There is no doubt that aviation is recovering well from the slowdowns of 2020 to 2022. Commercial schedules are still reduced in some places, but the latest estimates are that passenger volumes will recover in most regions by the end of 2023. Private aviation stands out for recovering even faster – by the end of 2022 it had significantly exceeded pre-pandemic levels of activity in all regions.
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Commercial flights almost back to normal
There has undoubtedly been a big shift towards sustainability and green thinking in the aviation sector. The entire industry has committed to reaching net zero carbon emissions by 2050. In
The aviation sector, of course, was hit very badly during the pandemic. Travel was heavily restricted, and some airlines barely operated at the peak. Commercial air travel globally rebounded quickly once travel restrictions were released, though – in many cases faster than analysts and airlines had predicted.
According to ICAO, recovery in 2022 saw passenger numbers increase 47% over 2021. This took overall recovery to 74% of pre-pandemic levels, with revenue passenger kilometres (RPK’s) up by around 70%. This strong recovery rate has increased and ICAO’s predictions in early 2023 were that overall passenger levels will return to pre-pandemic (2019) levels in many regions by the end of the first quarter of 2023.
There are, of course, strong regional differences to this recovery. IATA data for different regions shows that North America traffic was already up to 94% of 2019 levels by the end of 2022, and European traffic up to 86%. At the lower end, Asia only reached 68% and the Caribbean region 72%.
Airlines returning to profitability in 2023
Airlines losses during the pandemic were substantial. Overall, the sector lost $370 billion in revenue (according to Statista) just in 2020. A report by Cirium in late 2022 put overall losses to airlines at almost $220 billion.
Despite the strong recovery in passenger numbers, the sector has yet to return to profitability. This is expected, however, in 2023. IATA predicts that the overall industry will see a net profit of $4.7 billion in 2023. This is a strong reflection of the continued recovery but still only gives a small 0.6% profit margin. Pre-pandemic levels were around 3.1%, so there is still some way to go.
Re-activating the fleet has been a challenge
One of the challenges that continues to hamper airlines is getting its full fleet flying again. Demand has recovered faster than many expected, leading to a rush to get flying again and strain on limited resources. Aircraft that had been put out of service needed to be quickly returned, with simultaneous demand from many airlines creating bottlenecks and delays.
This is not just about aircraft. Routes and slots have had to be re-activated, and airlines have had to hire new staff. Other challenges coming out of the pandemic, notably reluctance in some regions to re-join the sector, and the effects of inflation. You only have to look at the extensive and increasing strike action in 2022 and 2023 to see the challenges.
This is somewhat stabilising in 2023. ICAO estimates that by the end of 2022, 75% of the pre-pandemic fleet level has been reached globally. Looking forward, fleet predictions are very healthy, with ambitious growth plans. Both Airbus and Boeing are showing strong order books (although there is impact here from delivery delays during the pandemic).
Private aviation even further ahead
The situation is quite different in the private aviation sector. Flight activity has not only recovered from the pandemic already but has picked up. Globally, private and business aviation flight departures increased by 14% in 2022 compared to 2019 (this is based on data from aviation consultancy Wingx Advance). There are strong regional differences though – in Africa, departures were up an incredible 79% and in the Middle East they are up 56%.
This is being driven by several factors. There was a growth during the pandemic due to reduced commercial schedules, and for medical and repatriation purposes. Some of this continues, but growth is also being pushed by growing economies, and an increasing number of high-net-worth individuals seeking privacy and luxury.
Both commercial and private aviation have recovered well since the pandemic. Commercial aviation still has some way to go, and the hopeful return to profitability in 2023 will be a major milestone. Issues remain though, particularly in commercial aviation. Fleet, staff, and inflation-related challenges could make 2023 a difficult year in some areas. Certainly, for passengers, high airfares and potential disruption will be hallmarks of the year.
IATA profit forecasts: https://www.iata.org/en/pressroom/2022-releases/2022-12-06-01/
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