The aviation industry constitutes an important element of global economic development. It supports the rise in connectivity between cities and countries to enable the flow of goods, people, capital, and technology. With this, the airline sector certainly plays a fundamental role in society, but it also has its fair share of challenges. From the COVID-19 pandemic, which remains one of the worst crises in the history of commercial aviation, to climate change, there are innumerable issues this sector has been facing over the past few years.
Yet, after the initial negative impacts of the COVID-19 outbreak, the aviation market outlook has improved to a notable extent. Over the last three years, the air cargo sector has demonstrated substantial resilience and adaptability, playing a pivotal role in global trade, e-commerce, and the rapid transportation of essential goods. A significant benefit of air cargo transport is its critical role in driving global trade and supporting e-commerce, enabling the globalization of production. Despite the relatively small volumes, the value of goods transported by air cargo amounts to a substantial portion of world trade.
According to the International Air Transport Association (IATA), cargo volumes were anticipated to reach 58 million tons in 2023 and 61 million tons by 2024, indicating a notable share of airline revenues. Despite the gradual resumption of tourist activities worldwide and other positive driving factors, airlines and a ancillary companies are bound to face some trials over the next decade.
Here are some of the challenges that the aviation industry will experience over the coming years:
1) Fuel Cost Uncertainty
The availability and costs of aviation fuel remain one of the major economic factors affecting the airline industry for decades. A spike in jet fuel prices has a direct influence on the financial portfolio of airline firms. In 2024, airline fuel is expected to represent over 31% of all operating costs. The Russia-Ukraine conflict had prompted oil price variations, during 2022, while the trajectory of global oil markets today remains contingent upon the dynamics of geopolitical developments in the Middle East and the strategic production choices made by OPEC.
Industry partnerships can play a significant role in mitigating the impact of rising fuel prices on airlines, primarily through collaborative efforts that increase efficiency and reduce costs. For instance, airlines can come together to negotiate and hedge favorable fuel prices due to the larger volume of purchases, possibly leveraging their collective bargaining power. In 2022, a few airlines from Africa joined forces to avert the fuel price crisis.
2) Aftermath of the COVID-19 pandemic:
The COVID-19 pandemic was among the greatest challenges the aviation sector ever faced, with an impact continuing even after travel restrictions were lifted in many parts of the world. According to an IATA report, the crisis erased essentially 20 years of passenger traffic gains in one sudden blow. The report forecasted that by 2040, air traffic would still be 6% below IATA’s pre-pandemic forecast, highlighting the long-lasting effect of the COVID-19 crisis.
The recovery from COVID-19 has brought potential issues and necessary adaptations, including changes in airline operations and consumer behavior. For example, last year nearly 50 new domestic and international air routes were announced starting August 2023, by airliners such as Air Canada, Atlantic Airways, IndiGo, and others, to meet a rising demand from consumers. A consistent surge in passenger air travel after a large gap during the pandemic could create scheduling and availability challenges for airlines.
3) Impact of International Conflicts
The conflict between Russia and Ukraine, starting in 2022, brought along the imposition of various sanctions and the creation of a few no-fly zones, which hampered the aviation sector. The impact of the conflict was especially felt by specific trading partners and across key markets. The start of the war prompted a surge in global oil prices. However, the opportunity to find alternative sources of fuel and destination markets will help to offset some of these potential impacts over the next few years.
Similarly, the recent Israel-Hamas War resulted in a large number of canceled flights in the Middle East region, a cut down of seats available, and a significant reduction in total revenues for many airlines. Fuel costs are a notable area of concern for international companies. Most airlines opted for hedging oil bills to mitigate the risks of the war. Air Canada and Air Shuttle had reported profits from their measures to protect against fuel price changes.
