The Paris Air Show, one of the largest aviation trade shows in the world, returned for the first time since 2019 and further demonstrated the global aviation industry’s recovery post-pandemic.
The event is usually biennial, but it had been four years, a pandemic, and a full-scale invasion of Ukraine since the aerospace industry convened at Aéroport Paris Le Bourget.
According to the International Air Transport Association (IATA), which publishes monthly Air Passenger Market Analysis reports, the global aviation industry appears to be well on its way to a complete post-pandemic recovery.
Global air passenger has recorded solid growth, with industry-wide RPK’s (revenue passenger-kilometres) reaching 96.1% of pre-pandemic levels in May 2023 and domestic traffic even outperforming 2019 levels for the second month running according to the IATA.
Notably, May 2023 was the first month that passenger load factor – the percentage of available seating capacity that has been filled with passengers – recovered to the 2019 level, with available seat capacity being 96.1% of pre-Covid-19 levels. All these figures are industry-wide statistics.
This industry-wide recovery appeared evident at the Paris Air Show 2023. In total, there were 1,343 new deals signed at this year’s show – exceeding the previous record of 1,226 in 2017. While these numbers are impressive, they are somewhat skewed by two large headline aircraft orders.
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Firstly, Air India finalised a large order for 470 aircraft – 250 from Airbus and from 220 Boeing. More notably, IndiGo ordered 500 aircraft from Airbus – the largest single purchase agreement by any airline in commercial aviation history. Beyond being the two largest deals in history, further analysis reveals many details about the state of the post-pandemic commercial aviation industry.
Single-aisle versus twin-aisle aircraft
The aviation industry has committed to achieving net-zero carbon emissions by 2050, and airlines are looking to replace existing fleets with more sustainable and lower-emission single-aisle aircraft.
IndiGo’s deal was for 500 of the single-aisle A320neo family, being roughly 20% more fuel efficient than prior models, with 91% of Airbus’ new orders from the Paris Air Show being for A320neo family aircraft. The A320neo family includes the A321XLR – a narrow-body aircraft predicted to enter service in 2024, which some may think will spark a move away from the hub and spoke model dominated by Airbus A380s.
Production of A380s stopped in 2021, with Airbus marketing the A321XLR as a proposed replacement for many routes. The large A380s require both long runways and special unloading facilities and furthermore are only economically viable to operate when full.
While demand for new aircraft seems to be focused on new single-aisle, energy-efficient aircraft, this does not necessarily detract from the sustained demand for wide-body aircraft.
While the A321XLR aircraft has nearly half the range, it is a lot easier to fill (≈200 versus ≈500 seats) and it will target point-to-point flights. Airbus refers to this as “single-aisle economics with Xtra Long Range performance”, resulting in 45% lower trip costs than wide-body (or twin-aisle) aircraft and 30% less fuel burned per seat than previous generation aircraft.
Boeing’s recent Commercial Market Outlook predicted that single-aisle fleet sizes would more than double in the next 20 years, going from 16,200 in 2022 to over 34,000 by 2024, demonstrating a possible industry-wide preference for single-aisle aircraft driven by net-zero goals.
However, while demand for new aircraft seems to be focused on new single-aisle, energy-efficient aircraft, this does not necessarily detract from the sustained demand for wide-body aircraft. British aero-engine manufacturer Rolls-Royce left the market for single-aisle aircraft over a decade ago and now manufactures engines for wide-body aircraft such as the Airbus A350 and Boeing 787.
According to a Financial Times article, they claim that demand for wide-body jets is back up to 83% of pre-pandemic levels, and the company believe the market for wide-body jets (as well as their business jet engine market) is strong enough that they aren’t currently considering a return to the single-aisle aircraft market.
The Indian commercial aviation industry
With the two largest single purchase agreements in commercial aviation history coming out of India, you may expect a thriving Indian aviation industry, especially as IndiGo now have a total of 1,330 Airbus aircraft on order.
In some ways this is true – domestic RPKs in India were 16.2% higher in April 2023 versus 2019 according to the IATA, and IndiGO has a commanding 56% share of this domestic market.
Additionally, the Asia Pacific region continued to lead growth in increase in international RPKs, with a 156.7% year-on-year (YoY), but the YoY change in RPKs in May 2023 versus 2019 was -31.3%, suggesting there is plenty of room for additional growth.
These deals suggest that whilst the domestic aviation market in India is strong, these airlines are also hoping to disrupt the global market by expanding to offer international destinations with ultra-fuel-efficient and longer-range aircraft.
These ambitions are being supported by the Indian Government, which has not allowed foreign carriers such as Emirates to increase the number of weekly flights to tap into this growing market – a move supported by Air India.
While there is plenty of opportunity for expansion in the Indian aviation market, there are plenty of risks as well. Indian airline Go First ceased operations in May 2023 – the third Indian airline to go under in 11 years – due to “a gap in local regulations over the protection of rights of foreign leasing firms that finance many large plane deals”, according to Reuters.
Additionally, aviation watchdog DGCA has placed Indian budget airline SpiceJet under ‘enhanced surveillance’ for multiple reasons, with various lessors seeking repossession of aircraft. Leasing companies in India have warned that restrictions on repossessing their assets in case of defaults will drive up costs for all airlines – even for IndiGo and Air India.
The supply chain still catching up in the post-pandemic recovery
One last point of consideration is that while the demand for new aircraft seems to be huge alongside a commercial aviation industry that in many ways has left the pandemic in the past, there are vast pandemic-related supply chain issues holding back short-term airline growth.
Boeing and Airbus’ order books are increasingly large (≈4,500 and ≈7,000 in backlog respectively) and many airlines are having to wait until the end of the decade for the delivery of their purchased aircraft.
The inability of manufacturers to keep up with demand is illustrated by the rate of lease extensions by airlines, with the CEO of US-based aircraft leasing company Air Lease claiming rates have risen from 75% to roughly 95%, and Boeing 737 Max 8 planes are leasing for about $350,000 per month versus $305,000 pre pandemic.
In many ways, the specific post-pandemic demand is less important for the industry than the industry prime’s actual capacity to manufacture aircraft at pace for customers.
However, both companies have announced plans to increase their output to meet the strong demand, with Airbus reporting a 6% increase in deliveries in the first half of 2023 (316) versus 2022 (297) according to an analysis by GlobalData.
Despite this, Airbus is still not on track to meet its 2023 target of 720 aircraft delivered, after failing to meet the 2022 target. In many ways, the specific post-pandemic demand is less important for the industry than the industry prime’s actual capacity to manufacture aircraft at pace for customers.
In conclusion, big headline orders from the Paris Air Show are not necessarily reflective of the post-Covid-19 global commercial industry, with deeper analysis of aircraft types, airline location, and supply chain issues providing more meaningful insights and giving a more complete picture of the complexity within the aerospace industry’s post-pandemic recovery.