Air travel demand normalises after Covid boom, customers back to basics

Ryanair reported earlier on Monday a bigger than expected drop in quarterly profit as fares plunged 15 per cent, with management saying that ticket prices were continuing to deteriorate

Demand for air travel has normalised after a years-long boom following the COVID-19 pandemic as holidaymakers and travellers baulk at higher fares, executives at major airlines said at the Farnborough Airshow on Monday.

Guliz Ozturk, CEO of Turkey's low-cost Pegasus Airlines, said the airline expected yields - a measure of average fare paid per mile by each passenger - to be flat as customers go "back to basics".

Travellers are looking for the most cost effective way to travel, she said.

"We have started seeing the normalisation of demand. What does it mean? I mean, the demand is there, but now the travellers are looking for, as before the pandemic, for the most affordable, the lowest, the best price for their travel," she said.

 

Air India CEO Campbell Wilson said he expected the international market to moderate for the next six months, while the CEO of BA-owner IAG, Luis Gallego, said business travel was still recovering from the COVID crisis when travel almost ground to a halt with borders shut and planes grounded.

The comments come after Ryanair reported earlier on Monday a bigger than expected drop in quarterly profit as fares plunged 15%, with management saying that ticket prices were continuing to deteriorate.

Some European airlines reported weaker than expected first quarter results, with their cost struggles set to carry over into second quarter results too. Lufthansa cut its profit target for the second time this year earlier this month.

Gallego said demand was still strong for flights within Europe, but yields were under pressure, which was reflected in the Ryanair results.

Supply-chain woes

The executives lamented ongoing delivery delays from planemakers Airbus and Boeing, as well as supply chain constraints.

Production slots at the two dominant planemakers are sold out for many years, resulting in long wait times for airlines wishing to replace and grow their fleets.

For Pegasus, which has laid out an ambitious growth trajectory but said it would not sign any plane orders at the air show this week, Ozturk said better coordination and communication with Airbus on delays would help with planning.

"Even a two, three week (delay) for a July aircraft is so critical for an airline, and they (Airbus) have to overcome this in a way, optimise the processes," Ozturk said.

In India, there's so much appetite for growth that Air India is robbing its own aircrafts for parts to keep other planes flying.

"We have 30 aircraft on the ground for want of spare parts," Wilson said, adding that he expected plane delivery delays to last a "good couple of years."

Darren Hulst, Boeing's vice president of commercial marketing, acknowledged that the manufacturer must to do better by its customers.

"There's no doubt we've disappointed our customers, and we've disappointed them, you know, over and over again, in many cases," Hulst said, referring to delivery delays.

"We need to create that stability so that we can provide not just a quality airplane, but a quality airplane when we tell our customers that it's going to be delivered," he added.