Airlines are enjoying strong demand this year, and fuel prices have dropped from last year’s highs. But non-fuel costs are rising, and supply-side bottlenecks are frustrating the industry’s efforts to expand.
On Tuesday, October 17 Airline Weekly Analyst Jay Shabat and Skift Editor-in-Chief Sarah Kopit went live on LinkedIn to have a conversation on the current state of the global airline industry.
Now that third quarter airline earnings season is now underway, several dominant themes emerging. One is that fuel costs are down from last year, albeit back on the upswing. Non-fuel costs, however, are for many airlines increasing at a far greater rate than revenues. That said, industry revenues have been strong in 2023, and most airlines (though not all) say robust demand continues.
Revenues are up for another less conventional reason. Supply-side bottlenecks are greatly impeding the sector’s ability to grow, depressing capacity levels. While frustrating airlines, these bottlenecks—aircraft delivery delays, engine issues, long maintenance backlogs, labor shortages, and so on—are contributing to upward pressure on fares.
In the meantime, airlines are reacting to the many changes unfolding as pandemic nightmares fade. Leisure travel is booming, aircraft markets are tightening, geopolitics are upending route networks, and consolidation is reshaping competitive landscapes.
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Photo credit: A plane departing Santiago de Cuba. Skift