The past couple of years have certainly been tough for the aviation industry especially during the turbulence the 2202 bought with it. 2022 saw strong improvements in demand and capacity, and more optimism from airlines. Looking forward to 2023, this is likely to continue. There are challenges still for the industry in terms of pricing, staffing and inflation. But there is also plenty to look forward to with progress underway on new aircraft and new technologies in particular.
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Continued travel disruption and industrial action
To start with an obvious and prominent concern from the end of 2022, 2023 is likely to see continued disruption to airline schedules, airport operations, and passengers plans. Staffing in many areas remains disrupted following the pandemic (and in the UK following Brexit), but the war in Ukraine, inflation, and volatile pricing has now begun to play a part too.
Many of these problems will continue to affect aviation throughout 2023. With staff shortages, many airports and airlines have been forced to cut services. In most areas, we are not seeing any resolution to this yet.
COVID may be forgotten in many regions, but it has not gone away. 2022 is also ending with renewed concern in China. Discussion once again of virus variants and new travel restrictions are a strong reminder of how quickly things could change.
The effect of rising prices
Many economies are entering 2023 with long-term high inflation rates. This will continue to have an effect in many areas – prices faced by airlines, continued strikes and disruption from staff over wages, and likely lower demand for travel as increased cost of living bites.
Fuel makes up a major part of airline expenditure and this ends 2022 up almost 35% over the year (according to global IATA statistics). Longer routes faced by many European and Asian flights avoiding Russia only adds to the problem.
These rising costs have already had an effect on air fares in 2022 and this will continue in 2023. A recent forecast from American Express Global Business Travel predicts increases of up to 12% for Asia-Europe economy fares, and 5.5% for European flights.
Continued strong demand for travel
Set against these staffing and pricing challenges, is the fact that demand for travel remains strong. According to the World Economic Forum, flight activity in Europe reached 86% of pre-pandemic levels in 2022. This strong and rapidly returning demand will give confidence to airlines to expand routes and fleets.
There may be some slips in 2023 with the effect of inflation and the cost of living, but predictions are that recovery will continue. IATA predicts that by the end of 2023, most regions will be at, or exceeding, pre-pandemic levels of demand.
With this, and despite rising costs, IATA expects the aviation industry overall to return to profitability in 2023 for the first time in three years. This will be a modest profit margin of under 1%, compared with over 3% in 2019.
Progress, but no deliveries, of the new Boeing 777X
Turning to aircraft related expectations in 2023, it is not looking to be a great year for Boeing and the new 777X. The much anticipated aircraft is set to be the largest twin engine aircraft ever built, and offer significant efficiency improvements. It was due to be in service already, but with a number of delays it remains in testing.
Delivery has already been pushed to 2024 or 2025, and this is in the spotlight once again as we enter 2023. In late November 2022, it was reported that there were issues with the GE9X engines that were once again delaying testing.
Delays have already frustrated many airlines, and further problems will worsen this in 2023. While delays during COVID weren’t necessarily disastrous, several airlines have committed heavily to the 777X as a replacement for 747s, 777s and A380s. Emirates (the largest planned operator with 115 aircraft on order) has suggested it may have to cancel.
Airbus A321XLR will hopefully be certified
The other major upcoming commercial aircraft is the Airbus A321XLR. This is the latest update to the A320 series, and will feature additional fuel tanks for extended range. This opens up exciting opportunities for airlines to operate longer point to point flights using narrowbody aircraft. It has proved a popular choice for airlines well before introduction, with over 500 aircraft ordered so far.
2022 finished with the new aircraft making a 13 hour test flight around Europe. Until mid-2022 it was expected to enter service in 2023, but this has been pushed into 2024. Airbus hopes to secure type certification during the year.
A good year for China?
The developing Chinese and Russian aviation industries offer new competition to Boeing and Airbus’ long held duopoly. Russian development is less significant now, but China is at a strong point with two major commercial aircraft as we enter 2023.
COMAC’s regional jet ARJ21 entered service in 2016, but 2022 has been a milestone year with the first aircraft delivered to an overseas airline customer (TransNusa Airlines). This could well be the start of more deliveries, or leases, to foreign airlines.
The larger narrowbody C919 is more of a threat to Boeing and Airbus. Having received certification earlier in 2022, the first aircraft was delivered in December. So far the new aircraft has only been ordered by Chinese airlines, with COMAC claiming around 300 orders. We are likely to see much more of this in 2023 and onwards.
Continued improvements in electric and hydrogen power
For longer term significant green improvements, electric or hydrogen propulsion are promising developments. Both of these are some way off for large aircraft, but progress is being made.
We will see more from electric aircraft in 2023, as a number of options get closer to entering commercial service. Rolls-Royce is working on the 9-seat P-Volt aircraft (with Norwegian airline Wideroe committed as the first customer), hopefully for 2026. Eviation is close behind with its Alice electric 9-seat aircraft, just flying for the first time in September 2022.
There are exciting developments underway in hydrogen power,too. In late 2022, UK based ZeroAvia received permission from the Civil Aviation Authority to fly its 19-seat Dornier 228 aircraft equipped with its prototype hydrogen-electric engine. Flights will start in 2023, with ZeroAvia targeting the first commercial hydrogen-electric flight in 2024.
Ground testing of the first hydrogen fuelled turbofan engine is also at a high point. Rolls-Royce (in partnership with easyJet) successfully ran its modified AE 2100 test engine in November using hydrogen as a fuel source. These tests will continue in 2023 and beyond (with a next phase of testing moving to Pearl 15 jet engines), working towards having small or medium-sized aircraft flying in the 2030s.
Signs of a pilot shortage in 2023?
There has been discussion for some time about whether or not the industry is facing a pilot shortage. As just one major example, Boeing made a claim in July 2022 that over 600,000 new pilots will be needed between now and 2041.
There are several reasons for this – including more pilots reaching retirement age (and no confirmed plans to change this), an ongoing shortage of military pilots, and volatile job prospects with past experiences of recession and the recent pandemic.
Many of these factors are particularly affecting the US market, and smaller airlines there could be hit the worst. There will be little change in 2023. How quickly pilots return to the industry, and what plans airlines have for new recruitment will start to become clearer as well. Oliver Wyman predicts in its research that signs of the shortage could start to be seen in 2023. It claims “we believe a global pilot shortage will emerge in certain regions no later than 2023.”
Final Thoughts
2023 should hopefully be the year that the industry pulls clear of the pandemic. Predictions of an overall return to profitability are encouraging, as is robust demand. Although there are no milestone expectations for new aircraft development, some big changes are underway and back on track in an industry less hampered by COVID concerns.
Sources:
IATA fuel prices: https://www.iata.org/en/publications/economics/fuel-monitor/
Oliver Wyman quotes on pilot shortage: https://www.oliverwyman.com/our-expertise/insights/2021/mar/after-covid-19-aviation-faces-a-pilot-shortage.html
AMEX fare increases 2023: https://www.amexglobalbusinesstravel.com/press-room/air-monitor-2023-american-express-global-business-travel-forecasts-fare-rises-on-key-business-routes/
