From post-pandemic recovery to geopolitical tensions, environmental pressures and transformative technological advances with the adoption of AI (Artificial Intelligence), the aviation industry experienced both turbulence and triumph in 2023. This article delves into the highs and lows of the past year. We explore the post-Covid-19 landscape, the new face of business travel, the impact of conflict zone activity, the newly emerging hiring trends, as well as looking forward to what lies ahead for 2024.
Post-Pandemic Recovery
The aviation sector encountered a setback of approximately four years due to the Covid-19 pandemic, significantly impacting its growth trajectory. Despite this, the industry continued to display resilience in 2023, making notable progress towards the demand levels seen in 2019. However, this swift recovery unveiled a series of challenges, particularly a workforce shortage across essential roles within airlines and aircraft operators. This shortage predates the pandemic, but the unprecedented speed of recovery has intensified this key concern for the industry.
In March 2023, AeroProfessional conducted a poll, seeking insights from our network of aviation professionals and leaders regarding the most significant challenges for airlines in the next five years. A substantial 61% of respondents highlighted attracting and retaining skilled labour as the paramount future challenge.
Their foresight proved accurate, as 2023 witnessed a significantly challenging hiring landscape. The aftermath of Covid-19 played a pivotal role in staff attrition, prompting many to opt for early retirement or seek more secure work environments outside the industry. Combined with training cutbacks during the pandemic, replacing these lost employees became even more challenging, especially in pilot recruitment. The industry now grapples with the dual challenge of addressing attrition and fostering growth while navigating a 2+ year training hiatus (Aviation Source News, 2023).
Geopolitical Tensions
As the industry was recovering from the pandemic, the Russian invasion of Ukraine introduced new challenges that persisted into 2023. Sanctions on Russia resulted in a surge in oil prices, causing airlines to struggle with travel demand. To sever ties with the Russian oil market, the aviation sector faced notable oil shortages, leading to operational challenges. As China eased travel restrictions after the pandemic, the worldwide demand for jet fuel rose even higher in 2023, putting additional pressure on jet fuel supplies (Reuters, 2023).
In October 2023, the Israel-Hamas war began and significantly impacted the aviation industry, particularly in the Middle East, which is experiencing a downturn in bookings. Flight cancellations include a 26% decrease to Egypt, a 49% drop to Jordan, and a 74% decline to Lebanon, according to data from ForwardKeys. The impact extends beyond immediate conflict zones, with reduced demand affecting hotel bookings, tour cancellations, and a general hesitancy in travel planning for the extended Middle East and Northeast Africa region (Reuters, 2023).
Oil prices also rose by 1% in December 2023 after Yemen’s pro-Iran organisation, Houthi, attacked numerous cargo ships in the Red Sea in an attempt to pressure Israel to stop bombarding Gaza. The Suez Canal in the Red Sea hosts about 12% of the world’s shipping traffic. The attacks caused major disruptions on trade, with many cargo companies forced to reroute their vessels and others to pause operations completely. To protect the Red Sea trade, the US sent ships to de-escalate the situation. As a result, oil tankers carrying jet fuel through the Suez Canal take much longer to arrive from the Middle East and India into Europe, causing delays and fuel shortages.
Environmental Pressures
In the ongoing pursuit of achieving net-zero emissions by 2050, the global aviation industry faced challenges in 2023. While the sector has broadly agreed on the key strategies and actions required to achieve this goal, including sustainable aviation fuel (SAF), operational efficiency, carbon offsetting, and fleet renewal, aviation continued to face increased pressure. Business aviation in particular, drew intense scrutiny for its carbon footprint.
Throughout 2023, protests and demonstrations advocating for the ban on business jets gained momentum. Amsterdam's Schiphol Airport even proposed a ban on private jets and business aircraft starting in 2025. The environmental focus has created a more demanding hiring landscape for business aircraft operators, as their talent pipeline begins its shift towards individuals from a generation with a heightened environmental consciousness.
2023 also marked a groundbreaking achievement in aviation history with Virgin Atlantic’s Flight100, becoming the first commercial transatlantic flight propelled solely by sustainable aviation fuel . This landmark event demonstrated the potential of SAF in reducing aviation’s carbon footprint, potentially paving the way for a more sustainable future for the industry.
Business Travel
Despite the seismic shift towards remote work, triggered by Covid-19, 2023 witnessed the somewhat hesitant return of business travel. Passenger demand for leisure trips bounced back, leaving their corporate counterparts in the dust. Deloitte's April 2023 report predicts the return of pre-pandemic normalcy, with full recovery expected between late 2024 and early 2025.
However, the expense of business travel is not just about money. Business leaders are checking their travel-per-employee and considering reductions to meet their own sustainability goals and save unnecessary resources. The Deloitte report shows that around a third of US companies and 40% of European ones need to reduce this travel measure by more than 20% to reach their 2030 goals. Since business travel used to make up 60% of the industry's profits before the pandemic, this new way of thinking might impact profit margins for some airlines and operators in the future.
Technology Advances
In 2023, AI gained prominence across many industries, including aviation. This brought opportunities in Urban Air Mobility, biometrics, safety and security enhancements, and predictive maintenance, amongst many others.
Pilots benefit from Augmented Reality (AR) with improved digital mapping, weather tools, and troubleshooting capabilities. AI-driven simulators are revolutionising training by replicating real flight scenarios, delivering a
better understanding of emergency situations and system failures while in a controlled environment.
