The uneven year 2022 in the European Aviation Industry
The second decade of the new millennium started quite shockingly, when the COVID-19 pandemia hit the world globally. It hasn't got any easier ever since especially because of the war in Ukraine and all the implications from it to the global stability. Especially the aviation industry, which has always been the one to react first in all the crisis phenomena, has been hit very hard. Therefore looking at the business outcomes and some other factors behind them in the aviation industry from the year 2022 are worth studying.
Eurocontrol has published a very interesting analysis report called "2022 - the year European Aviation bounced back, despite war and Omicrom/COVID". It's focusing on the various stakeholders of the European aviation industry and looking at the situation from their perspective.
The following chart from the Eurocontrol's report claims that the aviation industry continues to be a growth business in Europe also in the future. The growth angles just vary based on the three different growth scenarios.
I personally believe in the green line. Firstly; people were forced to stay at home during the pandemia and now when the borders have been opened again, the fever to travel somewhere is strong. I don't believe that the environmental consciousness matters much, if the travellers can compensate their carbon footprint if they wish to do so. Secondly; during the pandemia it was widely discussed in the media that business travel won't recover well any more. The meeting applications like Teams or Zoom would change the scene. But the recovery has been rather good; you just can't dismiss the contact meetings totally. Thirdly; the Asian and especially the Chinese travellers are still missing in high numbers from the European flights. The travelling fever in China is strong after such a long time of not being able to go anywhere.
According to Eurocontrol, the year 2022 was the year of bouncing back in the European aviation. It's true that according to the statistics the figures look good. The main waves of pandemia seem to be more or less behind us and it supports all the European aviation companies. But then there is the war in Ukraine.
The biggest carrier has been Ryanair. Based on their point-to-point strategy and focus on the central European flights with mostly leisure travelers, all the stars are in the right position; the company has been doing very well. The post pandemic situation and the travel fever support the low cost carriers especially. This has benefited also the airports, air navigation service providers and ground handlers that have a large number of low cost carriers as their customers.
While some companies like Ryanair are recovering well, some others have been almost paralyzed with a new shock: the war in Ukraine. Clearly there are direct and the worst implications to countries like Ukraine itself or countries close by like Moldova, but from the business perspective there are affects to the Europe-Asian traffic because of the closure of the Russian air space.
One of the big victims has been the whole Finnish aviation ecosystem. The main carrier Finnair's big growth strategy has been based on the transfer traffic using the shortest way from Europe to Asia via Russian airspace. Both the passenger and the cargo traffic were tied to this. The airport built large extensions to support Asian travelers. The ground handling companies were doing well because of the large amount of transfer traffic. The air navigation service provider had a lot of flights that were coming from the central Europe and using the Finnish air space before entering the Russian air space on their way to Asia.
Right now Finnair has totally changed their strategy towards another direction and the airport is having too much areas especially at the non-Schengen side, where also the shops and the restaurants are lacking customers. The Chinese travellers haven't been able to fly extensively until recently, but if the market now really opens again, the Finnish route to Europe has lost its competitive edge: the shortest route. The ground handling companies are getting smaller and even closing their operations. The air navigation service provider has lost a lot of customers since the flight routes go now around Russia and Finland might not be on the way any more.
The year 2022 has been very uneven in the European Aviation Industry. Even though the statistical figures show good numbers, there are many sad stories in the business. Finland is a rather small country and the aviation business crisis doesn't really show in the European statistics. Especially in Finland but everywhere in Europe there are a lot of companies that are struggling to survive, and behind that there are always employees and partners that are struggling even more. The delays and cancellations in air travel during the summer happened in many cases because of the decision to avoid business risk and therefore finally start the recovery processes too late. Many good talents and a lot of expertise have left the industry permanently.
The aviation industry will be a growth industry, but the players, strategies and challenges will change. Low cost airlines are benefitting from the situation and so are the Asian, especially the Chinese ones. The situation in Finland will also change because of the changes in every stakeholder's strategies. Nobody can guarantee that all the bad things have been seen by now; there might be something totally unexpected happening tomorrow. And that might turn the wheel into some totally other direction again. Let's just try to be prepared.