Heathrow boss: Aviation sector can’t bank on soaring demand continuing into winter
The aviation sector should not bank on soaring demand continuing, the boss of Heathrow airport has warned, amid concerns that airlines could struggle after summer without corporate travels’ sustained recovery.
“We all want to make the most of the demand while it’s here but we can’t bank on it continuing,” long-time chief John Holland-Kaye told Morning Wire
While leisure travel bookings have soared ahead of expectations, business demand has recovered much more slowly, which could create issues when the busiest months – traditionally May to October – come to an end and holiday bookings dry up.
“What we’re seeing at the moment is leisure demand is ahead of where it was in 2019, business demand is behind where it was in 2019,” Holland-Kaye explained.
“Business was about 34 per cent of our demand in 2019, it’s now down. So it is coming back much more slowly, which is sort of what we would have expected. The surprise is that leisure demand is defying gravity and I think we all think it’s only a question of time before that starts to slow down,” he said.
Aviation has seen an unprecedented boom this year as a result of pent-up demand for holidays post-pandemic and despite ongoing cost-of-living concerns.
Both Easyjet and the IAG reported record profits for their last quarters in July, with the British Airways’ owner netting a colossal €1.25bn (£1.07bn). Ryanair, though slightly more tempered, still flew past pre-pandemic levels on the back of strong demand.
John Grant, senior analyst at aviation analytics company OAG, said “the great unknown, which airlines are watching is the corporate recovery, which has been much slower than anticipated and at this time of the year is traditionally at its lowest point.”
“Airlines are hoping that corporate demand will recover in the last quarter of the year and at that in turn will fill those crucial premium class seats that some leisure travellers have been filling for the last few years, it is the great unknown and with airlines noting this issue as a factor in their year-end guidance its clearly something that needs to be watched,” he explained.
Rob Morris, global head of consultancy at aviation analytics firm Cirium’s Ascend branch, told Morning Wire that the UK’s economic outlook and high inflation could see “weakening airline passenger demand,” as we head into the fourth quarter.
“The release of frustrated demand from Covid is almost completed, which means that the drivers for so-called ‘revenge travel’ are weakening. Accumulated savings which many built up through Covid are eroding with higher prices in other parts of the economy meaning leisure passengers are potentially prioritising spend in other areas in 2024,” he said.
He added that business travel was continuing its recovery, “but in that sector high fares are typically driving many corporations to manage budgets more efficiently, which could slow recovery and/or potential growth.”
“We’d tend to agree that significant uncertainty exists around airline demand post-summer 2023 and, for most, this period may be as good as it gets for a while,” he said.