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(Text/Deng Wenjing Edited by Zhao Qiankun)

On July 22nd local time, the Farnborough International Air Show in the UK kicked off. Reuters reported on the same day that executives of several airlines expressed their views on topics of concern in the industry, such as post-epidemic air travel demand, revenue pressure and supply chain barriers.

Excessive optimism may lead to overcapacity

"We have seen a gradual return to normal demand for air travel," said Guliz Ozturk, CEO of Pegasus Airlines. "Travelers are looking for the most cost-effective way to travel, returning to their pre-pandemic spending habits and searching for the best prices." She expects yields to gradually flatten as consumer demand returns.

Air India CEO Campbell Wilson expects growth in the international aviation market to slow in the next six months after a rapid market rebound.

Luis Gallego, chief executive of British Airways parent International Airlines Group (IAG), said demand in the first quarter of this year was stronger than the same period last year, but business travel was still recovering.

Screenshot of Reuters video at the Farnborough International Air Show

The report mentioned that this year's passenger volume in the United States hit a record high. In the first half of the year, the Transportation Security Administration (TSA) screened an average of 2.46 million passengers per day, a year-on-year increase of 6%.

Reuters also suggested in another report that airlines' overly optimistic view of travel demand has posed a risk of overcapacity.

Yields under pressure

Reuters reported that declining airline profits and delayed aircraft deliveries have caused industry concerns. Ryanair's quarterly profits almost halved, ticket prices plummeted by about 15%, and management warned that prices will face greater pressure in the future. Air Canada also lowered its full-year core profit forecast due to factors such as overcapacity in the market and weakened pricing power on international routes.

Market information shows that some European airlines' first-quarter performance was lower than expected, and their cost difficulties have continued into the second quarter. For example, Lufthansa cut its profit target for the second time earlier this month. The report also said that British EasyJet and Air France-KLM Group plan to release financial reports this week, and some analysts are worried that their performance may not be able to rebound from the weak first quarter.

In this regard, Luis Gallego said that judging from the performance of airlines such as Ryanair, although demand for domestic flights in Europe remains strong, yields are under pressure.

Supply chain "broken chain" needs to be repaired urgently

One of the focus topics at the air show was urging manufacturers to resolve supply chain issues.

Delays in aircraft deliveries have pushed up costs, and there are growing signs they will have to pass those costs on to consumers as demand begins to normalize.

Ryanair CEO Michael O'Leary said Boeing's deliveries have improved, but there are still delays, and he is worried about next year's deliveries. In addition, Emirates also said that its fleet expansion plans were affected by Boeing's delivery delays. Campbell Wilson said that Air India is facing problems with the timely supply of aircraft spare parts.

Another report released by Reuters on July 23 also mentioned that Southwest Airlines was affected by the delay in Boeing aircraft deliveries, and activist investors put forward demands such as removing its CEO and completely reforming the board of directors.

Darren Hulst, Boeing's vice president of commercial marketing, admitted that Boeing had "let its customers down," expected delays in aircraft deliveries to continue for years, and said it would work to ensure that this did not happen again. Guillaume Faury, Airbus's chief executive, said he was pushing ahead with the production increase of Airbus passenger aircraft.

COMAC appears at Farnborough International Airshow. COMAC

According to a report by Flight Global, a US aviation data website, on July 22, COMAC also exhibited several aircraft models to the public at the Farnborough International Air Show, including the basic models of the C919, ARJ21 and C929, as well as the ARJ21 business jet, the shortened/high-altitude model and the extended model of the C919, and other series aircraft. The report also mentioned that COMAC will also hold special promotion activities during this period to strengthen negotiations and exchanges with customers and partners.

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