The International Air Transport Association (IATA) reported that global air travel continued to recover in November ahead of the Omicron outbreak, but that traffic improvement had slowed compared to previous months. Industry-wide Revenue Passenger Kilometres (RPKs), an indicator of global passenger demand, were down 47% from pre-pandemic November 2019. International air travel continued its upward trend with improvement across all regions as more markets re-opened prior to Omicron, whereas domestic travel deteriorated due to new lockdowns in China.

In domestic air travel trends, China in particular continued to tighten its domestic travel restrictions to contain localised outbreaks of COVID-19. Russia’s domestic market, 17% ahead of November 2019 RPKs, slowed, reflecting the start of winter and the impact of a new COVID-19 wave. Positive developments continued in the US, which saw high demand around Thanksgiving, and in Brazil, where vaccine roll-outs increased and infections fell, whilst Australia’s domestic recovery continued to lag.

International travel continues to recover, driven by growing vaccination rates and a relaxation of international travel restrictions in certain regions. All regions are showing slight improvement, with Europe and North America leading the pack, benefiting from the re-opening of the North Atlantic corridor on 8 November. Asia-Pacific remains the worst performing region, with international RPKs 90% below November 2019 levels, reflecting stringent travel restrictions holding back pent-up demand.

The IATA has cautioned that despite positive November RPK data, uncertainty around the recovery through the northern hemisphere winter is rising due to outbreaks of the more contagious Omicron variant, which is resulting in enhanced travel restrictions once more. Booking data shows the new Omicron wave is affecting travel demand.

Airlines releasing financial results in Q3 2021 showed continued improvement, with some carriers reporting their first profitable quarter since the start of the pandemic. The improvement reflected the easing of travel restrictions on domestic and short-haul routes during the traditionally busy Q3, which boosted the recovery in passenger travel.

North American, European and Latin American airlines posted the best results, benefiting from their large domestic markets and short-haul routes (intra-Europe and North-Central America). In contrast, operating losses increased in Asia-Pacific versus Q2 as new outbreaks and the resulting lockdowns hindered the recovering demand in many key markets, such as China, Japan and Australia.  Downside risk remains high, with several countries introducing new Omicron driven travel restrictions, and bookings for future travel have fallen sharply since late November.

The IATA reported that airline passenger revenues declined 34% in Q3 2021 compared to the same quarter in 2019. Cargo maintained its strength, increasing 65% versus Q3 2019 as the wider economy rebounded. Total revenues, including passenger and cargo, were down circa 30%, a significant improvement from the 46% decline in Q2. Despite the efforts of airlines to cut costs, the year-on-year decline in operating costs was limited to 18%, short of the decline in revenue. Rising jet fuel prices are increasing pressure on costs, coupled with additional challenges from rising infrastructure costs and staff shortages in the US.

Rising jet fuel prices are increasing pressure on costs, coupled with additional challenges from rising infrastructure costs and staff shortages in the US.

Airbus reported deliveries of 611 commercial aircraft in 2021, up 45 on the previous year and dominated by the A320 family, which accounted for 79% of all deliveries. Net orders stood at 507 aircraft sales during 2021. Airbus chief executive Guillaume Faury stated that the order and delivery results are a signal of "confidence in the sustainable growth of air travel post-COVID", adding: “While uncertainties remain, we are on track to lift production through 2022 to meet our customers’ requirements." By comparison, Boeing delivered 340 aircraft during 2021, up 183 on the prior year. Deliveries of the 787 halted for most of 2021, as Boeing addressed manufacturing quality issues. Net orders totalled 535 aircraft, dominated by the 737 MAX representing 74% of orders and freighters accounting for 16%.

The Boeing 737 MAX came one step closer to flying in China again, after the country’s civil aviation regulator mandated fixes to the aircraft’s flight control software. Following implementation of the fixes and associated pilot training, the aircraft is anticipated to resume operations in one of Boeing’s largest markets. Boeing has a backlog of circa 100 built aircraft ordered by Chinese airlines that have not been delivered. To date, 180 out of 195 countries have re-approved the MAX. Airlines around the world have returned Boeing’s best-selling jet to service, pointing to its operational economics, range and payload improvements over previous 737 types.

On 1 December 2021, over 18 months after filing for bankruptcy, Latin American carrier Avianca announced it is emerging from the US Chapter 11 bankruptcy restructuring. The airline stated it has successfully achieved agreements with its creditors, raised $1.7bn in investments, and received approval for its plan of reorganisation. Exiting Chapter 11, the airline now has a stronger balance sheet, additional liquidity and a lower debt burden. Under the revamped business model, the airline will pivot towards a future with far fewer business travellers and one where it flies denser planes on more point-to-point routes from its geographies of strength, under a broad partnership with United Airlines.

UK low-cost carrier easyJet is accelerating its growth strategy outlined as part of its £1.2bn rights issue in September. The airline is securing additional slots at European hub airports, particularly in Southern Europe and at its London Gatwick base. The airline is planning a robust summer 2022 schedule, where it plans to operate at pre-pandemic 2019 capacity levels. CEO Johan Lundgren noted that whilst Omicron has softened near-term travel bookings, they remain unchanged for the holidays. The airline has boosted its firm order book by an additional 19 Airbus A320neos to 118 aircraft. The recovery in capacity is possible by the replacement of 156-seat Airbus A319s with larger A320neo and A321neo aircraft that seat 186 and 235 passengers, respectively.

Australia’s Qantas forecasts robust international traffic through 2023 amid strong demand for the long-haul flights it resumed in November. Australia closed its borders to keep COVID-19 at bay for about two years until vaccination rates hit an 80% national threshold. Two years of pent-up demand sold out many of the flights Qantas has resumed. Subsequently, first quarter capacity was pared back amid a sudden COVID-19 spike that resulted in increased travel restrictions in Japan, Thailand and Indonesia amongst others. However, no material adjustments have been made to capacity expectations for the April-June quarter, with Qantas noting that early bookings for the Easter holidays in April are “looking promising for both domestic and international” flights.

Lufthansa is targeting the roll-out of sharkskin technology on its Boeing 777 freighter fleet during 2022. Using nature as a role model, Lufthansa Technik and chemicals giant BASF have developed a surface film that reduces aerodynamic drag by mimicking the fine structure of a shark’s skin. Lufthansa Technik estimates a drag reduction of more than 1% on a B777F. For the entire fleet of ten aircraft, this translates to annual savings of circa 3,700 tons of kerosene and about 11,700 tons of CO2 emissions, which is the equivalent of 48 individual freight flights from Frankfurt to Shanghai.