Aviation industry has shown signs of a strong rebound in 2022. The International Air Transport Association (IATA) has predicted that the aviation industry will return to profit for 2023 as the contained demand for travel maintains bookings, despite the global economy tightening.
Supply chain disruptions and talent shortages may be the biggest risks or challenges for aviation organizations in 2023. In the beginning of the year, with most airlines posting soaring profits as people took advantage of the first travel season without COVID 19 restrictions, few of the aviation players are expressing their concern about expecting 2023 to be tough provided the price of energy to come down with inflation tames.
But recent survey indicates, 88% of senior executives in the aviation industry trusting the general business outlook for the aviation sector for the next year is “somewhat to very positive.” There are more reasons for this optimistic outlook. These include growth in new technologies and the use of digital thread and smart solutions in the aviation sector. All these factors should help the aviation industry grow and create new markets in the coming year. Aviation companies focused on innovation and prepared to capitalize on new emerging opportunities could outperform their peers in 2023.
What are we expecting in 2023?
According to aviation industry leaders, global demand is continuing to ramp as consumers shift spend to experiences, businesses return to travel, and international markets continue to reopen.
The recent Consumer Price Index (CPI) data from the Bureau of Labor Statistics indicates that carriers’ huge revenue numbers are the result of airfare inflation, up a massive 42.9% annually, That’s the highest on record and more than five times higher than the overall inflation rate of 8.2%. During the month of September, average airfares rose 0.8% twice as fast as the rate for all items.
Demand remains strong, and consumers around the world continue to value air travel and the ability to reconnect post-pandemic
As demand for passenger travel is correlated to ticket prices which rely on jet fuel prices, a sustained rise in jet fuel prices can affect traffic and increase market volatility. To address this challenge aircraft manufacturers are investing in aircrafts which are more fuel-efficient with lower operating costs, with lower zero-emissions.
Airline ticket prices have climbed much faster than overall inflation due to several factors. Rise in fuel costs and return of travel demand has collided with massive challenges to supply, including labor shortages, aircraft delivery delays and other issues. Still, passengers are willing to pay higher prices that have more than offset airlines’ rising costs. In a nutshell, aviation consumers should brace for more airfare inflation ahead. Ticket prices will remain high with Holiday Travel Outlook report showing thanksgiving airfare prices up by 25% and Christmas airfares soaring high by 55%.
According to Delloitte, as the passenger traffic steadily returns to pre-pandemic levels, strong increases in new aircrafts, signal growth for the aviation sector continuing in 2023. However, optimism around growth is held in check by caution from ongoing risks. Supply chain disruptions, talent shortages, and inflation will likely be the biggest challenges for the industry in 2023.
The coming year could see increased competition in three areas in particular:
1. Digitally skilled talent (from other industries)
2. Materials (due to the shift of supply chain)
3. Customers (from new players entering the market)
Top signposts for companies to watch in 2023:
• Business Agility: Achieving agility could be critical for the aviation sector seeking to operate through turbulence and compete in the next growth period.
• Emerging Technologies: Investing in emerging technologies and smart solutions in the aviation sector can help companies address supply chain challenges, optimize production capacity, progress toward sustainability goals, and improve employee retention.
• Emissions Reduction: Companies can further reduce emissions in 2023 across the value chain, specifically by helping ramp up the production capability of SAF.
• Developing Key Business Areas: The growing interest in the aviation industry will likely generate more business and employment opportunities, and the value chain may further expand in 2023.
Reference: Industry Sources