After the initial hit of Covid crisis, domestic passenger markets were the first to rebound since domestic travel faced less uncertainty and fewer constraints than international travel. Moreover, 2 of the largest markets, the United States and China, allowed inbound travel earlier than the rest of the world, that led to a strong recovery in global numbers. The global domestic market was significantly and repeatedly impacted in 2020 and 2021, however, strong demand ensured that traffic bounced back quickly following each setback.
Traffic levels were sideways until reopening of the domestic markets in Asia Pacific , especially China after long Covid restrictions when most of the world was open for international travel. Over the first months of 2022, it is indeed international traffic that has driven the recovery in the industry. There are still setbacks in Asia Pacific due to ongoing concerns regarding the Omicron variant, notably in China. Industry wide RPKs increased by 76% over the year to June, leaving the aggregate measure around 30% below its pre-pandemic level. Nonetheless, the air travel is coming back stronger and demand is here. Based on few LCC data, airlines such as Ryanair and WizzAir reached higher numbers of passengers levels than during pre-pandemic times.
Another factor that significantly affects the air travel in the last couple of months are shortage of ground handling and airport staff as most of these workers were dismissed during Covid and it is harder to get those people back. Economic uncertainty, military operation in Ukraine, fuel prices and inflation also affect both airlines and travellers as operating expenses increase that falls back to passengers who should cover increasing costs, that significantly affect price conscious travellers.
Air cargo played an important role during the pandemic and CTKs remained above pre-pandemic levels throughout 2021. Benefitting from increased competitiveness compared to maritime cargo, growing e-commerce sector, the industry has recorded strong results including a doubling of air cargo revenues which in turn have tripled as a share of total airline revenue. Cargo volumes have retraced some of their gains over the past year (- down approx. 6.4% but CTKs are currently 1% above their pre pandemic level. Air-Cargo is continuously growing as 24-48 hour deliveries offered by many online shops is booming and subscriptions such as Amazon Prime memberships are fuelling this demand. Airplanes such as (A319, A320 and A321) that were disposed after 18-20 years of service now have significant potential to be converted as cargo planes and operate another 5+ years. Lessors are looking for cargo conversion specialist, opening new departments within the companies to serve growing demand for conversions and middle, and end-of-life aircraft.
While confidence that the recovery will continue remains, there are risks to the outlook including supply chain challenges, a softer global macroeconomic backdrop and ongoing geopolitical uncertainty.