Higher Passenger Capacity for 2023, Is It Enough?

Air traffic recovery has been strong and there have been some important airline consolidations in large markets, such as India, the US and Latin America. Even though passenger recovery sets new high standards for 2023, experts insist on finding ways to diversify profitability in the aviation sector. To do so, managing uncertainty and playing by the rules of “the new normal” is a must. 

The aviation industry is keeping itself focussed on 1Q23 and has been optimistically adding 4 million more seats, which amounts to a massive 0.3 percent increase. Due to a strong recovery in air traffic, several airlines re-evaluated the role of certain aircraft which have long been withdrawn from service. ANA, Lufthansa, Etihad and Thai have decided to bring back the Airbus A380 into service or are preparing to do so. Emirates is investing billions of dollars in upgrading its existing fleet. On the other hand, some aircraft orders attracted attention. Air India, United and Alaska Airlines announced important orders from the US aircraft manufacturer Boeing, according to A21. 

Global capacity has bounced back by over 30 percent compared to 2021 and nearly 50 percent compared to 2020. “We are, however, still on a per annum basis around 18 percent below the 2019 level and, despite the second half of the year reporting a stronger performance with around a 13-15 percent shortfall, catching up any further after the first quarter of the year was a challenge,” as mentioned by OAG. Currently, there are three “hot spots” for capacity growth against 2019: Upper South America (+6 percent) Western/Central Africa (+10 percent) and Central Asia (+7 percent). 

Research reaffirms that airlines improved their profitability in the years following the Global Financial Crisis. However, on average, airlines were not able to benefit financially to the same degree as their suppliers and infrastructure partners. Airlines are the most sensitive to shocks but have limited profits with which to build a financial buffer,” said Willie Walsh, IATA’s Director General. While there is no clear path to improve profitability, some key areas that should be considered when diversifying profit channels include decarbonization and data-sharing.

There are many challenges to be faced in 2023, including increased operating costs, concerns around consumer confidence and the return of the corporate traveler. As aviation emerges from the pandemic, there is an opportunity to expand the value created for all participants in the value chain. This requires performance improvement within each sector and also requires greater collaboration and fresh ways of working across partners in the value chain.