I've spent far too much time sifting through IATA reports, airline reports, industry predictions etc. - the most prominent feature of the recovery is that nobody can be sure what is going to happen.
The first thing that I found to be intriguing was domestic market recovery. We've seen China surpass 2019 levels and reach 104% of that level already. The US domestic market is recovering well as we know, with growth being thwarted by lack of international numbers. IATA and ICAO have forecast strong a strong recovery to 80-90% of 2019 levels by the end of this year - this is largely in line with market sentiment.
It's no surprise to us that Europe is the outlier. Business travel makes up 10-20% of European 2019 traffic (Although the stats are not completely reliable!), but what is known is that business travel can make up to 75% of flight revenues. This is going to be the problem for airlines. Aircraft being filled with leisure travellers is inevitable as we continue the summer growth and recovery, but that becomes a problem as we enter Q3/Q4, where leisure travel trails off. This winter could be a big problem for the airlines, if business travel doesn't return to good levels, it could serve as a big blow.
With regards to business travel, one thing we know is that it simply is not going to reach 2019 levels for a few years. It can only be below it. How far below that level it will be remains to be seen and speculating on this is useless. My point is that this uncertainty will prove to be a big problem for airlines once the initial leisure boom subsides.
From a top-down view, I agree with the sentiment that this drop in business travel and WFH tendencies could lead to a climb in leisure travel, however this is not what an airline would choose. These types of customers are fundamentally different and will exacerbate this race to the bottom for air fares we've been seeing over the past few decades. I don't think that this increase in leisure travel would help to account for the loss in business travel - I imagine that it would be negligible.
This uncertainty coupled with the alarm bells ringing for ESG investing, global warming and zero emission trends will thwart growth and recovery. It's clear that we will recover well to 70-80% of 2019 levels, but at lower fares, and that final 10-20% will be the toughest (and most lucrative) to recover for the airlines. There are interesting times ahead for aviation for sure, and I really hope we can recover quicker than forecast - it's just not going to be easy!
Last edited by SliabhLuachra; 6th Mar 2023 at 10:27.