A Retrospective Look
2023 has been a good year for the air transport industry. In 2023 the widespread use of fossil fuels was a prominent factor in the air transport industry and the International Air Transport Association (IATA) says in its Global Outlook for Air Transport released in December 2023, that in 2023 air transport had almost returned to its level of services in the pre pandemic era and may represent a peak for the industry, and the same rate of growth and financial recovery is unlikely to be replicated in 2024 and beyond. In its outlook IATA also says that a successful transition to alternative energy sources is necessary to chart a new course for sustained and sustainable growth, leading to improved economic outcomes for the world.
According to IATA, industry-wide passenger traffic, measured in revenue passenger-kilometers (RPKs), experienced a significant 40.1% year-on-year growth through September 2023, reaching 92.9% of pre-pandemic levels. With the exception of Asia Pacific, all regions are projected to achieve or surpass their 2019 traffic levels in 2023. At this rate of increase, it can be expected that global passenger traffic will double by 2040.
In the context of cargo, the sector had faced challenges in 2023, encountering a demand slowdown due to macro-economic headwinds and a global trade deceleration. Despite a decrease in cargo tonne-kilometers (CTKs) from 2022, signs of improvement emerged in the latter half of 2023. Notably, Latin America experienced annual growth in cargo tonne kilometers (CTKs), and North America and Africa exceeded their pre-Covid levels. However, overall industry CTKs are forecasted to remain below 2022 levels in 2023, with a projected 4.5% growth in 2024.
All this seems to suggest that the industry is on track to regain profitability in 2023, a mere three years after the historic loss of nearly USD 140 billion in 2020. This recovery stands as a testament to the industry’s resilience, adaptability, and hard work. Total airline revenue is expected to reach 107% of 2019 earnings, with operating profits amounting to USD 41 billion.
The projected net profit for the entire industry this year stands at USD 23.3 billion. While this is a positive development, the levels of profitability fall short of being extraordinary. To put it in perspective, a single oil company surpassed nearly half of this amount in the third quarter alone, and a major technology company nearly matched the entire annual profits of the aviation industry within that single quarter.
In 2023, the net profit margin for air transportation is a modest 2.6%, notably lower than the 11% and 22% margins achieved by the aforementioned oil and technology companies, respectively. The industry’s profits for the year, amounting to USD 5.44 per passenger, are less than the cost of a cup of cold brew coffee in Geneva. Despite its remarkable resilience, the aviation sector still lacks robustness.
The IATA report opines that global passengers have unequivocally demonstrated the essential nature of air transportation by voting with their wallets, even in the face of historically high jet fuel prices relative to crude oil prices. A survey of 8,000 air travelers revealed an 82% satisfaction rate, with 91% stating that air transportation is a necessary mode of travel. The need for global connectivity is evident, and air transportation plays a crucial and indispensable role in facilitating this connectivity. The industry’s swift recovery from a near-total halt underscores its significance.
A note of caution has been sounded: the aviation industry remains the most vulnerable link in the aviation value chain, as indicated by the anticipated net profits. The recommendation of IATA is that in the short term, airlines must enhance their profit margins and fortify their balance sheets following the pandemic. Looking ahead, securing access to renewable energy sources is essential for the industry to fulfill its role in fostering a sustainable, inclusive, and equitable global economy over the long term. IATA believes that sustainable aviation fuels (SAF) could contribute over 60 percent of the emissions reduction required in global aviation by 2050, but airlines are facing challenges in acquiring sufficient quantities to power flights.
It must be noted in this context that while the airline industry is responsible for approximately 3 percent of global CO2 emissions and serves a relatively small portion of the world’s population, it acknowledges its environmental impact and is actively pursuing multiple pathways towards decarbonization.
Airports Council International (ACI)
ACI, in its Outlook for the Industry in 2023–2024 fourteenth quarterly evaluation, examining the repercussions of the COVID-19 pandemic on airports and outlining the trajectory has stated that before the onset of the COVID-19 pandemic, the anticipated global passenger volume for 2023 was 10.5 billion passengers. However, the current estimate places the global passenger volume for 2023 at around 8.6 billion passengers, equivalent to 94.2% of the 2019 level.
