Airlines require 40,000 new aircraft over the next 20 years valued at up to $7 trillion, meaning that the industry needs to be consistently profitable.
The benefits of aviation are significant; it supports some 66 million jobs and $2.7 trillion in economic impact. It puts the industry on a level with the likes of Switzerland and Argentina in terms of contribution to the global economy.
And the outlook is bright, noted Andrew Matters, IATA’s Deputy Chief Economist. Air travel’s popularity will double in the next two decades. Asia-Pacific will grow at more than 5% and though the mature markets of North America and Europe have far slower rates of increase, their size means they will still add more than 500 million passengers each.
Nevertheless, aviation’s center of gravity will continue to move eastward. By the middle of the next decade, China will be the world’s largest aviation market and India and Indonesia will also make notable gains.
“So, the story is not only about growth but also about the composition of that growth,” said Matters.
Only four of the top 100 airports will not have capacity constraints in 10 years’ time, all things being equal
But, he warned, there are no guarantees. Aside from environmental concerns, supply-side considerations, technology and government policy could all affect demand.
Airlines need 40,000 new aircraft over the next 20 years valued at up to $7 trillion. It means that the industry needs to be consistently profitable. And, said Matters, the history of the industry is not a cause for optimism in this regard.
Growing ancillary revenues could help. These are not only helping airlines directly but also indirectly. Ancillary revenues mean base fares can be kept low and, in turn, this stimulates demand.
Airport congestion is also a concern. Only four of the top 100 airports will not have capacity constraints in 10 years’ time, all things being equal. The majority are already facing difficulties. A EUROCONTROL study estimates that by 2040, 1.5 million European flights will not be able to be flown because of capacity issues. In other words, about 8% of demand in Europe will be lost.
A third supply-side consideration is staff. Boeing estimates that, globally, the industry 800,000 new pilots and technicians in the next 20 years and about 900,000 cabin crew.
Meanwhile, technology could be a double-edged sword. As the industry collaborates and develops a digital ecosystem, there will be increasing competition surrounding the customer relationship. This brings into focus the duality of the digital world, comprising new digital solutions and the digitization of existing processes. How the airlines invest and implement technology will therefore be vital.
As for the policy and regulatory environment, this can either be a key driver of the industry or an impediment, said Matters. If protectionist measures proliferate rather than fly 8 billion-plus passengers in 2038, airlines will likely have just 6.5 billion customers.