Budget carriers are big winners from shifting passenger preferences

The recovery in air travel since the Covid-19 pandemic has been patchy, but two trends are clear: the recovery is uneven across European countries and low cost carriers (LCCs) are continuing to win market share from their full-service carrier (FSC) rivals.

The aviation industry slumped when the pandemic broke out. International passenger traffic dropped 60% in 2020, taking it back to 2003 levels and prompting predictions that the industry was doomed. “How Covid and Zoom could spell the end of business travel” read one headline. “The end of tourism?” asked another.

Not so fast. Passenger numbers in 2023 in Germany were still a lot lower than in 2019, the year before the pandemic, and were also lower in Britain, but totals in France and especially Spain surpassed their pre-Covid levels, according to data from OAG, a leading provider of flight information.

The variation is especially pronounced in the data for short-haul flights. Germany experienced a 30% decline in the number of short-haul passengers compared with 2019, while Britain suffered a drop of 11%.

By contrast, Spain, which enjoyed the fastest economic growth of any major European economy in 2023, saw a 4% rise in short-haul numbers and France had an increase of 2%.

Therefore, predictions of the demise of short-haul air travel were decidedly premature. Less well known however, is that the breakdown between long-haul and short-haul passengers has barely changed since 2019 across the UK, Spain, Germany and France.

Figure 1 Breakdown of departing passengers from the UK, Spain, Germany and France in 2019 and 2023

Source: Frontier analysis of OAG traffic data

Note: Short-haul flights defined as distance <= 3000 km

What is clear in the short-haul market is that LCCs such as Ryanair bounced back from the Covid-induced slump more quickly than FSCs. Looking at the major European airline groups, IAG airlines Vueling (LCC) and Iberia (FSC) grew their market share, Transavia (a LCC which is part of the Air France-KLM Group) also grew market share, while Lufthansa Group Airlines Eurowings (LCC) and Lufthansa (FSC) have lost market share, as has Air France (FSC).

Figure 2 Largest carriers by share of departing seats in 2019 and 2023

Source: Frontier analysis of OAG data

Note: The chart is based on the departing seats (capacity) offered by each airline from the countries in our sample (France, Germany, Spain, the UK). The top 10 has changed from 2019 to 2023 - Air Europa was in the top 10 in 2019, but was replaced by Transavia in 2023.

For airlines, the success of the LCCs (including those operating as part of the major European airline groups) in growing back from the pandemic faster suggests that the aviation market in Europe is likely to increasingly be driven by these types of airlines, whether they are separate airlines or parts of the major European airline groups.

This has substantial implications for many airports, given the greater flexibility available to these LCCs. Frontier has carried out an in-depth analysis of competition between Europe’s airports for ACI Europe, which can be found here.

Therefore competition between airports across a broad geographic region can be expected to intensify, and these shifting dynamics will be especially acute for airports with large numbers of inbound passengers.

In short, the predictions made during the Covid-19 pandemic of the death of the aviation industry in Europe were premature, but the industry that has emerged looks different to the one before, with different operators and countries gaining and losing, and signs that competition between airlines and airports is likely to be fiercer than before.