Despite the recovery from the Covid-19 pandemic, total airport connectivity in Europe in 2023 will remain 16 percent below the all-time highs of 2019. The expansion of ultra-low-cost carriers (LCCs) and the withdrawal of European network carriers (FSCs, airlines with a global route network and a central hub to connect passengers via short-, medium-, and long-haul flights) are significantly influencing this development.

What is the economic relevance of the aviation industry in Europe?

The airports within the European Union generate:

• 851 billion euros GDP (5 percent of EU GDP)
• 14 million jobs (6 percent of total jobs in Europe)

The aviation industry has always demonstrated remarkable resilience throughout its history. Even after the pandemic-related slump in 2020, the sector is now experiencing significant growth again. By 2023, it had already matched the peak performances of 2015 and 2016. Despite this respectable recovery, there are still areas in the industry where the Performance of the aviation industry (at least) in Europe, could not be restored. The reasons for this are diverse. The following highlights three sub-areas that will be crucial for the future development of the industry in Europe:

1. Connectivity network: Why is aviation connectivity important?

To appreciate the importance of developing connectivity, it is enough to look at the positive economic implications generated by European airports and aviation connectivity.

Increasing direct connectivity by 10 percent leads to:

• 0,5 percent growth in EU GDP
• 1,6 percent more jobs within the European Union

The aviation connectivity generated by European airports contributes €851 billion to GDP, equivalent to 5 percent of EU GDP, and secures 14 million jobs, or 6 percent of all employment in the European Union. The simple calculation: When connectivity increases, so does GDP, and there are more jobs. This is demonstrated by a recent study, which calculates that a 10 percent increase in direct connectivity translates into a 0,5 percent increase in EU GDP and a 1,6 percent increase in jobs.

In addition to the Connectivity and its importance for the European economy The changing travel behavior of passengers must also be reassessed. The increase in leisure and VFR (visiting friends and relatives) travel, coupled with a simultaneous decline in business travel, requires an adapted infrastructure. However, the European aviation industry is not responding quickly enough to these changes, due, among other things, to the strains of geopolitical crises and conflicts, which are hitting the industry particularly hard.

2. Where are the European hubs heading?

Changes in the European market are also reflected in the development of European hubs.

• Decline of European hubs:
  • Frankfurt: minus 23 percent (2023 vs. 2019)
  • Amsterdam: minus 19 percent
    
• In comparison Istanbul:
  • Growth of 31 percent in the same period

While the European hubs of Frankfurt and Amsterdam shrank by 23 percent and 19 percent respectively compared to 2023, the hub at Istanbul Airport grew by 31 percent year-on-year. The weakening hub development in Central Europe is symptomatic of the developing competition in the European market between LCCs and FSCs, which account for the vast majority of flights at the European hubs. Thus, the growth in connectivity since 2013 has been solely attributable to the growth of LCCs, while FSCs have actually declined in comparison (see: ACI Europe Airport Industry Connectivity Report 2023). Looking at the market share of EU airlines in passenger travel from Europe to Asia, a clear picture emerges, to the detriment of countries within the European Union. The share of Gulf and Bosporus airlines in passengers traveling from Europe to East and Southeast Asia has increased severalfold since 2002, while the share of EU airlines has halved.

The European aviation industry is facing structural changes, driven by growing international competition and new regulations. The demand for greater competitiveness aims to promote investment and innovation to establish the industry as an international leader. — Anselm Waterhouse

3. How do sustainable aviation fuels (SAF) impact the future of aviation?

In addition to the changed market conditions outlined above, since January 2025, all flights traveling within and departing from the EU must use a mandatory minimum of 2 percent of sustainable aviation fuels (SAF) to fuel the aircraft.

From 2025, strict quotas will apply to EU flights:

• 2 percent SAF requirement since January 2025
• Gradual increase of the quota to 70 percent from 2050

challenges:

• Costs: SAF is currently three to five times more expensive than conventional kerosene
• Production: SAF must be produced in the EU; imports are excluded
• Investments: High capital requirements for infrastructure development

Industry demands:

• State subsidies for SAF production within Europe
• Relief for European airlines in fulfilling the SAF blending obligation to strengthen international competitiveness

The 2 percent SAF share is to gradually increase to 2050 percent in five-year increments by 70. The aviation industry recognizes the need to reduce emissions and decarbonize, but considers fulfilling the blending obligation a Herculean task. This is due, on the one hand, to the high additional costs for airlines and, on the other, to the investment costs that the manufacturing industry must bear to produce SAF within Europe. For example, the SAF to be blended must be produced in the EU and may not be purchased from non-European markets. Whether sufficient SAF will be available on the European market by 2030 and 2035 to meet the increasing blending obligations (6 and 20 percent, respectively) is currently being critically questioned. Here, too, there is a unanimous consensus within the industry that the regulatory requirement for blending must be offset by state subsidies, which would be necessary both to finance SAF production in Europe and to relieve the burden on European airlines, which are particularly exposed to competition from airlines from the Middle East, where no SAF blending obligation has to be fulfilled.

Given the high costs expected from the use of SAF for both airlines and the manufacturing industry, it is not surprising that industry representatives on the international stage are appealing to the European Commission to take measures to strengthen competition in Europe, in order to also support the aviation industry against its international competitors. Whether this appeal, which was recently clearly expressed at this year's IATA WOCE conference in Rome, will be followed by measures to strengthen the competitiveness of the aviation industry remains to be seen. In any case, the conference participants welcomed the clear message from Filip Cornelis, Director of Aviation within the European Commission, to strengthen competition in the European Union and a concession to pursue the Draghi report was communicated.

Conclusion

The European aviation industry is once again facing structural market changes, the effects of which, given rapidly growing international competition and regulatory requirements, can certainly be viewed as a challenge, but perhaps also as an opportunity. The call for strengthening European competitiveness is also being heard from the aviation industry, where renewed competition should serve as a driver for investment and innovation, establishing the European aviation sector as an innovative pioneer in international competition.