UK charter destinations evolve as airlines consolidate or collapse; Thomsonfly/First Choice, Thomas Cook grab 70% of market

Lead

Last week’s collapse of XL Airways has focussed attention on the state of the UK charter market. After steady growth in the late 90s, passenger numbers travelling on charter flights to and from the UK have been in gradual decline since around 2002. From a peak of just under 38 million in 2001 (26.6% of all UK international passengers), last year fewer than 32 million (16.6% of all UK international passengers) flew on charter flights, a fall of over 15% in six years while scheduled traffic increased considerably.

In 2007 total charter traffic was down 4.7% although average load factor among UK charter carriers remained impressively high at 87.9%. Of even greater concern is that in the first six months of 2008 charter traffic at UK airports is down 14.5% from 14.95 million passengers to 12.78 million.

Chart: UK Charter 94 - 07
Source: Derived from UK CAA

Low-cost carriers such as bmibaby, easyJet and Jet2.com have had a significant impact as they have stolen traffic from the charter carriers, in particular on routes to the Spanish mainland. Charter traffic here has almost halved from 12.3 million in 2002 to just 6.7 million in 2007. The Canary Islands and Greece have also seen a significant fall in charter traffic from the UK during this period.

Turkey and Egypt are growing fast

As charters have been eased out of some of their Spanish markets they have moved into other regions which have been less vulnerable to low-cost attack. These markets tend to be non-EU and have slightly longer sector lengths. Since 2003 charter traffic to Turkey has increased 79% while traffic to Egypt has increased from 263,000 in 2001 to 1.43 million in 2007.

In 2007 the fastest growing charter markets (minimum 200,000 annual passengers) were Turkey (+13.2%), Cyprus (+7.8%) and Mexico (+2.8%). In several markets where charter traffic was down overall traffic was up thanks to an increase in scheduled services. This applies to Austria, Bulgaria, Croatia, India, Malta, Spain and the USA.

Consolidation leads to two dominant carriers

In 2007 there were six UK charter airlines which each carried over 2.5 million passengers. They accounted for almost 93% of all charter traffic on UK airlines. Since then Thomsonfly and First Choice have merged, as have Thomas Cook and MyTravel.

Chart: Charter airlines 2006-07
Source: UK CAA Airline data

Logos: Thomas Cook and First ChoiceIn May 2008, Thomas Cook incorporating MyTravel had a 38% share of UK charter passengers while Thomsonfly and First Choice had a 32% share. Monarch had 9.8% and XL Airways had 9.6%. The demise of XL means that, at least in summer, Jet2.com will now become the UK’s fourth biggest charter airline.


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