Advisory Bulletins

19 June 2023

Strong northern hemisphere summer season expected amidst recession risks

Industry outlook for 2023

Montreal, 19 June 2023 – Airports Council International (ACI) World has published its thirteenth quarterly assessment analyzing the impact of the COVID-19 pandemic, its effects on airports, and the path to recovery.

Industry outlook and aviation

Global economic growth faced significant challenges in 2022, with a slowdown to 3.2% due to various factors such as the war in Ukraine, cost-of-living crisis, and China’s deceleration. In the aviation industry, these economic conditions had a notable impact on airports and airlines worldwide. Slower global growth rates have influenced air travel demand, resulting in lower passenger volumes and reduced revenues for airports.

However, positive developments are emerging, including improved business and consumer sentiment, declining food and energy prices, and the full reopening of China, which have positively affected worldwide airport traffic. Although there is room for optimism, the moderation of GDP growth projections for 2023 and 2024, at 2.6% and 2.9%, respectively, implies a continued challenging environment for the aviation sector, with airports facing ongoing difficulties in recovering passenger numbers and revenue.

Demand for air transport is closely tied to overall economic performance, with the United States, Europe, and China being key players. In the United States, annual GDP growth is projected to slow to 1.5% in 2023 and 0.9% in 2024, partly due to a moderation in demand pressures influenced by monetary policy. Similarly, the Euro area is expected to experience a modest growth of 0.8% in 2023, followed by a pickup to 1.5% in 2024 as the effects of high energy prices fade. China, after facing a slowdown, is projected to rebound with growth rates of 5.3% in 2023 and 4.9% in 2024. The recovery of these economies will have a direct impact on the demand for air travel, and consequently, on airport operations and revenues.

Inflationary pressures continue to be a concern. The aviation industry has been impacted by cost pressures, and tight labor markets, leading to potential challenges in maintaining profitability and managing expenses for airports. Inflation is expected to gradually moderate over 2023 and 2024 but is likely to remain above central bank targets until the latter half of 2024 in most countries. This inflationary environment can further strain the financial viability of airports as they face increased operational costs.

Some signs of improving economic activity in early 2023

In early 2023, there were signs of improved growth prospects in the largest economies, which have positive implications for the aviation sector. Monthly data (Source: OECD) reveals that economic activity in the United States surpassed expectations in January, while labour markets remained tight across major G20 economies, including Europe. This supports private consumption, and survey indicators show a stabilization or rebound from the lows of late 2022. Consumer confidence is improving in all major aviation markets.

These positive trends are accompanied by a decline in global energy and food prices, which boosts purchasing power and aids in lowering headline inflation. The reopening of China’s economy further contributes to global activity. However, energy and food prices, although decreased from their peak levels, remain higher than pre-pandemic levels, creating budget pressures for lower-income households.

In the aviation and tourism industry, these developments are expected to lead to a further recovery of air travel demand and passenger volumes compared to pre-pandemic volumes. As consumer confidence improves, people are more likely to engage in travel, benefiting airlines and airports.

Finally, focusing on quarterly figures in China, the economy exceeded expectations in Q1, with GDP growth accelerating to 4.5% from 2.9% in Q4 2022.

Looking at the latest figures from April, we can see a continued strong traffic trend we saw in the first quarter of 2023. The easing of inflation and rising consumer confidence in most OECD countries, combined with declining jet fuel prices, suggests sustained strong air travel demand that will continue to improve into the northern hemisphere summer season.

Passenger traffic forecast 2023: key takeaways

Before the COVID-19 pandemic, the global passenger volume forecast was 10.2 billion passengers in 2022. However, the actual 2022 passenger volume is estimated to be 6.8 billion passengers.

For the year 2023, global passenger volume is estimated to reach 8.4 billion passengers. Compared to the pre-COVID forecast, which is estimated to be 10.5 billion passengers in 2023, this represents a potential loss of 20.4%.

The Africa region marked 189 million passengers, which is 82.4% of the 2019 level. In the year 2023, it is estimated to reach 222 million or 96.8% of 2019 level.

The Asia-Pacific region had a slower recovery compared to the global average in the year 2022 with 1.8 billion passengers or 53.8% of the 2019 level. However, in 2023, it is expected that the region will have the strongest recovery among all regions, reaching 2.9 billion, or 85.3% of the 2019 level.

The Europe region had the greatest increase in passenger traffic in 2022, driven by the summer travel demand surge, with 2.0 billion passengers, or 81.1% of the 2019 level. In 2023, recovery will slow down in the region, marking 2.2 billion passengers, or 92.2% of the 2019 level.

In 2022, the Latin America-Caribbean region had the fastest recovery, reaching 637 million passengers, or 92.7% of the 2019 level. In 2023, the region is projected to exceed the 2019 volumes, reaching 701 million passengers or 102.1% compared to the 2019 level.

