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2023-02-21 17:25:33

A short review of the aviation industry’s capability

Tracking projected capacity is more crucial than ever in the airline business because of continuous COVID, aircraft delivery, jet fuel, and work-related delays. Our evaluation gives a concise examination of the aviation sector market, allowing you to more accurately estimate data on buying plane tickets, crew training constraints, and operational surprises.





Market Research

Hawaiian Airlines has lowered the expected volume of passenger traffic in the first quarter of 2023 by 0.5%, and by 8.0% in the second quarter, beginning on January 24, 2023. This is related to a drop in demand for Japanese air travel. Hawaiian plans continue to point to a gradual improvement in Japan.

Let's take a look at the predicted volumes of Hawaiian Airlines air traffic throughout the last year (relative to 2019).

Table 1. Hawaiian Airlines' predicted air traffic volumes during the last year (based on Bloomberg data)

There is also a decrease in predicted volumes among the major US corporations (see Table 2). Sun Country cut its planned capacity for 2023 by 1.7%, while American Airlines followed suit, reducing its projected capacity by 0.7% due to capacity reductions in Miami, Dallas and Charlotte Douglas.

Table 2. Airline capacity in comparison to the same period in 2019. (based on Bloomberg data)

Airlines' capacity in 2023 will also be dramatically reduced as a result of issues in finding, training, and paying skilled pilots. This might explain why not all American airlines will be able to meet their air transportation goals. Allegiant Air forecasts only a 4% growth in capacity in 2023, which is much lower than historical standards. We expect that other airlines will be forced to reduce their scheduled indicators as well.

Based on existing bookings, we may also assume that demand for plane tickets will stay reasonably strong, at least through April, suggesting that rates may remain high to fulfill demand.

Risks of airline investing

The aviation sector, like any other investing industry, is relatively risky. Take into account the following airline investing risks:

  • Liquidity. Airlines are costly, however there are periods when capital markets are limited, reducing their capacity to support the purchasing and upgrading of planes.
  • Economic and geopolitical risks. Airlines, particularly those with international flights, rely on the global economy.
  • Tariff uncertainty. Airfares may not rise as quickly as costs, reducing profit margins.
  • State control. Because the aircraft business is heavily regulated and taxed, the expenses may be higher than anticipated.
  • Insurance costs. The cost of CASCO insurance fluctuates from year to year, although it is generally determined by the number of incidents in the previous year.

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