It’s been a frustrating year for the aviation industry, so in this headline review of 2024 - the first in a two-part series - we look at how the industry has shaped up, highlighting some of the biggest issues it faces. In part two, we’ll begin to look at what 2025 may hold – Sign up to our blog notifications to be alerted when that’s published.
Five Years of Lost Capacity and Some Regions Still Lag Behind
Whilst there are many reasons to be optimistic about aviation, it’s important to put everything into context and that means acknowledging that global capacity is only 2.4% higher than in 2019, the last year before the pandemic closed down the whole global economy. The table below shows this year’s total airline capacity compared to 2023 and 2019 so that a 6.4% year on year growth in capacity is placed into context.
By the end of this year, four regional aviation markets will still not have returned to their 2019 capacity levels, effectively stagnating in terms of global connectivity and potentially trade. These are:
- South East Asia (-13.1%)
- Eastern Europe (-8.6%)
- Southern Africa (-17.0%)
- Southwest Pacific (-4.5%)
Sadly, in two of those regions, geo-political developments have certainly impacted capacity; in South East Asia the much-discussed Chinese international market recovery lingers, while in Eastern Europe the ongoing situation in Ukraine is an unfortunate example of how vulnerable the sector is to other events, although capacity growth this year has been more encouraging. Southern Africa with a 17% reduction in capacity versus 2019 has seen the loss of two of its largest airlines but ironically from an integrity of service and financial viability standpoint, is in a better position than pre-pandemic. In the Southwest Pacific, modest capacity cuts versus 2019 from a range of airlines including Qantas, Air New Zealand and Virgin Australia - some of which are supply and maintenance related - continue to draw back capacity growth.
In Which Regions Has Airline Capacity Grown?
More optimistically, 2024 has seen continued airline capacity growth in some parts of the world. Among regional markets with more than 100 million seats per annum, North Africa and Upper South America have been standout growth markets. This is largely due to Colombian capacity increasing by 40% compared to 2019, and Egypt reporting over 50% capacity growth versus 2019, as low-cost airlines such as Air Cairo, EasyJet and FlyNAS build their presence in the market.
The sensitivity and careful balance of supply to demand is always a challenge and in 2024 that has been severely tested in the US domestic market where a softening of demand through the course of the year has resulted in some airlines struggling to deliver profits for shareholders, despite capacity having increased by 5.6% compared to 2019. Low-cost airline capacity has increased by 16% since 2019, creating a scramble of low-fare capacity whilst carriers such as Delta Air Lines have consciously maintained domestic capacity at 2019 levels and avoided much of the need for deep discounting.
The Economy, Sustainability & Taxation Have Impacted Capacity
A country’s economic health and the strength of its aviation market are intrinsically linked, and this is certainly the case in some European markets as reflected in the table below.
Across the twenty largest country markets in the world, half have yet to recover back to 2019 capacity levels as a combination of geo-political circumstances, impositions of aviation taxes, and sustainability pressures impact operations.
Despite growth in capacity of 8.3% in 2024 versus 2023, Germany remains at 17% fewer seats than in 2019 as domestic capacity has halved compared to 2019, while in France a 25% reduction in domestic capacity is hardly helping the aviation industry in its broader recovery. In contrast, other European markets such as Spain and Italy continue their pandemic recoveries standing at +12.1% and +11.3% respectively versus 2019.
China’s 10% capacity growth might come as a surprise to anyone not living in China, given their economic challenges and ongoing bilateral restrictions in some markets, but from 2020 the country has seen an increase in domestic capacity of some 15% whilst international capacity has fallen by 26%. The reductions in international capacity are clearly being felt in traditional overseas markets, Japan, South Korea, Thailand and to a lesser degree Australia; all remain with negative capacity versus 2019 and the Chinese market is the primary factor in those lost seats.
The Standout Growth Markets in 2024
The standout growth markets in 2024 and indeed since 2019 have included the normal candidates, who seem sometimes to defy gravity with their consistent growth and network developments. The United Arab Emirates is a clear winner with 15% more capacity than in 2019 and 10.5% capacity growth year on year. All the region’s major locally-based airlines are adding more capacity as fast as supply allows.
India’s market potential is only now being realised, with two very strong local airlines in Air India and Indigo - both of which have placed substantial aircraft orders that will only accelerate growth from a country with an insatiable appetite for air travel. The power of Istanbul as a global hub continues to develop and the Turkish Airlines group are certainly driving more and more growth with new destinations added this year and some 12.3% growth on 2019; with approval for the operation of three simultaneous runways capacity at IST will just grow and grow in the coming years. And perhaps surprisingly Spain is now the largest European market as 9.4% growth in 2024 has nudged them ahead of the United Kingdom.
And so, you may ask, with 6.4% growth in capacity year on year, most markets ahead of pre-pandemic levels, record profits for some airlines, new routes being opened, some new aircraft being delivered and exciting opportunities emerging for the next few years. Where’s the frustration?
Aircraft Supply, Maintenance Issues and People Have Impacted Airline Capacity
2024 could have been so much better for the aviation industry! Only when you take a step back from the daily numbers and look at the wider global picture can you see how good it could have been.
Delivery of new aircraft has been a challenge for various reasons, and in comparison to the initial expectations of this year the two major manufacturers are likely to deliver around 30% fewer new aircraft than they had hoped. The impact of those non-deliveries has left airlines struggling to operate their initially planned schedules, making short-notice cancellations and furloughing staff that had been recruited on the basis of a full programme being operated. Short-term lease agreements or extensions from lessors don’t come cheap when aircraft are in short supply and that has certainly been the case this year, with some airlines opting not to lease and cancel flights rather than operate.
Problems with engine reliability has plagued Airbus operators with the A350 and A320 issues causing immense frustration. Indigo Airlines have some 70 aircraft currently grounded awaiting parts because of the Pratt & Whitney issues and that rapidly adds up to around 68,000 “lost” seats per day for the airline, while in Mexico low-cost airline Volaris is running at 18% less capacity this year with around 25 aircraft grounded for engine related maintenance.
While AI seems capable of doing most things it can neither fly a plane nor open an emergency door, and for many airlines people are their greatest asset. Which makes the current shortages in nearly every sector of the industry a worry as we head into the new year. However fast airlines recruit, the fact is that people continue to retire or leave the aviation industry, and that loss of skills and experience will take decades to be replaced. But for those still in the industry it’s never been a better time to ask for a pay increase! And of course, those pay increases translate into higher air fares and increasing complaints about the cost of air travel. Now, if only travellers knew how much (little) profit they provide per trip, perhaps they would rethink the value of air travel!
Aircraft supply and the ongoing maintenance issues are not going to go away in 2025 or indeed perhaps into 2026 in some cases, so airlines will continue to be as creative as ever in maximising their networks and revenues. Iberia’s launch of their Madrid – Boston A321XLR service this week with a nine-hour block time may be the start of some interesting opportunities in the coming years but we need to settle some outstanding issues first.
And finally, all of this has happened in 2024, while there are clear signs that demand is coming slightly off the boil of the post pandemic revenge spending that drove record levels of revenue in 2023 (albeit with record levels of cost in some cases). While the appetite for air travel remains, economic pressures such as the cost of living, increasing taxation and the constant spectre of geo-political events will leave most airline and airport CEOs on high alert for what’s next. This of course leads us into 2025, and what can we expect coming over the horizon there? Look out for our look ahead to 2025, coming soon.
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