Passenger aviation: Chaos in 2022, but full recovery by 2023?

Oct 11, 2022

Scott Thompson
Partner, Global Aerospace and Defense Leader, PwC US

The commercial aviation industry is in an odd state. While it copes with challenges on numerous fronts, demand is hot. As air travel glitches pop up in the news almost daily, they seem to challenge prospects for full recovery of the industry.

In the 2022 edition of PwC’s Global Aerospace and Defense: Annual Industry Performance and Outlook, we highlight the topsy-turvy state of passenger (PAX) air travel in 2021 and into 2022. In this blog, we take a closer look at how and why we believe the industry will likely normalize over the next year.

Despite the current rash of flight cancellations, higher fares, aviation worker shortages and skyrocketing fuel costs, it appears that commercial aviation is working through a process of normalization and recovery, which we expect to occur in 2023.

Road to a full recovery in 2023: Takeaways for the commercial aviation industry

  • Airlines should redouble efforts to recruit new pilots and to incentivize the existing pilot workforce – as well as all other industry workforces – in order to meet the expected increase in PAX demand over the next year and beyond.
  • To better mitigate against vulnerabilities to volatile jet fuel prices, airlines and aerospace original equipment manufacturers (OEMs) should accelerate development of sustainable fuel production at scale.
  • Airlines should improve the customer experience overall (reducing rate of flight cancellation, control spiraling ticket prices, etc.). “Revenge travel” will not last forever.

In the US, consumer demand turned a corner in February when US domestic bookings surpassed the comparable 2019 monthly level for the first time since the pandemic’s onset. Demand has since risen steadily, as measured by the two key metrics of bookings and consumer spending. This PAX demand rebound has exceeded even the most optimistic projections.

Business travel is surging, too. April 2022 saw North American business flight activity reach its highest year-on-year increase, up 16.7%, and a 24.5% jump in global business flight activity over the previous year, according to Argus International.

Revenge travel persists, despite average cost of a US domestic flight rising nearly 50% since January. The scorching demand for air travel has been dubbed revenge travel (travelers’ revenge upon the COVID-19 virus), and has persisted despite ensuing chaos in numerous major airports. Given this unprecedented and unanticipated collision, as the unstoppable force of surging consumer demand for flights meets the apparently immovable object of airline and airport staffing shortages, what’s next?

Yet, issues persist, led by rising fuel prices. Russia’s invasion of Ukraine in February sent jet fuel prices soaring to their highest level since 2008. Prices have moderated but are likely to remain elevated and volatile. Supply, both US and global, is constrained. The US Department of Energy reports that inventory on the East Coast stood at its lowest level since 1990, when the agency first began tracking such indicators. However, high demand and a pandemic-inspired shift in consumer purchasing behavior toward ticket buying closer to departure date have enabled airlines to pass on a portion of increased fuel costs much more quickly than in the past – almost in real time.

Reduced flight volume – due to staff shortfalls – also lifting airfares. Some airlines have cut flights to cope with persistent staff shortfalls, further driving up fares. Consider just a few examples. JetBlue announced in March 2022 plans to cut or suspend 27 routes through the summer of 2022, then pulled another nine routes in April. Alaska Air, too, trimmed its offerings to catch up on pilot training. Delta announced cuts of 100 daily flights for July and August.

Worker absenteeism, workforce cuts contribute to understaffing woes. The aviation industry confronts persistently elevated levels of staff absenteeism due to COVID-19 illness. To compound this problem, commercial aviation shed 2.3 million employees in 2020-21. The resulting shortages affect every category of personnel influencing passengers’ experience: pilots, flight attendants, baggage handlers, security staff, air traffic controllers, check-in and gate staff. It is increasingly clear that some airlines and airports managed the transition from 2020’s lockdowns to the rebounded PAX travel with more foresight than others.

Pilots wanted. Still, industry analysts project that North American airlines will need to hire 130,000 new pilots over the next 20 years, and that the global industry could confront a shortfall of 50,000 pilots by 2025. In the US specifically, airlines may need to transform their approach to recruiting new pilots by supporting their education and certification. The current crisis also offers a prime opportunity for launching effective initiatives to diversify the cockpit. In the short term, pilots are demanding big raises and measures to improve the quality of their work life.

Ultimately, full recovery for the airline industry is a question of when, not if. The long-term growth outlook for commercial passenger aviation is bullish. Approximately 82% of the global population has never flown. Access to business and leisure air travel remains an essential part of middle-class life. And the global middle class is projected to grow by up to 80% and reach some 5.3 billion people or more by 2030. Developing countries will likely lead the way.

Remember the big picture. The data continue to suggest that revenue passenger kilometers (RPKs) will likely stabilize near pre-pandemic levels by late 2022 and achieve full recovery by late 2023. However, as China – the world’s second-largest and fastest-growing aviation market – continues to rely on lockdowns to suppress coronavirus outbreaks, passengers may be in for intermittently bumpy rides for months.