Global shortage of passenger aircraft

Budrigannews.com – This week, financiers who are at the heart of a $200 billion industry that supports airline fleets are gathered in Dublin. They are betting that China’s decision to allow free travel will speed up their recovery from a pandemic downturn and are also expressing concern about a lack of jets.

China’s decision last month to end its zero-COVID policies has boosted demand for air travel, three years after the spread of COVID-19 grounded thousands of aircraft.

The Chinese-owned Avolon, the second-largest aircraft leasing company in the world, predicted in a report on Monday that global traffic would return to pre-pandemic levels as early as June of this year, which was months earlier than the majority of industry experts had anticipated.

In 2024, full recovery is anticipated, according to the International Air Transport Association, which represents global airlines.

According to Avolon, “Asia will drive growth in 2023, helped by the recent reopening in China,” “after a 70% recovery in passenger traffic last year led by… Europe and North America,” and other regions.

Despite concerns about infections, data suggests that Chinese are returning to travel ahead of the Lunar New Year, with passenger traffic increasing to 63% of 2019 levels since the annual travel season began.

Some people aren’t as upbeat.

“Airlines are not significantly increasing the number of times they fly to China. Bertrand Grabowski, an aviation advisor, stated, “It’s going to take some time. It’s going in the right direction.”

Dutzendes of airlines went out of business as a result of the crippling effects of COVID-19, which wiped billions of dollars from their balance sheets.

In a sharp turn around, the industry’s biggest concern right now is obtaining enough of the most widely used narrow-body jets to meet demand because strained supply chains delay new aircraft deliveries.

Additionally, it is frustrating to try to keep existing jets in regular service or get others out of storage due to severe MRO plant bottlenecks.

“The end result is MRO; “They are completely full,” Grabowski stated, adding that extensive checks were required on stored aircraft.

Airlines and leasing companies have publicly complained about delivery delays and are likely to demand compensation from aircraft manufacturers.

Privately, many airline executives acknowledge that the shortages have enabled them to maintain higher airfares in order to support their balance sheets and ward off concerns about a recession.

According to Rob Morris, global head of consultancy at Ascend by Cirium, the same is true for aircraft rentals charged by lessors. Some of these rentals have, on average, increased by double-digit percentages over the past 12 to 24 months for a variety of reasons.

Prior to this week’s annual Dublin conferences, which are being hosted by Airfinance Journal and airline economics, a slew of macroeconomic concerns is keeping attendees on edge.

Prices for aircraft parts are rising as a result of inflation, which also raises concerns about the endurance of travel demand.

Leasing companies must pay significantly more to service the substantial debts inherited from a multi-year plane ordering boom as interest rates accelerate to combat inflation.

Oil prices are erratic for all airlines, and the majority of emerging market airlines will see a significant increase in the amount of money required to pay for aircraft rentals and fuel.

All of this takes place at the same time that the sector is figuring out how to put into action and pay for pledges to achieve net-zero emissions by 2050.

During this week’s gathering of more than 2,000 financiers, lessors, investors, airline executives, and manufacturers, hundreds of private meetings will be held to generate financial support for newly delivered aircraft or to locate new homes for existing ones.

It is an annual ritual for the specialist industry, which was started by the late leasing tycoon Tony Ryan and is mostly based in Ireland. Tony Ryan’s empire grew and fell between the 1970s and the 1990s, but it was rebuilt under the current market leader, AerCap.

Global leasing companies control more than half of the airline fleet worldwide rather than directly owning it.