The North American aviation market is recovering strongly
The North American aviation market is recovering strongly after the Covid-19 pandemic, according to an IBA panel of experts discussing “What future for aviation in the Americas?” The panel detailed a range of key metrics that demonstrate the improving health of the North American aviation market. These include the return of airline profitability, lower aircraft storage levels, increased utilization, strong aircraft orders and rising values.
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They also warned of a number of economic headwinds, including rising labor costs and fuel prices, and labor shortages, coupled with debt levels. higher, which have increased during the pandemic.
Looking first at fares and returns achieved by North American carriers, data presented by IBA Insight, the intelligence platform, showed a strong rebound, particularly in the ultra-low-cost carrier segment, with positive revenue trend in the North American airline industry. in general. However, fuel costs are beginning to impact airline bottom lines and as consumer spending comes under pressure from economic headwinds, IBA expects an increase in the level of airline fare reductions, triggering the post-pandemic return of a more traditional market cycle.
North America leads the world in airline profitability and is the only region expected to return to profitability in 2022, with an expected average net profit margin of 3%. Government support and the resilience of the North American airline industry – which allowed it to increase domestic capacity when restrictions on international travel were in place – played a crucial role in restoring market profitability North American despite rising costs.
North American carrier fleet storage levels have returned to levels rapidly approaching pre-pandemic levels. From a pre-Covid-19 level of 16%, aircraft storage soared to over 60% during the pandemic, but has now fallen to 22% – representing around 3,000 aircraft.
The number of flights operated by North American carriers rebounded strongly, with the dynamism of the American domestic market contributing to the strong recovery of the airline sector. Domestic flight traffic was back to around 90% of pre-pandemic levels in early 2022, but the lagging international market has caught up as restrictions were lifted, and now accounts for nearly 15 % of all North American flights – down from less than 10% a year ago.
At the same time, North American airline capacity has recovered strongly, with the ultra-low-cost carrier segment ahead of the rest and now at 113% of pre-pandemic levels. The network and value carrier segments are currently at 94%.
With over 10,000 aircraft, the North American fleet is the largest in the world, but it has one of the highest average ages, around 16 years, due to the large number of mid-life narrowbodies in service, with the Boeing 737-800 and the A320ceo alone representing approximately 15% of the fleet.
North American carriers are leading the way globally in post-pandemic resupply, with more than 1,100 aircraft orders in 2021 and so far in 2022. North America now has the second share the highest order backlog in the world, representing 25% of all commitments, behind Asia-Pacific alone at 35%. The North American airline industry’s total backlog of approximately 2,600 aircraft is dominated by the A320 neo and Boeing 737 MAX families, which collectively represent approximately 1,900 aircraft.
From an emissions perspective, North America remains the most carbon-intensive region in the world, but the average CO2 emissions per seat per mile of carriers in the region have fallen by 5% since 2018, as they stored and retired from older, less efficient aircraft. IBA anticipates that rising fuel costs and the path to net zero will continue to accelerate the current fleet renewal being undertaken by North American airlines.
While aircraft leasing is less prominent in North America, investor demand for aircraft based in the region is stronger than before Covid-19. Around 35% of the North American fleet is leased, compared to 56% in Europe and 69% in Latin America. However, North American-based aircraft accounted for 27% of all lease transactions in 2022 year-to-date, compared to less than 18% in 2017.