End of year review for 2023 — GRIDPOINT CONSULTING

I skipped over the bingo card item of volcanoes, earthquakes, fires and floods. We might as well also cover severe weather at the same time. We had plenty of all of these during the year and the consequences for people directly affected were of course tragic, but I’m not aware that any of these caused major issues for the industry in general during 2023.

We should deal with the topics of supply chain disruption and aircraft technical issues together I think, since the main supply chain issues were aircraft and engine related. Highest profile were Pratt & Witney’s problems with the GTF engine, but Rolls Royce continues to have problems too with the Trent and these issues were compounded by ongoing difficulties in the maintenance supply chain. Neither Boeing nor Airbus have been covering themselves in glory when it comes to on-time delivery of aircraft either. Whilst these issues have caused problems for affected airlines, those were generally offset by supplier compensation payments. And the impact on aircraft availability has I think been helpful for the overall supply/demand balance for airlines.

When it comes to pandemics, as I’d hoped this time last year, COVID has ceased to be an important issue affecting demand. The last of the travel restrictions in Asia have been lifted. There are lingering effects on travel demand of course, with Asia still in recovery mode and business traffic remaining down on pre-COVID levels. That’s especially true for short-haul and for corporate travel, but I think that has more to do with the sustainability agenda, with the pandemic having served as an accelerator of change.

The final four areas were government regulations & tax hikes, environmental protests, labour shortages and disputes and ATC & Airport disruptions. There have been some issues in all of these areas, with perhaps the ongoing attempts by the Dutch government to reduce flight numbers at Schiphol being amongst the most noteworthy. But despite the impact that individual incidents had on airlines, it is hard to say that at an industry level these were materially worse than what counts for normal these days. My worst fears of ATC meltdowns and major industry-wide disruptions due to labour disputes did not materialise.

Demand and pricing

Last year I stuck my neck out with some specific predictions for volume and yields for the European carriers:

Overall I’d bet on a substantially better Q1 for European airlines against a soft prior year comparator, maybe as much as 30% in volume terms with higher yields. Summer 2023 should be up 10% in volume terms versus 2022, perhaps with some downwards yield pressure.

Let’s look first at passenger volumes. Here are the figures for the big six Western European airline groups. My prediction for volume growth in the first quarter of “maybe as much as 30%” was exceeded by all six, with all achieving growth of 40% or higher. For the summer period (Q2 & Q3), my 10% prediction was closer to the mark, although IAG and Wizz both exceeded it.