US airline bookings dropped 17% last month from March, according to a report from Adobe published Thursday, one of the first signs of cooling demand for air travel as ticket prices surpass pre-Covid pandemic levels. Consumers spent $7.8b on domestic tickets in April, down 13% from the previous month, according to the report. Air travel has been resilient in recent months despite the highest inflation since the early 1980s. Prices on everything from gasoline to groceries to travel have shot up. The new data suggests consumers are starting to back off buying tickets. Despite the slowdown, demand for domestic US plane tickets remains above 2019 levels. In April, online spending on tickets was up 23% over the same month in 2019 while bookings rose 5%. Prices were up 27% from 2019 and 8% higher than in March, Adobe said.<br/>
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Aviation is able to meet the EU’s target to significantly reduce net CO2 emissions by 2030, but only through a heavy reliance on market-based measures and the absorption of billions of euros in extra costs, according to the region’s network manager Eurocontrol. Its assessment came as the EC works on proposals for the so-called ‘Fit for 55’ climate and energy package, under which the bloc is aiming to reduce economy-wide CO2 emissions by 55% from 1990 levels by 2030. The first votes on the package are due to take place later this year. Publishing the conclusions of a report – Think Paper: Reducing aviation emissions by 55% by 2030 – on 12 May, Eurocontrol suggests that under all of its traffic growth scenarios, MBMs would account for between 75% and 87% of the net CO2 emissions reduction required to meet the proposal’s target. Carbon credits from the EU’s Emissions Trading System (ETS) – which covers intra-EU travel – would be the main MBM recourse for the aviation sector, the report suggests, while ICAO’s CORSIA scheme would also contribute via the offsetting of any growth in emissions on international flights that are not intra-EU. Other initiatives would play a smaller part, reflecting the sector’s lack of transformative options to achieve emissions reductions at source over the coming years. Air traffic management (ATM) improvements are estimated to be the second-biggest contributor to cutting net CO2 emissions, achieving 8-12% of the total, while fleet upgrades contribute 1-3%. Sustainable aviation fuel is only forecast to contribute 4-9% of the net reduction through to 2030. Achieving the ambitions of the Fit for 55 programme will theoretically come at a high cost to Europe’s aviation industry, not least because the proposals include the removal of jet fuel’s tax exemption. Eurocontrol’s report estimates the “cumulative extra cost” of the decarbonisation measures over 2022-2030 will amount to E62b in its base-case traffic scenario. <br/>
Auckland International Airport in New Zealand plans to begin enabling works next month for the Auckland Airport Transport Hub, which will be built in front of the international terminal. The project entails an investment of more than $187m and is expected to transform the way passengers arrive and depart from the main airport terminal. It will also serve as a major step in the delivery of the future combined domestic and international terminal. Auckland International Airport CEO Carrie Hurihanganui said: “At Auckland Airport we are starting a new chapter of infrastructure investment that is all about building a better future for travellers from the moment they step foot on our precinct. With every project, we are focused on providing a high-quality customer experience that equals some of the best airports in the world. Easy and intuitive journeys are an important part of this and we’re excited about the benefits that the Transport Hub will bring. It will place existing and future public transport at the heart of Auckland Airport and create a seamless arrival and departure experience for passengers, with a direct connection to the combined international and domestic terminal.” The Transport Hub will be a four-storey structure built on the footprint of the main international carpark. It has been designed to facilitate traffic movements through its ground floor.<br/>
Rolls-Royce Holdings said renewed coronavirus restrictions in China are holding back crucial service revenue from its jetliner engines even as markets begin to recover elsewhere. Over the first four months of 2022, flying hours, which determine revenue-generating maintenance visits, were 42% higher than the prior year, London-based Rolls-Royce said. “Passenger demand is recovering on routes where travel restrictions have been lifted, such as in Europe and the Americas, but additional Covid-19 restrictions have resulted in fewer flights in China where the situation is still evolving,” the company said. Shop visits, together with deliveries of installed and spare engines, will accelerate during the course of the year, Rolls-Royce said ahead of its annual shareholder meeting later Thursday. Rolls saw revenues plunge during the two years over which the pandemic roiled global travel. Demand for the wide-body engines in which it specializes has been hardest hit, with long-haul flights returning more slowly than regional and domestic trips. The company, which was profitable last year, spurred by cost cuts and the travel restart, reiterated previous guidance for a broadly unchanged operating profit margin in 2022, combined with revenue growth of less than 10%.<br/>
Inflation clauses that determine how much airlines pay for new jets have jumped into a “hyper-escalation” band, pushing up aircraft prices but still leaving manufacturers unable to fully pass on their soaring costs, industry executives said. The hike to the top inflationary band is a rare move in the industry, potentially triggering a rise in airfares by airlines while manufacturers will also be left out of pocket, experts warned during major gatherings over the past week in Dublin, the centre of the global aviation finance industry. Airlines buy jets at a basic price agreed in confidential negotiations but the final price includes adjustments for inflation during long production waiting times, based on US factory input and labour costs, wherever the planes are built. For years, these “escalation” clauses discreetly swelled the profits of planemakers as price revisions exceeded their long-term purchasing costs, people familiar with the contracts say. Now, with key US cost indices rising by the largest amount in over a decade, the price adjustments are steeper and the cushion between escalation and real costs has vanished. “It’s always been a windfall game for the (manufacturers) so long as they’re efficient enough to make sure their own costs don’t grow as fast as the escalation,” AerCap CE Aengus Kelly told the Airline Economics conference. The rapid spike means some manufacturers may be left out of pocket as the clauses were negotiated during an era when inflation fears were low. Yet leasing companies who secured limits to their exposure during that decades-long lull in inflation will be in a more comfortable position than some competitors, Kelly said. “It’s certainly something that we’re watching carefully... We’re seeing very strong inflation pressures in the United States,” said Steven C. Udvar-Hazy, senior vice-president at Tokyo Century leasing unit Aviation Capital Group.<br/>
General Electric Thursday said it expects an improvement across its businesses in the second half of the year despite persistent inflationary and supply chain pressures. But CFO Carolina Dybeck Happe said the company expects to burn cash in the current quarter despite an improvement in cash flow. GE's shares were down 1.6% at $71.30 in afternoon trade. The Boston-based industrial conglomerate last month said it was trending toward the lower end of its full-year earnings forecast, citing fresh COVID-19 pandemic-related lockdowns in China as well as the war in Ukraine. To mitigate the impact, the company has raised prices for its products and is invoking price escalation clauses in its service contracts. It is also trying to find alternative sources for parts and improve productivity to reduce cost. While the company has not seen any "material" change in the COVID-19 situation in China, Happe said the measures are expected to result in an improved performance in the second half of the year. "Nothing is certain in an environment where so much is changing day to day," she told Goldman Sachs Industrials & Materials Conference. "But clearly, we have a path to significant growth in the second half." The company has projected adjusted profit for 2022 to be in the range of $2.80 to $3.50 per share. It also expects to post high-single-digit revenue growth this year and generate $5.5b to $6.5b in free cash flow.<br/>