Lufthansa Group chief executive Carsten Spohr continues to insist that the global aviation industry will see constrained capacity for the foreseeable future as it seeks to serve resurgent demand for air travel.
Speaking during a third-quarter earnings briefing on 27 October, Spohr outlined a number of factors that are limiting capacity development, saying: “Global aviation will not return to the over-capacities witnessed in pre-pandemic times anywhere soon.
“Capacity development will be limited by several factors… probably for years to come.”
Among the key factors, global supply chain bottlenecks are causing “massive delays” to deliveries of new aircraft and spares for MRO work, Spohr says.
“For example, it’s currently basically impossible around the world to obtain a cockpit window for the [Boeing] 787 and for other aircraft types because of supply insolvencies, shortages of staff and materials, and so on,” he states.
He also cites the staffing shortages that caused operational challenges at many airports during the summer, suggesting they are yet to be fully resolved and will weigh on future capacity.
“There are many still-unfilled vacancies at airports, ground service providers and security check organisations around the world, continuing to limit any significant capacity expansion,” he says.
Spohr adds that US airlines are suffering from a “dramatic pilot shortage”, which he believes will “take years to address”.
A final supply-side constraint are the hurdles that would prevent additional capacity from becoming profitable, such as “the high costs of fees, materials and fuel”, Spohr says.
All the while, a series of factors mean demand is only rising, the Lufthansa chief explains.
“Business travel, for instance, continues to recover, for us to 70% of pre-crisis revenues,” he says. “And we expect volumes to continue normalising at the current rapid pace.”
He notes that this is partly driven by corporate reaction to the global supply-chain challenges, as businesses scramble to build new relationships with new suppliers and customers.
In leisure and visiting friends and relatives markets, meanwhile, Spohr believes that “one summer was surely not enough to release all the pent-up demand which has been built up during the pandemic”.
Notably, for many people ”travel has become more important to their personal hierarchy of needs, especially in the US”, he states.
Finally, Spohr highlights Asia as a market that has not yet been a big factor in the recovery of the long-haul sector.
“But now, with the opening of Japan – a traditionally high-yield market – that is changing,” he says, adding that the partial lifting of travel restrictions in Hong Kong might eventually become “a blueprint” for mainland China.
In the case of Lufthansa Group, Spohr believes the supply-demand balance will be beneficial financially, given it should support higher yields.