While it’s encouraging to see the industry starting to adopt these technologies, further development of AI, AR and VR into training, across all aviation disciplines, will help to engage the next generation in aviation roles. Those who have grown up with technology as part of their everyday life will expect their career to involve new and innovative techniques and methods. By further incorporating technology into training programmes, it would help to make aviation occupations more engaging and appealing for the next generation This could potentially help to combat those underfilled talent pipelines.
Hiring Trends
The ongoing labour shortage, together with the extremely competitive marketplace and the fast-accelerating passenger demand, created an exceptionally challenging hiring environment for the aviation industry on a global scale in 2023.
Pilots Take Off for New Horizons
Our recent pilot survey painted a stark picture. Two-thirds of pilots were already employed while attending assessments, indicating significant churn and retention issues within airlines. It also revealed a number of other concerning trends from the pilot community:
Over 60% of pilots attended multiple assessments in 2023, suggesting ample opportunity and a hunger for better prospects.
More than 2/3 of pilots are considering new roles in 2024, despite 60% of them stating they’re in permanent roles.
Only 1 in 10 returned to their 2022 airline, and only 50% plan to return to the same airline they’re currently flying for in 2024.
These statistics reflect the pilot skills shortage currently being felt by the industry, one that is driven by more than just salary. Career growth, job security, and work-life balance play a significant role as well.
Beyond the Cockpit: Turbulence Across the Industry
The talent shortage is not only present within pilot recruitment and retention. As noted in our earlier white paper on Aircraft Engineering, the challenge extends across many of aviation's highly skilled roles. The reasons? A complex mix of factors like:
Post-pandemic training delays: The pandemic stalled training pipelines, causing a talent gap that is now widening.
Early retirements and career shifts: Covid-19 prompted some to rethink their career choices, leaving openings unfilled.
Attracting the next generation: As the baby boomers (1946-1964) start exiting the workforce, Gen Z-ers (1997-2012) are failing to replace them in numbers great enough to offset the shortage.
Workforce diversity: This continues to be an issue that the industry is not yet fully addressing.
Passenger Demand
Passenger demand increased rapidly after pandemic restrictions eased, and skills shortages became more obvious than ever as a result. As CAPA's 2023 Megatrends report warns, the labour shortage is "not going away any time soon", potentially posing a significant threat to aviation’s future in both the near and long-term.
What Does 2024 Hold?
Air Travel Boom
IATA anticipates a 2024 rebound with a record 4.7 billion travellers, surpassing pre-pandemic levels. IATA’s 2023 public opinion poll revealed that recent sentiment underscores air travel's essential role, with 89% viewing it as crucial to modern life and the economy.
Conflict Zone Risks
Ongoing conflicts like the Russia-Ukraine and Israel-Hamas wars are elevating economic risks for 2024, impacting oil prices and causing disruptions in aviation routes, ticket and fuel prices. Escalations could harm the global economy, including aviation.
Enhanced Talent Attraction
In 2024, workforce shortages will likely continue for airlines and aircraft operators. A strategic focus, including partnerships with recruitment specialists, will be critical to attracting and securing much-needed talent. Investments in recruiting and training will be necessary for hiring and retaining aviation employees across all roles.
Elevated Employee Experience
2024 will see a heightened focus on engagement and retention strategies. An increasing focus on employee experience to enhance engagement and loyalty from the existing workforce will become more prevalent. In 2023 we published our Complete Guide to Creating your Employee Value Proposition (EVP) in the Aviation Industry, aimed at addressing this increasing concern.
OEM’s Aircraft Delivery Rates Rise
By November 2023, Boeing and Airbus delivered 461 and 623 aircraft respectively. The aircraft manufacturers are already planning to increase their production in 2024. Boeing aims to ramp up its 737 production from 351 to around 462 in total by the end of 2024. Similarly, Airbus is set to increase its A320 production from 540 to 780 by 2024. Engine OEMs also plan to boost engine production and delivery. This is positive news for engineering recruitment as the high number of aircraft will inevitably require maintenance services. With global passenger traffic expected to grow by 3%, the demand is looking good for 2024 with many job openings for cabin crew, pilots and engineers. Current supply however, will need rigorous efforts to catch up with the growing demand.
Conclusion - Summary of the Future Outlook
The International Air Transport Association (IATA) projects a strengthened outlook for the aviation industry's profitability in 2023 and anticipates stabilisation in 2024. While net profitability is expected to reach $23.3 billion in 2023 with a 2.6% net profit margin, a slight improvement is projected for 2024 at $25.7 billion (2.7% net profit margin). Despite this, global net profitability is set to remain well below the cost of capital in both years, emphasising regional variations in financial performance.
Operating profits for the airline industry are forecasted to increase from $40.7 billion in 2023 to $49.3 billion in 2024, with total revenues reaching a record $964 billion in 2024. Passenger travel is expected to hit a historic high of 4.7 billion people in 2024, surpassing pre-pandemic levels (IATA, 2023).
Overall, the future looks bright, with recruitment efforts intensifying to combat the continued skills shortages. However, the uncertainty over ongoing war zones remains a concern.
How Can We Help?
Make 2024 a prosperous year with the help of AeroProfessional, your trusted aviation recruitment experts. Contact us to discuss your current hiring challenges and get the expert advice you need for a successful strategy in 2024.