by Valentin Mory, Mobility & Transport Analyst
With an average expected growth of 3-4% per year, air traffic has returned to pre-COVID levels. Airlines are experiencing an up-cycle moment, witnessing a perfect storm of low fuel cost, robust premium demand and constrained aircraft production, which acts as a safeguard against overcapacity and supports robust pricing power.
However, this balance remains vulnerable to a potential slowdown in the U.S. macroeconomic environment, which could challenge the post-COVID shift toward increased leisure and premium travel that has been thriving in recent years and is buttering airlines' bread.
In this landscape, the constrained production chain for aircraft presents a double-edged sword: while it protects against overcapacity, it also hinders fleet renewal. Recent developments indicate a positive trend, but a full-fledged recovery may take several years to materialize. In the meantime, MRO (Maintenance, Repair, and Overhaul) services are poised to thrive due to increased activity and demand.
In Europe, robust earnings in recent years have allowed many airlines to deleverage, resulting in a widespread improvement in credit ratings. However, tapering growth prospects, combined with increasing regulatory and fiscal headwinds, have brought consolidation to the forefront of industry discussions.
In this context, what does the future hold for airlines? Are the prospects consistent across different regions of the world?
Listen to Valentin Mory's Mobility & Transport Analyst insights in a video and a special report.
