Airlines are grappling with aircraft shortages as air travel is set to hit record levels

The global airline industry is facing a summer crisis, with travel demand expected to surpass pre-pandemic levels while aircraft deliveries have fallen due to production problems at Boeing and Airbus.

Air carriers spend billions on repairs to keep flying older, less efficient planes and pay a premium to secure the planes from lessors. However, some carriers are shortening their schedules to cope with the lack of available aircraft. At the same time, the number of travelers worldwide is expected to reach historic levels, with 4.7 billion people expected to travel in 2024, compared to 4.5 billion in 2019.

Passenger carriers to accept fewer planes

“We can expect a strong performance from airlines over the summer with some particularly high airfares,” said John Grant, senior analyst at travel data firm OAG.

Last December, the International Air Transport Association (IATA) forecast 9% annual growth in global airline capacity this year. That estimate seems optimistic after the Boeing safety crisis.

Passenger carriers will receive 19 percent fewer planes this year than expected because of production problems at Boeing and Airbus, said Martha Neubauer, senior associate at AeroDynamic Advisory.

US carriers will receive 32 percent fewer planes than planned a year ago because several airlines depend on Boeing’s 737 MAX planes, Ms. Neubauer said. Boeing production was curtailed after a panel blew up in mid-air in January.

The company is reeling from a growing crisis that erupted after the Alaska Airlines crash on January 5. Regulators have put a cap on 737 MAX production, but the company is not even reaching that level.

Up to 650 Airbus A320neo planes could be grounded in the first half of 2024 for inspections to address a defect in RTX Corp’s Pratt & Whitney engines, RTX said last year.

In Europe, low-cost airline Ryanair has reduced some routes. In the United States, United and Southwest have cut flights and adjusted hiring and staffing plans.

The aircraft leasing market is booming

Analysts expect capacity at most US carriers to grow at a slower pace in the second quarter than a year ago. Airlines will update their growth plans and explain how they will offset capacity constraints when they report quarterly results, starting Wednesday with Delta Air Lines.

Due to the shortage of new aircraft, the aircraft leasing market is booming. Data from Cirium Ascend Consultancy showed that lease rates for new Airbus A320-200neo and Boeing 737-8 MAX aircraft reached $400,000 a month, the highest level since mid-2008.

Airlines are spending 30 percent more on aircraft leases than before the pandemic, said John Heimlich, chief economist at Airlines for America (A4A), which represents major U.S. carriers.

They also hold aircraft that are past their useful economic life and require heavy maintenance that now takes several months, Mr. Heimlich said. Repair costs at United, Delta and American increased 40% last year compared to 2019.

Increased leasing, repair and labor costs will reduce profit despite strong demand, Mr. Heimlich said. U.S. passenger airlines reported a pretax margin of 4.5 percent last year, with the bulk of the contribution coming from Delta and United.

Fewer Americans plan to travel by plane this summer than a year ago because of high inflation, a survey by the travel website Vacationer found. Airline prices go down on a yearly basis, but go up on a monthly basis.