With summer just around the corner and the tourism industry poised to break another record, the weakest link is proving to be the global airline industry.
Airlines around the world are facing severe shortages of planes unable to meet growing demand for air travel as Boeing and Airbus have cut production and deliveries of new planes.
This forces them to spend billions of dollars repairing their old planes, which are outdated and less fuel efficient, and often have to lease planes from other companies, significantly increasing their costs and making their prices uncompetitive.
Some airlines have chosen to cut their itineraries to cope with the lack of available planes, losing a significant part of the “global pie” at a time when the number of travelers worldwide is expected to reach historic levels in 2024.
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It is estimated that this year, 4.7 billion people will travel compared to 4.5 billion in 2019 before the pandemic.
“This is leading to particularly high fares,” said John Grant, senior analyst at travel data firm OAG.
Boeing and Airbus can’t catch up
Last December, the International Air Transport Association (IATA) predicted that air traffic would grow by 9% in 2024, but the forecast is now considered overoptimistic after Boeing’s inability to meet the need for more planes.
In 2024, airlines will add 19% fewer aircraft to their fleets than expected due to production problems at Boeing and Airbus, according to Martha Neubauer, senior partner at AeroDynamic Advisory.
US carriers will face even bigger shortages as they add 32% fewer planes than they planned a year ago, as US carriers prefer Boeing’s 737 MAX because of its long-haul range.
But Boeing is facing serious problems after the Jan. 5 explosion on an Alaska Airlines jet led regulators to cap production of the 737 MAX.
At the same time, 650 Airbus A320neo aircraft have been grounded in the first half of 2024 for inspections and checks after a defect was found with RTX Corp and Pratt & Whitney engines.
In Europe, low-cost airline Ryanair has cut some of its routes and in the US, United and Southwest are also cutting staff.
Airplane leasing is on the rise
Data from Cirium Ascend Consultancy shows airlines are turning to aircraft leases, with costs reaching $400,000 a month for new Airbus A320-200neo and Boeing 737-8 MAX aircraft, the highest levels since 2008.
“Airlines are spending 30% more on aircraft leases than before the pandemic,” said John Heimlich, chief economist at Airlines for America (A4A), which represents major US carriers.
They are also forced to maintain older planes, a process that takes several months, with repair costs at United, Delta and American rising 40% last year from 2019.
That leaves US airlines with pre-tax profits of 4.5% last year, with Delta and United earning the most.
But this year, expensive tickets and high inflation are putting Americans off air travel with most planning closer and cheaper vacations.
