The reopening of China to international travel will help propel global air traffic to pre-pandemic levels by the middle of this year, according to one of the world’s largest aircraft leasing companies, even as a shortage of new jets continues to hobble the industry’s full recovery.
Avolon, the world’s second-largest jet lessor, said that after a “70 per cent recovery in passenger traffic last year led by . . . Europe and North America, Asia will drive growth in 2023, helped by the recent reopening in China”.
For every two seats of airline capacity added worldwide, one is in Asia, according to a report published by Avolon on Monday.
The company’s prediction is the most optimistic yet almost three years after Covid-19 brought the industry to a standstill.
Executives had generally warned that a recovery to 2019 levels would not come until 2024 at the earliest. China’s recent decision to reopen its borders, however, is seen as the final move needed to trigger a full recovery in passenger traffic.
The decision sparked a rise in flight bookings, although they remain well below pre-pandemic levels. Outbound international flight bookings between December 26 and January 3 jumped 192 per cent compared with the same period the year before, but were still 85 per cent behind pre-pandemic levels, according to industry data provider ForwardKeys.
Aviation executives expect booking levels to continue to rise as airlines in China hire staff and rebuild their international flight schedules after three dormant years, although they worry that travellers could be put off by testing rules imposed on air passengers travelling from China by the US, UK and other European countries.
Avolon’s optimism was echoed by other industry executives. Aengus Kelly, chief executive of AerCap, the world’s largest lessor, said airline customers were all reporting strong demand, despite the economic downturn.
“What you hear, the consumer has bought as much stuff as they need. And that is why you see difficulties for other companies that are providing certain services and goods that were consumed in large-scale in Covid. Demand for those other things was pulled forward. The opposite happened for travel,” he told the Financial Times.
As a result, “what air travel is competing against in someone’s wallet for that disposable income is a lot less”, he added.
AerCap, he said, had seen more demand for aircraft last year than at any time in its history. It signed 570 lease agreements in 2022, predominantly for aircraft to be delivered in 2023 and 2024.
“We would not have leased so many aeroplanes if there wasn’t really strong demand that the airlines could see. They are putting the money down then,” said Kelly.
Yet while the demand to fly has returned, executives cautioned that production issues at the main manufacturers, Airbus and Boeing, could yet put a brake on the recovery.
Avolon warned that delivery delays were becoming “endemic”. About 2,400 planes that had been planned had not been built because of the pandemic, it said.
AerCap’s Kelly said Boeing and Airbus “are under tremendous pressure” and would “not hit their production targets”.
The company is the largest seller of used aircraft in the world. Last year, half of AerCap’s aircraft sales were to airlines, according to Kelly, amid heightened concerns over delays to deliveries of new planes.
Airlines “cannot take the risk that when the summer comes they don’t have the lift needed to transport the passengers”, he added.
Airbus and Boeing both ramped up production of aircraft last year to satisfy the surging demand from airlines. Airbus delivered 661 jets in 2022, an increase of 8 per cent, while its US rival boosted output by 41 per cent over the previous year to 480.
Supply chain constraints, however, forced Airbus, which has moved to rapidly expand production of its best-selling A320neo jet, to pull back on its delivery targets.
The company has stuck to plans to raise output rates of its A320neo to 75 a month by the middle of the decade — higher than its rates before the pandemic — but has admitted that its narrow-body model is at present sold out through to 2029.