The Middle East region had its continuous recovery in 2022, with 345 million passengers, or 84.9% of the 2019 level. In 2023, the passenger number is projected to be 396 million, or 97.3% of the 2019 level.

The North America region marked the second fastest recovery with passenger traffic of 1.8 billion or 88.8% of the 2019 level. In the year 2023, the region is expected to reach 2.0 billion passengers, which is 98.7% of the 2019 level.

Chart 1: Projected global quarterly passenger traffic compared to 2019 level (2020-2023, quarterly indexed, 2019 level = 100%)

Source: ACI World

Table 1A: The impact of the COVID-19 crisis on quarterly passenger traffic by region, compared to pre-COVID baseline (2022-2023, rounded to the nearest million passengers)

* Estimated passenger traffic volumes are based on a broad range of inputs provided by ACI Regional offices and industry experts.

** The projected baseline (pre-COVID-19) scenario is based on a standard time-series forecast generated using the most up-to-date and complete historical data to February 2023. It also makes use of adjusted World Airport Traffic Forecasts (WATF) 2019–2040 and considers the latest insights provided by ACI Regional offices and other inputs.

Source: ACI World

Table 1B: The impact of the COVID-19 crisis on quarterly passenger traffic by region, compared to the 2019 level (2022-2023, rounded to the nearest million passengers)

* Estimated passenger traffic volumes are based on a broad range of inputs provided by ACI Regional offices and industry experts.

Source: ACI World

In 2023, global passenger traffic is projected to reach 92% of 2019 levels. Although demand for leisure travel will likely remain strong in the first half of 2023, growth levels may be more subdued in the latter half of 2023, as the effects of higher interest rates are felt across economies. Despite several headwinds, the opening of Chinese aviation markets represents a positive shift in the path to recovery. The baseline projections for global passenger traffic indicate that the industry will recover to 2019 levels by 2024.

Chart 2: Medium-term global passenger traffic projection (indexed, 2019 = 100)

* Estimated passenger traffic volumes are based on a broad range of inputs provided by ACI Regional offices and industry experts.

Source: ACI World

Chart 3: Global passenger traffic – estimated losses and recovery (in billion passengers)

As mentioned, global passenger traffic is projected to reach 92% of 2019 levels in 2023. However, what if we compare the Business as Usual (BAU) forecast from 2019 against the current recovery projections for total passenger traffic? The gap between those forecasted figures is shown in chart 3 and a 19% difference in predicted traffic figures (lost traffic) can be noticed. The percentage of lost traffic is decreasing on a quarterly basis in 2023, from -22% in Q1 2023 to -19% in Q4 2023.

Source: ACI World

What this represents in terms of absolute passengers can be seen in chart 4. The lost traffic in 2024 is projected to be approximately 2.2 billion passengers in 2024.

Chart 4: Projected global quarterly passenger losses due to the COVID-19 crisis (2019–2023, in billions of passengers)

Source: ACI World

Chart 5: Medium-term global passenger traffic by type (in billion passengers)

International travel (longhaul) is rebounding with strong demand as COVID-related border restrictions have largely disappeared in most countries, resulting in a surge in travel demand, particularly in Europe last summer. While China and some Asian countries eased restrictions later, China reopened its borders in January.

Chart 5 plots total passenger traffic worldwide and presents the shares of traffic in both domestic as international passengers. The share of international passenger traffic reached 42% in 2019. Though passenger traffic dropped dramatically in 2020, the share increased to 35% in 2022 but recovered much slower as compared to domestic passenger traffic. In 2023, the share of international passengers is expected to make up 38% of total passengers, much closer to the 42% of traffic share it represented in 2019.

Source: ACI World

Even with the surge in international travel, the recovery of the sector to pre-COVID-19 levels continues to be driven mainly by domestic travel, which is predicted to recover to 2019 levels earlier than the international passenger numbers. International travel is forecast to recover by 2025 with a promising index of 107. Domestic passengers, fueled by a strong US domestic market, is expected to recover much quicker, attaining the 107 growth index a year earlier in 2024.

Chart 6: Medium-term global passenger traffic growth by type (indices of international and domestic passengers vs base year 2019)

About ACI

Airports Council International (ACI), the trade association of the world’s airports, is a federated organization comprising ACI World, ACI Africa, ACI Asia-Pacific, ACI EUROPE, ACI Latin America and the Caribbean, and ACI North America. In representing the best interests of airports during key phases of policy development, ACI makes a significant contribution toward ensuring a global air transport system that is safe, secure, efficient, and environmentally sustainable. As of January 2023, ACI serves 712 members, operating 1925 airports in 171 countries.