easyJet to cut network; Germany worst-performing with ~£84m estimated loss in past year, RDC’s Apex shows

easyJet does not expect 2019-level demand to return for three years – let alone the growth that would have occurred in this period. 

As such, it is cutting jobs by up to 30%, reducing its network, and cutting its fleet size. 

It now expects 301 aircraft by the end of 2021, down from the 339 it had last month. It had forecast operating between 330 and 354 aircraft by the end of 2021.

Like many airlines, easyJet will emerge from the crisis a smaller airline. And it expects to be stronger, leaner, and more competitive one.

One part of this will be through a stronger and optimised route network.

UK is easyJet’s top-performing country by estimated profitability

In the April 2019 to March 2020 period, easyJet’s largest countries by seat capacity were the UK, France, Italy, Spain, and Germany.

Not surprisingly, most of these big countries performed very strongly by estimated profitability (EBIT), based on the same period.  This is according to RDC Aviation’s Apex, which pulls together the airline’s fares, revenue and cost to route profitability across easyJet’s full network.

RDC estimates that easyJet’s routes to, from, and within the UK collectively generated over £374 million in profit, by far the single-largest country result. The other important markets for driving the airline’s profit volumes are France, Spain, and Switzerland where annual profits were above £100 million. 

Source: RDC Aviation. Note: both directions combined; EBIT profit in GBP; full airport charges.

The UK is key, but Greece stands out

The UK is all-important to easyJet, accounting for around 53% of its total seats and 551 routes in this period.  Four of easyJet’s top-ten airports, by seats, are within the country: London Gatwick (by far its number-one airport), London Luton (five), Bristol (nine), and Belfast International (ten).

Despite being a relatively small country by seats for easyJet, Greece performed well by profitability, with an estimated £85 million across its 95 routes.  The higher profit margin on routes to the country perhaps indicates the potential for further growth.

Greece benefited from much higher absolute average fares from being highly summer-seasonal, with the resulting strong demand, and from longer average sector lengths. 

Greece’s strong performance helps to explain the carrier’s very fast response to Wizz Air announcing it’ll serve multiple Greek islands from Luton and Milan Malpensa.

easyJet’s Greece routes in the current year. Source: OAG Mapper.

Germany is easyJet’s worst-performing country

Germany is easyJet’s fifth-largest country market by seat capacity, yet it is by far its worst-performing by profitability.

Germany lost an estimated £84 million in this year period, very significantly more than other loss-making countries, such as Denmark and Sweden. 

Some, like Albania, are new to the carrier’s network.

Source: RDC Aviation. Note: both directions combined; EBIT profit in GBP; full airport charges.

Germany’s losses come from very fast growth

easyJet’s Germany losses will primarily be from its very fast growth there. 

On a calendar-year basis, the carrier added almost 11 million seats to, from, and within Germany since 2010, for a CAGR of 11%.  This is much higher than for easyJet’s other top countries, which varied between 3% (Spain) and 7% (France).

At country-level, easyJet had 158 routes to, from, and within Germany in 2018, up from 99 the year before. 

Source: OAG Schedules Analyser.

Tegel was the primary reason for easyJet’s big Germany growth

The airline’s Germany seats grew very quickly following the end of airberlin in 2017.  Berlin Tegel was the primary beneficiary. Tegel only joined easyJet’s network in 2018 – and it had 59 routes from it that first year.  

Clearly, it considered Tegel – and Berlin – of strategic importance with the ability to attain great dominance.   Tegel is now easyJet’s second-largest airport, and the carrier is by far Tegel’s number-one airline. 

This changes with the opening of Berlin Brandenburg, which is now due to open this November.

Various country-pairs involving Germany are in the loss-making list

RDC Aviation’s Apex indicates easyJet’s highest estimated loss-making country-pairs, reproduced here:

• Germany – Germany: – £73.05 million
• Germany – Austria: -£8.44 million

• Italy – Italy: -£7.10 million

• Germany – Denmark: -£5.75 million
• Germany – Italy: -£5.25 million

• Germany – Sweden: -£4.38 million
• France – Israel: -£4.01 million

Germany features heavily throughout, with many country-pairs, such as Germany – Denmark, being relatively small yet loss-making.

Despite only operating two routes between Germany and Demark – Berlin Tegel to both Aarhus and Copenhagen – its estimated loss, in the year to March 2020, was nearly £6 million. 

easyJet’s seats between the two countries trebled between early 2018 versus 2017, but that was two years ago.  Competition doesn’t help with yields, with Berlin – Copenhagen, at city-pair level, having two competing carriers, Norwegian and SAS.

Domestic Germany accounted for 87% of easyJet’s Germany loss

It was Germany’s domestic routes that accounted for most of the carrier’s country loss.

Domestic services formed a key part of its development at Tegel, with the carrier previously saying that 41% of its intra-Germany passengers travelled for business reasons, presumably from smaller companies.  However, most of the country’s domestic passengers are for business reasons anyway.

Anecdotally, Eurowings achieves higher-yielding business traffic that easyJet is not achieving, the result of even higher frequency, stronger name awareness, and Lufthansa lobbying. 

Pre-coronavirus, easyJet had a network of five year-round domestic routes from Berlin Tegel: Cologne, Dusseldorf, Frankfurt, Munich, and Stuttgart.  Sylt is served in summer.

However, it appears that it has ended Berlin – Frankfurt: unlike the others, it is no longer bookable, and it does not appear in OAG Schedules Analyser.

Of strategic importance or do cuts now come first?

easyJet may decide that Germany in general – and Berlin in particular – is still of significant strategic importance going forward.  However, it will be interesting to see what implications the opening of Brandenburg has on this.

With the pressure of coronavirus, everything must be on the table, but will longer-term importance override shorter-term needs?

If routes, airports, and basses are loss-making or marginal or otherwise underperforming, they should be very seriously considered for cutting. 

RDC provides world-leading aviation data through its online apps, data services and APIs. Its Apex platform delivers airline route performance data (fares, profit, schedules, costs, CO2) while AirportCharges has detailed tariff data for over 3,000 airports as well as global en-route navigation fees and government taxes. Over 250 companies subscribe to RDC’s services; visit their website, www.rdcaviation.com, to find more information and contact details.