Unquestionably, the continued downturn of the global economy will be a significant challenge that the industry must weather. With inflation likely to end 2022 at unprecedented levels in most developed economies, the consumer will continue to be defensive and cautious as they will likely still be faced with high energy costs, rising food prices, and increased cost of housing. In fact, with most consumer products being impacted by higher production and distribution, we can expect to see many areas of the economy entering a period of even more rapid downturn.
Demand will clearly be a challenge, but conversely, the supply side of the equation — which has been below pre-COVID-19 levels throughout the past two years — is likely to eclipse pre-COVID levels as passenger traffic returns. This combines increased belly capacity with the rising number of freighters, both conversion and production, hitting the market.
These two scenarios will conspire to place downward pressure on yields and create even more difficult operating conditions for carriers.
Additionally, the industry will be faced with rising operational costs as leasing, financing, and wage costs will be impacted by the current trend of increased central bank rate hikes to combat inflation and labor force demands for salary increases to help address the rising cost of living.
With the International Monetary Fund (IMF), Organization for Economic Co-operation and Development (OECD), and World Trade Organization (WTO) all forecasting reduced levels of global GDP and international trade, it’s fair to say that seatbelts need to be fastened as turbulent skies are ahead.