By Babak Babali | Jan 25, 2023
New trends are emerging in the airline industry in 2023.
The year 2022 saw further recovery across the global air travel market, which had been suffering from low demand since 2019. The year-on-year recovery in 2022 has been particularly significant in terms of international traffic, which “climbed 122.2% versus September 2021,” according to the latest reports released by the International Air Transport Association (IATA).
Domestic vs international
While airlines have enjoyed a healthy recovery in the booking of international flights, demand for domestic tickets has showed a comparatively modest growth of around 7%. This is partly because domestic routes were not as severely affected by the pandemic as international routes.
All things considered, 2022 was a good year for the industry, though flight statistics still fell short of 2019 records. Even though the sector’s performance in 2022 improved compared to the previous year, “globally, traffic is now at 73.8% of September 2019 levels.”
With so much market to reclaim, the aviation industry is reorganizing itself in 2023 in various and interesting ways.
Leisure vs business
Another important trend across the sector is the dominance of leisure travel over business travel. The frequency of business travel has not returned back to pre-pandemic levels, though flights to popular tourist destinations have surpassed their pre-pandemic figures.
This trend seems to be consistent everywhere. While noting the market for business travel has indeed contracted, a new report by The Economist attributed this to “corporate travel policies, sustainability pressures, and the rise of blended business-leisure travel.”
It is probable that with the widespread adoption of remote work in 2020-2021, many businesses are now replacing some in-person meetings with teleconference on platforms such as Zoom and Meet. Some of the changes that happened in the work culture during the pandemic have evidently stuck with us.
The aviation industry, however, is not much worried about the situation as leisure segment of the market is perfuming well. And it will likely more than make up for the number of seats lost to new corporate travel policies.
Airlines are adapting, with part of their strategy revolving around “positioning premium leisure travelers as a new category of high-margin customers in place of or alongside business travelers,” according to a sector review by The Economist.
Regardless of the word “high-margin,” the profit margin has been narrowing in the sector, as airlines have been trying to keep airfares steady despite inflation and growing maintenance costs. The sector hopes to get through 2023 relying more on ticket sales than on profit per ticket.
An industry’s overall performance in the stock market can be a rough indicator of its general health. And airline stocks have been performing reasonably well as of January, 2023. “Several positive pieces of information including fundamentals, technicals, and industry specific news suggest that the worst may be behind the airline stocks,” according to Yahoo Finance.
Although 2023 is not going to be an easy year for the sector, it is going to be a decisive one, as new trends will be established for a few years to come.