After two years of instability, the aviation industry looks set for a decade of development.
FREMONT, CA: Two years of turbulence have prepared the aviation industry for a decade of growth. Unlike the current decade, which has seen stable annual demand growth, the next decade will likely present numerous obstacles that will test the industry's endurance.
Despite excellent immunizations, COVID-19 continues to plague the airline and aerospace industries, as well as the world economy as a whole. While a substantial chunk of domestic air travel demand worldwide has rebounded and the fleet is again expanding, the unpredictability of COVID-19 and its variants remains the industry's greatest impediment to business as usual. The rapid spread of Omicron at the end of 2021 caused many problems for the industry, including absenteeism in the workforce, government travel restrictions, and supply chain disruptions, to mention a few.
Stay ahead of the industry with exclusive feature stories on the top companies, expert insights and the latest news delivered straight to your inbox. Subscribe today.
Nonetheless, as the aviation sector enters 2022, there is cautious hope that the industry has shifted the corner and is again on an upward trajectory, thanks to universal vaccination, government support, and pent-up demand for travel—at least in developed economies. By early 2023, the global demand for domestic travel will surpass its 2019 pre-pandemic peak. The prognosis for the remainder of the decade is for sustained growth at rates exceeding the gross domestic product increase.
Globally, the business and international travel sectors will recover more slowly due to corporate and government policies likely to be entirely eased once COVID-19 becomes a pandemic. However, there were other factors besides constraints that diminished corporate travel.
Videoconferencing and the growing realization that people may conduct business remotely have had an impact. In the near future, the sluggish recovery of business travel will likely limit airline profitability and expansion, but there is the possibility of a decline in long-term corporate demand.
The greatest barrier to international travel has been and will continue to be the difference between cross-border regulations and immunization coverage. A gradual recovery in this market segment will limit the fleet size of wide-body aircraft for years.
It is likely that the global fleet will reach its January 2020 peak of about 28,000 by the first half of 2023, which was the same size at the beginning of 2022 as in 2017. There will be 38,100 aircraft in the fleet by 2032, representing a compound annual growth rate of 4.1 percent.
As international travel returns later, most of the fleet recovery will consist of narrowbody aircraft, which will make up around 64 percent of the fleet by January 2032, up from 58 percent in January 2020. While it is anticipated that narrowbodies will return to pre-pandemic levels by mid-year, most of the rise will first result from aircraft being removed from storage or the delivery of aircraft from manufacturers' inventories. The aviation sector was already suffering from the worldwide grounding of the 737 MAX in 2019; more than 400 of these aircraft were manufactured but had not been delivered by 2020 when COVID-19 struck.
Contrary to most of the fleet, cargo is experiencing an increase. During the pandemic, the expansion of the cargo fleet was necessitated by a 17 percent increase in shipments in 2021 over 2019, resulting in part from COVID-related online purchasing. Cargo aircraft increased by 3 percent in 2021, and passenger aircraft were converted to freight.
A fleet in transition is redefining the MRO industry market, partly due to increased aircraft retirements entering a time of intensive MRO expenses. Demand for MRO should recover to pre-COVID levels by 2024, although the second half of our 10-year prediction period will experience an annual increase of 2.8 percent. By 2030, demand for MRO will reach $118 billion, 13 percent less than the pre-COVID prediction of $135 billion.
The weaker growth forecasts will only be applicable in some places in the world. By the end of 2021, the active China-based fleet and its MRO demand had already surpassed pre-pandemic levels. Other regions, such as Western Europe, will experience a recovery in MRO demand in 2025.
Another factor that will affect the MRO environment is a possible push toward onshoring capacity—a direct response to COVID-19's unanticipated quarantining of some assets and its ongoing disruption of supply chains. While a portion of the push will wane as COVID-19 fades, airlines and aerospace manufacturers need a sizeable capacity that trade conflicts or unforeseen travel restrictions cannot eliminate. This translates to housekeeping service providers.
