Following the post-Covid recovery in recent years, 2024 is poised to resemble a return to normalcy for the airline industry. Across most regions, barring Asia-Pacific, capacity and traffic have either reached or exceeded pre-pandemic levels. The industry, on the whole, turned a profit in 2023, and a marginal improvement is anticipated in the coming year according to IATA.
But what lies ahead in 2024 in terms of broader trends and individual narratives that will shape this sector? How will clipped capacity impact operations? While the immediate staffing challenges have eased somewhat this year, the struggle to maintain existing fleets and manage incoming deliveries has intensified for most airlines. This situation isn’t likely to improve in 2024. Issues with capacity, particularly for those airlines grappling with additional engine inspections on certain Pratt & Whitney geared turbofan (GTF)-powered aircraft, might exacerbate. The focus on resolving the GTF problem notwithstanding, the crunch on aircraft capacity is being felt industry-wide. A scarcity of spare parts leads to longer maintenance times, while airframers still face the challenge of scaling up production to meet delivery schedules.
Until recently, most airlines could resort to grounded portions of their fleet if they required additional capacity, albeit reluctantly bringing some types back. However, for many, that option has now been exhausted, making it increasingly difficult to secure extra capacity next year. While a lack of capacity might impede an airline’s ability to capitalize on market opportunities and bolster their market share, it does offer a short-term benefit by keeping load factors and yields high. IATA acknowledges constrained capacity as a factor contributing to an estimated fourth consecutive year of passenger yield gains in 2024, albeit a more modest increase of 1.8%, and for a further rise in passenger load factor matching 2019 highs of 82.6%.
This bolstering of airline profitability should persist, even in the face of rising costs due to ongoing inflationary pressures. However, this environment might widen the gap between strong and weak airlines, favoring larger, well-financed operators with extensive existing fleets or hefty order books, granting them more flexibility in securing capacity or deliveries. Access to internal maintenance, repair, and training facilities
could also provide a diversified profit stream and help mitigate supply chain and recruitment issues.
Where will airlines choose to deploy their capacity? Since the resumption of operations post-pandemic, network decisions for many have been relatively straightforward, focusing on domestic and regional routes as well as intercontinental services to markets like Europe and the USA. This trend is likely to continue in 2024 due to restricted aircraft capacity, with airlines concentrating relatively limited capacity on their most profitable routes. For instance, European and North American carriers are expected to maintain a significant presence in the robust transatlantic market.
However, the slow reopening of Asia-Pacific countries from Covid-related travel restrictions means this market remains underserved. Despite the rapid lifting of Covid restrictions in China, the recovery has been predominantly domestic rather than international. This is evident in the significant disparity between domestic and international capacities from China, with international routes lagging behind.
Willie Walsh, IATA’s director general, notes the sluggishness in the US-China market recovery, primarily due to delays in the delivery of new widebody aircraft for airlines serving that route. Nonetheless, there’s potential for growth, with IATA anticipating a traffic surge of 13% – the highest among all regions – for Asia-Pacific in the coming year, finally surpassing pre-pandemic levels. Walsh expresses optimism: “We anticipate a continued strong recovery in the Asia-Pacific region as we move into 2024. All indications suggest a sustained upward trajectory in Asia Pacific.