Looking forward, ACI envisions that the year 2024 is anticipated to mark a significant milestone in global passenger traffic recovery, reaching 9.4 billion passengers, surpassing the 2019 figure of 9.2 billion passengers (102.5% of the 2019 level). This represents a 13.9% potential loss compared to the pre-COVID forecast of 10.9 billion passengers in 2024.
COP 28 and Air Transport
At the 28th session of the Conference of Parties (COP/28) of the United Nations Framework Convention on Climate Change (UNFCCC) held in Dubai a few weeks ago, representatives from the aviation industry expressed their consternation at critiques of the industry’s carbon emissions, reiterating their dedication to decarbonization while emphasizing the crucial need for increased support from both governments and the private sector. Emphasizing the diligence of measures taken in mitigation and adaptation by the global aviation community, a spokesperson of the International Civil Aviation Organization – the United Nations specialized agency for international civil aviation – is reported to have said: “We have done so much but we’re terrible at explaining it and announcing it to the world. Please let’s do more outreach, let’s talk about what aviation is doing. Let’s make the world understand where we are because we are so advanced, and sometimes I hear people talking about things we resolved 15 years ago.”
Executives representing the aviation industry at COP/28 underscored the importance of financial assistance to enhance the production of SAF, a critical element for the sector to attain its net-zero target by 2050.
Another strong voice in defense of aviation was Teresa Parejo, head of sustainability at Iberia Airlines, who had drawn attention to the importance of the air transport industry as a necessary catalyst in the global economy: “Sometimes I wonder why the focus is on aviation so much because there are so many other sectors that contribute as much or even more. People need to understand that aviation is critical for the well-being of many countries, even vulnerable ones that depend on tourism. It’s not just people who want to have fun that travel. Aviation creates jobs and wealth and is critical for humanitarian purposes. We are the ones most interested in moving towards sustainability; we want SAF. It is so critical to us because it’s a move from fossil fuels to a sustainable way of transportation – but we need help.”
In October 2023 ICAO released its flagship document The World of Civil Aviation wherein ICAO states inter alia that the objective of achieving net zero carbon emissions in international aviation by 2050, endorsed by both the aviation sector and world governments, marks a considerable undertaking that is just commencing. Attaining this goal depends on various measures to reduce CO2 emissions, with countries acknowledging that SAF and lower carbon aviation fuels (LCAF), alongside cleaner energy sources, hold the most significant potential impact on near-term aviation CO2 emissions reduction.
The substantial potential of SAF to contribute to aviation emission reduction is currently counterbalanced by the formidable challenge of rapidly expanding its development and distribution. ICAO claims to be actively cultivating global partnerships and cooperation, engaging with financial institutions, including development banks, private equity entities, and fuel producers, to stimulate the necessary investment and development.
How Will the Industry Cope in the Coming Weeks?
It is widely recognized that the holiday season will bring in exponential demand on airlines and airports. TravelPulse reports that U.S. airlines have preparied for several months to meet the demand of over 39 million passengers during the winter holiday season, spanning from December 20, 2023, to January 2, 2024. Airlines for America (A4A), representing the major U.S. passenger and cargo carriers, anticipates approximately 2.8 million passengers flying per day over the holidays, marking a 16 percent increase from the previous year, 2022. The peak days are forecasted to be Thursday, December 21, and Friday, December 22, leading up to Christmas, as well as Tuesday, December 26, through Friday, December 29, post-Christmas, with an expected 3 million passengers per day.
A4A member carriers are diligently working around the clock to transport packages globally, encompassing gifts and holiday treats, during this festive season. U.S. airlines routinely move more than 59,000 tons of goods daily, covering a wide range of items such as high-value electronics, fresh food, flowers, live animals, and medical supplies worldwide. To meet the unprecedented demand during the holiday season, some of the measures taken by American carriers are: aggressively hiring to ensure the optimal placement of personnel at the right time and place; adapting schedules to align with passenger demand, address Air Traffic Control (ATC) staffing shortages, and prioritize operational efficiency; and investing in cutting-edge technology, including mobile apps, to facilitate seamless communication with travelers and enhance overall efficiency.
