Airline Capacity Constraints Expected in 2024 Due to Aircraft Delivery Delays
The airline industry is bracing for significant capacity constraints in 2024, primarily driven by aircraft delivery delays from major manufacturers like Boeing and Airbus.
Airline Capacity Constraints Expected in 2024 Due to Aircraft Delivery Delays
Key Takeaways
- Aircraft delivery delays from Boeing and Airbus are causing significant capacity constraints for airlines in 2024.
- Supply chain issues and production limitations are major contributing factors.
- Airlines are adjusting their growth plans and focusing on operational stability.
- Higher airfares and slower industry growth are expected as long-term implications.
The airline industry is bracing for significant capacity constraints in 2024, primarily driven by aircraft delivery delays from major manufacturers like Boeing and Airbus. These delays are expected to be the determining factor in shaping airlines' capacity ambitions for the year, potentially impacting income growth as aircraft availability becomes scarce.
Supply Chain Issues and Production Limitations
Several factors have contributed to the current supply chain challenges faced by aircraft manufacturers:
- Pratt & Whitney engine checks and retrofits: In late 2023, engine manufacturer Pratt & Whitney announced extra inspections for turbofan engines installed in Airbus A320NEOs due to a risk of cracks. This will ground an expected 350 aircraft in 2024, affecting airlines such as JetBlue, Wizz Air, and Air New Zealand.
- Boeing production limitations: The breakaway of a door panel on a Boeing 737 MAX 9 flight in early 2024 forced the FAA to limit production of the 737 MAX to 38 aircraft per month. Supplier issues have also kept deliveries low in the first part of 2024, with production almost halving in the first quarter. Airlines like United, Southwest, and Ryanair with significant 737 MAX orders are facing postponed deliveries.
- Airbus manufacturing defects: Airbus operators in the U.S. and abroad have been forced to reconsider their capacity and adjust schedules as they manage the required inspections and maintenance resulting from a manufacturing defect in the Pratt & Whitney PW1100G turbofan engine on A321neo planes. Airlines affected include Delta, Frontier, JetBlue, Hawaiian, and Spirit.
Impact on Airline Operations and Growth
The capacity constraints stemming from aircraft delivery delays are expected to have a significant impact on airline operations and growth plans for 2024:
- Reduced flight schedules: Airlines are adjusting their flight schedules to accommodate the limited aircraft availability. Ryanair, for instance, announced plans to serve 200 million passengers in 2024, down from its previous target of 205 million, due to capacity constraints.
- Delayed network recovery: The recovery of airline networks has been slower than expected, with the number of direct and indirect destinations at European airports ending up 13 percentage points higher in 2023 compared to 2019. This has put a drag on flight activity, which sits at 91.5% of pre-pandemic levels.
- Operational challenges: The combination of delays and constraints at both Boeing and Airbus has left few airlines without some form of aircraft problem to navigate. This has led to operational challenges, forcing airlines to revise their flight schedules and adjust critical staff levels.
- Potential impact on income growth: As aircraft availability becomes scarce, airlines may face challenges in maintaining income growth. The IATA expects passenger revenue to grow by 15% year-over-year in 2024, while total passenger revenue (including ancillaries and other) should grow at a slightly slower pace of 14%.
Airline Responses and Adaptations
Airlines are adapting to the capacity constraints in various ways:
- Adjusting growth plans: Airlines are revising their capacity growth targets for 2024 to align with the available aircraft. Lufthansa, for example, plans to increase its available capacity in the second quarter of 2024 to 92% of its pre-COVID levels, down from its original plans due to delayed aircraft deliveries.
- Focusing on operational stability: Airlines are prioritizing operational stability and reliability over rapid growth. Lufthansa has stated that it will focus on improving operational stability in 2024, which may lead to a lower capacity level than originally planned.
- Investing in customer experience: Despite the capacity constraints, airlines are still investing in enhancing the customer experience. IAG, for example, reported that it increased its passenger unit revenue in 2023 by 8.2% year-over-year, supported by strong leisure and premium leisure traffic recovery.
Implications for the Future
The capacity constraints faced by airlines in 2024 are expected to have long-term implications for the industry:
- Higher airfares: With fewer planes available, higher passenger demand is likely to lead to higher airfares. Industry analysts predict that airfares may be as much as 10% higher in the summer of 2024 compared to the previous year.
- Slower industry growth: The backlog of orders at Boeing and Airbus is expected to continue growing over the next several years, with it taking more than 11 years to fulfill the current orders at 2023 production rates.
- Workforce challenges: Lower aircraft deliveries have forced airlines like Southwest and United to curb hiring, despite the industry's need for new pilots, maintenance technicians, and cabin crew members to support future growth.
Conclusion
The airline industry is facing significant capacity constraints in 2024 due to aircraft delivery delays from major manufacturers. These delays are expected to be the determining factor in shaping airlines' capacity ambitions for the year, potentially impacting income growth as aircraft availability becomes scarce. Airlines are adapting by adjusting their growth plans, focusing on operational stability, and investing in customer experience. However, the long-term implications of these constraints, such as higher airfares, slower industry growth, and workforce challenges, will require the industry to work together to find solutions.
Q&A Section
Q: What are the main reasons for the aircraft delivery delays?
A: The main reasons include Pratt & Whitney engine checks and retrofits, Boeing production limitations, and Airbus manufacturing defects.
Q: How are airlines adjusting to these capacity constraints?
A: Airlines are revising their growth plans, focusing on operational stability, and investing in customer experience.
Q: What are the long-term implications of these capacity constraints?
A: Long-term implications include higher airfares, slower industry growth, and workforce challenges.
