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While the Covid crisis did a lot of damage to the airline industry, one and a half years later, we are starting to see the end of the tunnel and hopes are rising again. Indeed, whether it is at the level of domestic or international flights, the sanitary restrictions have put many barriers and the sector is recovering little by little after they have been lifted. This is especially the case for countries like China, Russia, the US and the EU.
This hoped-for comeback can be explained by several factors which, taken together, allow for optimism. First, the fact that potential customers are ready to spend the money they saved during this long period of slump. The economic conditions of the States, which advocate a fiscal stimulus policy associated with an expansive monetary policy, are also a factor that favors this revival of activity despite certain divergences within the regions. Nevertheless, a problem will arise when it comes to allocating resources and aid to the various sectors affected by the crisis: what share, what proportion for each? Why? But all this has been made possible by the gradual lifting of restrictions thanks to a massive and rapid vaccination campaign.
Moreover, the covid crisis has certainly had a strong impact on the sector but has not broken its model or its fundamentals. It has even allowed the adoption of certain new technologies more quickly than expected and this could prove beneficial later in the post-crisis period.
All of this is conditional on a so-called normal recovery in activity, while test phases are still planned, notably with constraints such as quarantine maintained in certain countries.
Expert opinions allow for optimistic forecasts. Indeed, the fundamentals of the airline industry have not been affected. This means that long-term demand remains unchanged and constant. Indeed, people do not fly for pleasure, except for a few enthusiasts, it is to visit a loved one who is far away, for business, for vacations and the crisis has not changed these reasons to fly, loved ones will always be to visit in the future, business will always be to form, … The fundamentals remain the same and the need for air flights also. The predictions are that this sector will grow in the future. This is since the need for air travel remains unchanged. By 2025, the GDP will be 15% higher than before the crisis. This should boost economic activity as well as revenues.
Historically, short-haul travel has been driven by improved offerings such as new direct routes and lower fares from low-cost carriers with lower production costs. The latter have been the source of the recovery, and later the recovery of long-haul and premium traffic: this is due to their structure, which allows for rapid market entry, as well as their lower-cost service, which is particularly attractive during an economic downturn.
Since the start of the COVID-19 pandemic in early 2020, airlines have adjusted their networks to meet rapidly changing market needs. The projected growth in traffic over 21 years, using 2019 as the base year, is significant. By 2040, the global freighter fleet will grow from about 2,000 units in 2019 to about 3,400 units, a 70% increase over pre-pandemic levels. This long-term growth will be driven by GDP growth, industrial production and replacement demand. While in the short term, air cargo market demand has been driven by increased e-commerce, economic recovery, and the loss of wide-body capacity.
The 2021 CMO shows that the global forecast is largely unfolding as Boeing predicted in 2020: domestic flight demand is driving the recovery, with intraregional markets expected to follow as health and travel restrictions are eased followed by a return of long-haul travel to pre-pandemic levels around 2023 to 2024. In the 20-year forecast, the market disruption caused by the pandemic is largely absorbed.
In terms of aircraft replacement: to put it another way, about 40% of the pre-pandemic passenger fleet is expected to be replaced by 2030, converted to freighters. Over the 20-year forecast, airlines will need more than 43,000 aircraft valued at $7.2 trillon to meet market needs. Over the next 10 years, airlines will take delivery of more than 19,000 aircraft worth $3.2 trillion. Single-aisle passenger aircraft account for the largest share of new deliveries (75%), with airlines requiring more than 32,000 over the next 20 years. These new aircraft will continue to enable the growth of low-cost airlines and replace older, less efficient aircraft.
To sum up, despite a covid crisis that will have taken a heavy toll on the sector, the trend remains positive, and forecasts remain optimistic for a rapid and sustained recovery.
alex.roman@surfeo.eu Office: +33 (1) 55 17 14 73
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