As we progress into mid-2022 , the view from Europe gives reasons to be optimistic , but signs of caution also taper it .
2022 is the recovery year when global Available Seat Kilometres should , by the end of December , be close to 2019 levels . Naveo Consultancy ’ s nominal forecast will see air transport capacity exceed 2019 levels by 2023 . European operators account for approximately 25 % of global ASKs , and the continued recovery in traffic in Europe has been encouraging .
As we enter the all-important northern hemisphere summer travel period , when European airlines hope to generate increased revenue and profits , we have reasons for optimism . Most COVID-related travel restrictions have been removed ; COVID-19 cases are under control , and there ’ s pent-up demand to travel . This translates into airline bookings .
Clouds on the Horizon
Although travel demand is returning strongly , there are many headwinds that leadership is challenged with . For example , airports and airlines have sometimes struggled to meet demand , as seen by lengthy lines at check-in , security , and baggage claim . In addition , workers that were furloughed or let go during COVID haven ’ t necessarily returned . As a result , the labor shortage is acute , with airlines and airports struggling to cope with demand and MROs and OEMs suffering from shortages of parts and trained mechanics .
Jet fuel is currently at the highest price for a generation . At the time of writing , it is around $ 170 per barrel . To put this into context , jet fuel is more than double what it was 12 months ago . Many airlines are not hedged , so they face sudden cost increases . Fuel is typically an airline ’ s number one or number two cost , depending upon the price .
Source : Aviation Week . Naveo Analysis
IATA notes that the average fuel price for 2022 has been about $ 139.3 / bbl . which equates to an additional $ 125.4B that airlines will pay in 2022 for jet fuel . If jet fuel continues to remain high , it will put additional pressure on older , less fuel-efficient aircraft ( and encourage replacement by newer aircraft ), as we saw in 2008 , causing increasing retirements .
The supply chain is challenged . Ukraine has about 1 % of titanium mineral reserves , and Russia represents approximately 14 % of titanium sponge production . Approximately 35 % of titanium for Boeing and 50 % for Airbus came from Russia ’ s VSMPO – now under sanctions . OEMs have been stockpiling inventory , but VSMPO capacity will need to be replaced . In addition , production issues in castings , forgings , microchips , chemicals , and engineered components are impacting OE deliveries and MRO .
AUGUST | SEPTEMBER 2022 ISSUE NO . 28 47