The Europe Aviation Market was valued at USD 37.78 billion in 2020 and is projected to reach USD 68.41 billion in 2026 with a CAGR of 7.47% during the forecast period (2021-2026).
Europe is one of the earliest and most affected regions in the world due to the COVID-19 pandemic. The aviation industry is a strategically important industry for several countries in the region. The decline in passenger traffic and flight activity in 2020 has resulted in huge losses for the airlines in the region, with several airlines, including some of Europe’s most prominent flag carriers requesting substantial economic support from governments for their survival. Major commercial airlines have grounded a majority of their fleets and have canceled orders of new aircraft, thereby hampering the growth of the market studied during the forecast period.
Also, the advent of the second wave of the pandemic and the renewed border restrictions has hugely impacted the general and commercial aviation flight activity in major markets in the region, while the military sector remained resilient.
Due to the increasing pressure from the United States on the NATO members to achieve their defence expenditure target (2% of GDP), several countries in Europe plan to increase their military budget allocation in the coming years. It is estimated that a major share of the allocation is expected to be for the development and procurement of military combat and non-combat aircraft, as several major countries in the region are involved in the development of next generation military aircraft while many countries require rapid fleet modernisation to maintain technological superiority over their adversaries.
Key Market Trends
Rise in Defence Expenditures to Drive the Military Segment Growth During the Forecast Period
In Europe, both the commercial and the general aviation segments are affected due to the border restrictions and the decline in the passenger demand for the year 2020 as well as in the first quarter of 2021. However, the demand from the military segment is expected to be relatively unaffected by the pandemic. Despite the effect of the pandemic on the economies of the countries in the region, most of the countries in Europe have increased their defense expenditures in 2020. The average spending among European NATO members has increased from 1.52% of GDP in 2019 to 1.64% of GDP in 2020. In addition, the commitment by major European defense markets like France, Germany, Italy, and the United Kingdom will continue to increase defense budgets during the forecast period and is expected to make Europe the fastest growing region globally in terms of defense spending. Driven by this, several countries in Europe drafted plans to modernize and enhance their military aircraft fleet over the next decade. The United Kingdom, France, Germany, Poland, Italy, Spain, Finland, Slovakia, Romania, Bulgaria, and Croatia, among others, have announced plans and orders for procuring new combat and non-combat aircraft during the forecast period. In addition, countries in the region are also enhancing their local aircraft manufacturing capabilities. While France, Germany and Spain are working together on the Future Combat Air System (FCAS), the United Kingdom’s BAE System is working on the Tempest Sixth Generation fighter aircraft. At the same time, Russia is also working on several next-generation combat and non-combat aerial platforms. All these factors are expected to drive the military segment of the market during the forecast period.
United Kingdom is Expected to Dominate the Europe Aviation Market During the Forecast Period
In the European aviation market, the United Kingdom currently accounts for a major share in terms of revenue. The United Kingdom has some of the busiest international airports in Europe like London-Heathrow airport, Gatwick airport, Manchester airport, etc. Despite a huge reduction (about 72%) in passenger traffic in 2020, the London-Heathrow airport remained one of the busiest airports in Europe in 2020. Though the COVID-19 pandemic has drastically affected the future growth plans of carriers like EasyJet and Virgin Atlantic, a few airlines are defying the industry’s pessimism over the COVID-19 impact, and have expanded their order book in 2020. For instance, in December 2020, Ryanair placed an order for 75 B737 MAX aircraft worth over USD 9 billion in hopes that its customer base would grow from 149 million by 2022 and reach 200 million by 2026. British Airways' fleet of new aircraft is also growing as the airline is taking deliveries of the Airbus A350 aircraft following the retirement of its Boeing 747 in early 2020. The airline, however, pushed back the initial deliveries of the Boeing 777X aircraft from 2022 to 2024 due to delay from Boeing. Apart from commercial aviation, the United Kingdom government had invested heavily in the modernization of its fighter aircraft fleet. The Royal air force and Royal Navy planned to procure 138 Lockheed Martin F-35B STOVL aircraft in total, out of which 21 aircraft were in service as of 2020, out of 48 envisioned to be procured by 2025. The government has also announced to invest GBP 2 billion on Tempest, a new fighter aircraft project (under development) by 2025. Moreover, the UK business aviation sector has also witnessed a huge growth rate over the years. The country has two of the top ten busiest business aviation airports in Europe, Farnborough airport, and London Luton airport. VistaJet, Ravenair, Wijet, and the Luxaviation United Kingdom, are some of the main charter jet service providers in the United Kingdom. With the growing number of people opting for charter service for business travel in Europe, charter jet service providers are procuring new aircraft to increase their fleet. For instance, in July 2020, Luxaviation UK added a Embraer Legacy 650 to its fleet. However, with the outbreak of the second wave of the COVID-19, the growth of the United Kingdom aviation market is expected to be hampered in 2021, as aircraft operations have come down, and aircraft operators are facing severe losses which might result in cancellations and deferrals of aircraft orders in commercial and general aviation sectors.
Airbus SE, Boeing, Lockheed Martin Corporation, Leonardo SpA, and Dassault Aviation SA are some of the major players in this region. Airbus dominates the market in Europe in commercial, as well as military aviation. The market is highly competitive and is majorly dominated by a few players. The aircraft industry is expected to see new innovations getting implemented in aircraft design, which is expected to change the meaning of safety, comfort, and efficiency for both passengers and aircraft manufacturers. Companies are looking forward to grab the opportunities offered by the new technological innovations, thereby increasing their respective market shares. Multiple countries are partnering to develop new military aircraft models, which is expected to bolster the prospects of the local players in those countries. For instance, Germany, France, and Spain are involved in the development of a next-generation fighter jet named Future Combat Air System (FCAS). Such programs are expected to drive the growth of the local players in these countries during the forecast period.
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