4) Lack of Skilled Professionals
A personnel shortfall spanning a broad spectrum of roles—pilots, engineers, air traffic controllers, and maintenance technicians among them—poses a significant impediment to the industry’s operational capacity and growth potential. A report by Boeing projected that the aviation industry may need an additional 612,000 pilots, 626,000 maintenance technicians, and 886,000 cabin crew members over the next two decades to meet the accelerating demand for air cargo and travel services.
A survey conducted by IATA in 2023 revealed that nearly 37% of ground handling professionals said there would be staffing shortages until the end of 2023 and beyond, with 60% stating there was a lack of qualified staff for carrying out operations smoothly. These statistics demonstrage the necessity for workforce development within the aviation sector. Addressing these challenges head-on is imperative for safeguarding operational continuity, upholding safety standards, and preserving competitive advantage in a rapidly changing global landscape.
5) Inadequate Airline Infrastructure
Airport infrastructure such as runways, hotels, terminals, concourses, shopping centers, and lounges need to consistently be upgraded to cope with the rise in the number of air passengers. To maintain the reputation of the airline and remain ahead of the competition, aircraft should be periodically upgraded and maintained, while onsite amenities such as aircraft ground handling systems are also required to be renovated. Doing so certainly has its advantages, but consistent upgrades can have a significant impact on an airline company’s finances and create challenges for the aviation market.
According to ACI Latin America and Caribbean, more than USD 94 billion will be required up to 2040 to meet infrastructure needs at airports, considering the booming air transport in the region. On the other side of the globe, the ADB had reported in 2023 that in many countries in Southeast Asia, runway shortage becomes a fundamental constraint for the regional airways sector. Developing and maintaining facilities to complement the incessant air travel growth will put financial strains on the aviation industry.
6) Global Passenger Congestion
Air congestion and passenger traffic are other challenges faced by the aviation market, which seem to have no quick solution, at least in the immediate future. Airports in small cities are often crowded, and flight delays have turned out to become a regular thing. Most flights these days seem full, and terminals are always congested, with the rise in the number of air passengers constituting a major factor.
According to estimates, the Asia Pacific region is expected to add around 2.5 billion passenger journeys per year by 2040. It represents the significant sector opportunities across regional developing economies. Although carriers continue to try and make trips seamless for passengers, congestion will continue to remain a viable challenge for the aviation industry.
7) Cyber-Attacks Emerge
Cybercrime remains a clear and present danger to the aviation sector which cannot be ignored. The sector is witnessing a rising tide of cyber-attacks and a surge in the levels of risk, as criminals, hackers, and cyber-attackers look to use vulnerabilities, cause chaos, and steal capital at the expense of passengers and the aviation sector.
According to a report published by Eurocontrol, airlines are an irresistible target for cybercriminals with over USD 1 billion lost from fraud websites every year. Last year, pro-Russian hackers had attacked Europe’s Air Traffic control agency, making traffic control operations difficult. Also, Airbus reported a cybersecurity incident in September 2023, where information about 3,200 company vendors was released on the dark web.
8) Focus on Climate Change
Climate change and environmental issues certainly remain among the key challenges faced by the airline industry. Since commercial aviation is responsible for a significant percentage of carbon emissions, the industry is under significant pressure to take measures to reduce the environmental impact of air travel.
Rising sea levels and the incidence of extreme weather events are some other key factors indicating the need for sustainability in the sector. The commitment of international agencies toward net-zero CO2 emissions by 2050 is of existential importance to the industry and to the prospects of realizing a future global economic model.
Air transport plays a vital role in global supply chains, especially for international trade in manufactured goods. Trade and oil prices are facing interruptions by wars and before that, by the COVID-19 lockdowns. Even so, WTO has estimated that merchandise trade volumes will increase by 2.6% in 2024 and 3.3% during 2025, suggesting notable potential for air cargo transport over the next few years. Concurrently, advancements in aviation technology and a shift towards sustainability may introduce operational efficiencies, potentially lowering costs and thereby stimulating further growth in aviation—an indispensable cog within the intricate machinery of global commerce