolve with the launch of new ventures, routes, and business models. Norwegian Air Shuttle continues to expand their long-haul low-cost carrier (LCC) operations, while Lufthansa has launched a long-haul LCC subsidiary to compete for leisure passengers.

The introduction of the 787 has allowed operators to economically serve long-haul, nonstop markets that have not been served before. European operators have been on the forefront of this trend, with 96 long-haul routes introduced since 2012—the most of any region.

LCCs continue to grow short-haul markets, providing over 47 percent of intra-Europe capacity in 2015. Network airlines are shifting short-haul flying to their LCC subsidiaries, and are focused on flowing long-haul passengers through their hubs with connecting itineraries. Smaller flag carriers and charter airlines must carve out a profitable niche to be able to compete in an environment where LCCs dominate short-haul, point-to-point service and large network carriers and their alliance partners exploit the cost advantages of mega-hubs for long-haul traffic.

Large Middle East airlines have captured significant long-haul share from Europe's network carriers by providing one-stop service from Europe to destinations such as India, Australia, and Southeast Asia, where the geographic advantage of Middle East carriers is greatest. In response, Europe's network carriers have shifted long-haul capacity to more profitable markets—notably the North Atlantic, where their capacity has grown over 20 percent since 2010.

LCC share within Europe approaching 50%

Market value: $1.1 trillion

Key indicators and new airplanes