Cirium CEO Jeremy Bowen listed his seven airline industry predictions for 2022 as part of the 2021 analyst report.
He says the recovery has had its challenges as we continue to grapple with fluctuating COVID-19 cases, new variants and varying vaccination programs by country.
“International border closures have meant that markets with strong domestic travel, such as the United States and China, have rebounded quickly. Markets dependent on open borders and airlines operating in these markets have struggled.
“However, there are signs of recovery. international corridors are reopening, such as between the UK and the US. As new variants put a damper on pomp and circumstance, airlines responded by staying the course, Mr Bowen said.
But he warns “we are far from out of the woods, but we know that the global recovery will turn upwards this year. At Cirium, we’re looking at what to expect this year and beyond, working closely with the industry to anticipate future scenarios. Here are seven key things to consider for 2022.”
We regularly see more and more passengers returning to the air as the number of fully immunized people increases in many countries and travel restrictions ease. By September 2021, domestic traffic (measured in number of passengers) had improved and was down only 36% compared to 2019, thanks to improvements in North America and Russia.
Cirium’s consultancy team, Ascend by Cirium, forecasts that the global passenger fleet in service will increase to 20,700 by the end of 2022. This is only a few hundred less than at the end of 2019. By the end 2021, nearly 17,000 passenger aircraft are expected to be in service. Airbus and Boeing are expected to deliver more than 1,400 new aircraft in 2022 and nearly 1,600 in 2023. The current parked fleet of some 4,800 surplus aircraft is expected to continue to shrink to around 3,700 by the end of the year. next. This will further reduce to 2,400 by the end of 2023.
As the recovery continues in most markets and global passenger traffic exceeds 2019 levels by mid-2023, the surplus of passenger aircraft – which exceeded 14,000 at the height of the crisis in April 2020 – should be largely reabsorbed into the fleet. We expect to see around 550 aircraft retirements per year between 2022 and 2024 as older, less fuel-efficient aircraft from these surplus aircraft are being scrapped.
Airlines are emerging from the crisis with a redesigned fleet, where next-generation planes have 15% better fuel burn than the less efficient planes they replaced. This includes an order book of nearly 9,600 next-generation single-aisle and 1,600 next-generation twin-aisle aircraft scheduled for delivery in the 2020s and 2030s.
As vaccines are rolled out globally and economies recover, organizations have already increased their spending on business travel. According to the Global Business Travel Association (GBTA), spending on business travel is expected to increase by 21% in 2021, thanks to the easing of restrictions on international travel. For example, in March 2021, 217,100 international flights were tracked compared to 542,300 in October, i.e. 1.5 times more international flights.
This trend will continue and we expect business travel to accelerate further in 2022. GBTA forecasts a 36% year-over-year increase in business travel in 2022. We expect events and business meetings stimulate this increase. Cirium tracks online activity around corporate events and applies machine learning to this activity, to then integrate the data into the forecasting models of the airlines. Cirium Diio Signals shows increased activity on the web around corporate events and conferences. For example, according to data from Cirium, Barcelona hosted 10 major trade events that impacted air travel in January 2019, 23 events in January 2020 and only two in January 2021. There are expected to be four events in January 2022. This is a clear sign that trading events are slowly returning.
The positivity is also reflected in the GBTA’s forecast of a full recovery in business travel by the end of 2024, where annual business travel spending will take over pre-pandemic revenue at 1 .48 trillion dollars.
The air freight market continues to grow and had a good year in 2021. Traffic (calculated in Freight Tonne Kilometers) is up more than 8% for the first nine months of 2021, compared to 2019. Capacity is however down nearly 12% for this year, reflecting the continued lack of passenger hold capacity.
In an analysis of Cirium fleet data, 61 orders for new freighters were placed in 2021, the strongest year for orders since 2018. Airbus is seeking launch orders for its new A350 freighter, which will compete in the larger capacity freighter market. Boeing is expected to respond with a 777-X freighter.
In the first ten months of 2021, 97 passenger aircraft were converted to freighters, which is well above the 70 conversions made in 2020. There are potentially more conversions to occur between the time of writing and the end of this year, which could see a total of 140 conversions, double the amount in 2020. This greatly exceeds previous highs of 107 conversions made in a single year. 2022 is expected to be even higher, with a potential total of 160 passenger aircraft converted to freighters. Over 250 conversion orders have already been received in 2021. The high level of activity in this sector is due to a combination of factors, including aircraft available at lower prices and the rise of e-commerce.
Aircraft values and rental rates have taken an unprecedented hit in the 12 months from April 2020 to March 2021. From April to September 2021, values and rental rates for many types appear to have stabilized , and a few are getting better.
The fortunes of the world fleet diverge, not only between single-aisle and twin-aisle aircraft, but also within the single-aisle aircraft themselves. In 2021, the ATR 72s, Embraer E190/195s and the Boeing 737 MAX family saw improvements. The Airbus A320 saw mixed fortunes, with the value of older vintages improving while that of younger ones declined further. First we saw values improve while rental rates hold steady at what appears to be market lows.
On the twin-aisle front, rental rates continue to fall with A350-900 rentals recently reduced by up to 19%, and the 787s continue to be under scrutiny. This was necessary to stimulate demand from opportunistic airlines and to see part of the inactive fleet find new homes.
So far, there have been no willing sellers, so values have remained firm. However, given that some of the rental rate factors on the paired corridors have fallen below 0.5% relative to market values, it raises the question of how long these values can be sustained.
We anticipate a shift in airlines serving secondary markets after the pandemic and instead see airlines taking advantage of their partners to fly passengers to secondary cities.
Delta Air Lines is informative. In 2019, Delta served 88 US-Europe markets outside of the hubs of its main European Skyteam partners: KLM, Air France and Alitalia. Looking forward to the year ending in 2022, Delta is expected to serve only 72 of the original 88 markets. These markets include Atlanta to Stuttgart, Dusseldorf, Brussels and Zurich, and New York (JFK) to Berlin and Malaga. All these markets are served via the Amsterdam hub of KLM or via the Paris hub of Air France.
While seats scheduled by Delta to Amsterdam and Paris for the end of 2022 compared to 2019 are still down 25%, transatlantic traffic is also down dramatically. It’s a logical step for Delta to filter passengers to these now canceled routes through their partners’ hubs rather than investing in their own planes on long, narrow routes. Thanks to code sharing on these intra-European sections, the partners can supply each other with flights on routes which may not be complete without the efforts of each carrier.
As fewer flights were operated in 2021 – flights tracked from January 1 to October 31, 2021 are down 29% compared to 2019 – CO2 emissions from flights were 40% lower than before the pandemic. Although the trend seen in 2021 shows an increase in fuel consumption as domestic flights have started to return, it is lower as airlines fly their planes far fewer hours and favor more efficient planes.
The proportionally larger drop in emissions is also explained by the fact that international long-haul markets take longer to recover than domestic and intra-regional markets. This reduced the average size of aircraft flown and distance flown, while airspace and airports were less congested, resulting in less time spent in take-off queues and holding patterns .
Equipment manufacturers are already accelerating the production rates of the latest technology aircraft that will enter service. With the return of flights, this means that overall CO2 emissions will increase as markets recover, but as more efficient aircraft enter service, the fleet is expected to deliver average efficiency gains per seat of several percentage points from pre-pandemic levels.
To achieve net zero 2050 goals, the industry will increasingly seek to understand the actual fuel consumption of flights, as well as sustainable aviation fuels and offsets. We anticipate that discussions will also continue around hydrogen and electric aircraft, although these methods will play a much smaller role in achieving these goals.