The global airline industry is facing a summer squeeze, with travel demand expected to surpass pre-pandemic levels while aircraft deliveries drop sharply due to production problems at Boeing and Airbus.
Air carriers are spending billions on repairs to keep flying older, less fuel-efficient jets, and paying a premium to secure aircraft from lessors.
But some carriers are still being forced to trim their schedules to cope with the lack of available planes.
At the same time, the number of travellers globally is set to hit historic levels, with 4.7 billion people expected to travel in 2024 compared with 4.5 billion in 2019.
"We can expect a strong performance from airlines throughout the summer with some particularly high airfare," John Grant, senior analyst at travel data firm OAG, said.
Last December, the International Air Transport Association (IATA) had predicted a 9 per cent annual growth in global airline capacity this year. That estimate looks optimistic following Boeing's safety crisis.
Passenger carriers will receive 19 per cent fewer aircraft this year than they expected because of production issues at Boeing and Airbus, senior associate at AeroDynamic Advisory Martha Neubauer said.
Boeing's production has been curbed as the company reels from a sprawling crisis that erupted after a mid-air panel blowout on an Alaska Airlines flight on January 5th.
Regulators have put a cap on production of the 737 MAX, but the company is not hitting even that level.
As many as 650 Airbus A320neo jets could be grounded in the first half of 2024 for inspections to deal with a flaw with RTX Corp's Pratt & Whitney engines, RTX said last year.
In Europe, Ryanair has cut some routes, while in the US, United and Southwest have cut back flying and adjusted hiring and staffing plans.
Leasing market booms
Analysts expect capacity at most US carriers in the second quarter to grow at a slower pace than a year ago.
Airlines will update their growth plans and explain how they will offset capacity constraints when they report quarterly results, starting on Wednesday with Delta Air Lines.
Due to the shortage of new planes, the aircraft leasing market is booming. Data from Cirium Ascend Consultancy shows that lease rates for new Airbus A320-200neo and Boeing 737-8 MAX aircraft have hit $400,000 per month, the highest since mid-2008.
Airlines are spending 30 per cent more on aircraft leases than before the pandemic, chief economist at Airlines for America John Heimlich said.
They are also holding on to jets that are past their useful economic lives and require heavy maintenance that now takes several months, Heimlich said. Repair costs at United, Delta and American were up 40 per cent last year from 2019.
Increased leasing, repair and labour costs will bite into profit despite the high demand, Heimlich added.
-Reuters