In terms of technology, SITA – a multinational information technology company providing IT and telecommunication services to the air transport industry – in a publication titled Customer experience an increasingly decisive factor when booking travel amid post-pandemic disruptions released on 7 September 2023 says that following the post-pandemic surge in demand coupled with ongoing staff and resource shortages for airlines and airports, disruptions to air travel have adversely affected passengers’ experiences. More than half of passengers have faced flight delays and cancellations, with a significant number expressing the negative impact on their overall travel satisfaction. Consequently, it comes as no surprise that apprehension about delays and cancellations induces anxiety during the booking stage for nearly one-third of passengers in 2023.
Given this scenario, passengers are increasingly embracing smart technologies to alleviate challenges throughout their journeys. In 2023, there is a continued trend of passengers utilizing mobile devices as a remote control for various aspects of their journey, including booking, check-in, dwell time, on board, and bag collection. There are two aspects highlighted in the SITA document: the increased use of technology to alleviate congestion; and the balance between increased air travel and sustainability. SITA records an exponential increase in the use of bio metric identification during the journey, passengers rated an average of 7.36 out of 10 (with 10 indicating the highest comfort), up from 7.26 in 2022. This reflects a growing preference for a seamless airport experience facilitated by this technology. There is a notable interest in completing specific checks before arriving at the airport to enhance efficiency, with nearly one-fifth of passengers identifying ‘automated checks before the airport ensuring documents are sufficient to pass border checks’ as a potential improvement in the booking process.
As for sustainability SITA posits that passengers see the potential of technology. The use of new technologies supporting sustainability is the top initiative valued by 64% of passengers for airlines and 62% for airports. This marks a significant increase from around half of passengers in 2022, signaling a strong desire for innovative approaches to achieve tangible emissions reductions. Technologies include flight path optimization to reduce fuel consumption for airlines and tools monitoring environmental performance data to decrease emissions at airports. With the increasing interconnectedness of the travel world, a majority of passengers expect to book intermodal trips in the coming year.
Airlines are anticipating peak travel days on December 21-22 and December 26-29, encompassing the Thursday and Friday preceding Christmas (which falls on a Monday this year) and the four days immediately succeeding the holiday. The surge in holiday travel won’t only manifest itself in bustling airport terminals.
In the airspace, carriers are set to provide 5.6% more scheduled seats on U.S. domestic flights this month compared to December 2022, according to Cirium’s data. Moreover, domestic seat availability has increased by 2% this month compared to December 2019, despite a 12% reduction in the number of flights. Airlines are opting for larger aircraft with increased capacity, enabling them to reduce the frequency of flights while accommodating more passengers.
This holiday season, the primary focus should be on passenger well-being, with measures in place to mitigate delays and denied boarding. Additionally, efforts should be made to alleviate passenger stress at airports and enhance overall passenger comfort and travel experience.
Usually, passengers are not given a seat in aircraft for several reasons, some being lack of acceptable documentation; adverse and unacceptable conduct prior to boarding; and overbooking, and it will not be incorrect to anticipate the increased plausibility of thread during the holiday season. . . Usually, denied boarding takes place when a passenger, holding a valid ticket for a flight, is precluded from occupying a seat on board due to overbooking by the carrier resulting in the number of passengers checking in exceeding the number that can be accommodated in the aircraft. In order to obviate this possibility the passenger must have confirmed reservations and valid travel documents. Denied boarding may usually result if: overbooking occurs where the airline intentionally oversells the actual number of seats on the aircraft; or in the event the carrier has to replace an aircraft scheduled for the operation of a flight with a smaller aircraft. However, unusually, there may arise situations where a passenger could be denied a seat in the aircraft for reasons beyond the control of the carrier such as in an instance where an airline may be compelled to deny boarding to passengers in order to accommodate military personnel or persons seeking emergency medical transportation.
What he airlines and airports have to ensure is that adequate staff are available to cope with air traffic control services as well as ground services and there is anticipatory intelligence to be prepared for adverse weather conditions and power outages as well as failure of international communications services such as the internet. All these will affect flight delays, and, as SITA says, an increased reliance of advanced technology could greatly alleviate the lot of the passenger.