Key takeaways from the AGM and summit of the International Air Transport Association (IATA) in Dubai:
- Airline demand is expected to grow by 11pc this year, more than the historical average of around 4-5pc continuing an escalated return to flying after the pandemic.
- Widebody is slowly coming back: So far this year, there have been relatively few firm orders for long-haul aircraft. Airlines have placed orders for 72 A350s and three A330neos, while Boeing has secured deals for 40 widebodies, including 31 777s. Airbus is reportedly in negotiations with China for a potential order of up to 100 A330neos. Qatar Airways, which has not placed orders for widebody aircraft in several years, is potentially looking to acquire up to 200 A350 and the 777X. Turkish Airlines has yet to decide on the Boeing portion of a 500-unit order, while Royal Air Maroc is considering investing in up to 200 aircraft, a third of them widebodies. Riyadh Air has ordered 40 787s initially and might opt for additional A350s or 777Xs. Saudia, after ordering 105 narrowbodies with sister airline Flyadeal, is contemplating more. All Nippon Airways and Korean Air are exploring options to purchase more widebodies, while Japan Airlines is currently focusing on new narrowbodies and regional aircraft. A total of 433 Boeing and 342 Airbus widebody orders were received throughout the entirety of 2023.
- SAF at a standstill: Production of sustainable aviation fuel is struggling to reach 1pc of global demand with no sign of improvement.
- There are winners and losers form the current conflict. Chinese and Middle Eastern airlines still fly through Russian airspace, providing a significant advantage over Western competitors. Flight times for the same city pair are often extended by several hours for Western airlines because direct routes are unavailable to them.
- Airlines are assessing the risk of facing secondary sanctions enforcement. This could potentially make them pawns in political disputes and trade wars. The recovery of passenger traffic between the U.S. and China is unlikely to recover.
- The airline industry can anticipate shorter downturns in the future, according to IATA Chief Economist Marie Owens Thomsen highlighted trends that may boost future airline industry growth. She stated that the world economy is heavily influenced by services, which promote prolonged business cycle expansions benefiting everyone. She said that prioritising the prevention of a recession is more significant than solely focusing on maximising growth.
- In markets like the Asia-Pacific region, which are undergoing substantial growth, long-haul flights are common. After enduring challenging pandemic years, airlines have started to lessen their debt loads and are regaining confidence to reinvest.
- IATA predicts a significant shortage of aircraft deliveries in 2024. The organisation anticipates manufacturers will supply 1,583 aircraft this year, marking an 11pc decrease from projections made just six months ago. To counter the deficit, airlines are partially making up for it by utilising larger aircraft where feasible and postponing retirements.
- 2024 could the final opportunity to order aircraft before capacity becomes limited.
- Airlines fear being left behind in the market with production fully booked until the early 2030s for narrowbody aircraft and widebody order filing up fast airlines will need to order early to secure capacity and avoid the spiralling cost of leasing agreements.
- The order rush has come as a surprise even to the manufacturers. Manufacturer Airbus and Boeing increased production rates but unexpected high demand means this wil be inadequate. Airbus has increased production rates for A350 and A330neo, A350 to 12 per month in 2028, the A330neo to four this year and the Boeing 787 to 10 per month in 2025, while Boeing has done the same for the 787, but it may not be enough to meet customer demand. Both manufacturers are struggling with major supply chain constraints due to the increased demand. Boeing standalone quality issues with the 787 and delayed certification of the 777X is hindering their ability to increase production.
