Demand for air travel has normalised after a years-long boom following the COVID-19 pandemic as holidaymakers and travellers baulk at higher fares, executives at major airlines said at the Farnborough Airshow on Monday. Guliz Ozturk, CEO of Turkey's low-cost Pegasus Airlines, said the airline expected yields - a measure of average fare paid per mile by each passenger - to be flat as customers go "back to basics". Travellers are looking for the most cost effective way to travel, she said. "We have started seeing the normalisation of demand. What does it mean? I mean, the demand is there, but now the travellers are looking for, as before the pandemic, for the most affordable, the lowest, the best price for their travel," she said. Air India CEO Campbell Wilson said he expected the international market to moderate for the next six months, while the CEO of BA-owner IAG, Luis Gallego, said business travel was still recovering from the COVID crisis when travel almost ground to a halt with borders shut and planes grounded. The comments come after Ryanair reported earlier on Monday a bigger than expected drop in quarterly profit as fares plunged 15%, with management saying that ticket prices were continuing to deteriorate. Some European airlines reported weaker than expected first quarter results, with their cost struggles set to carry over into second quarter results too. Lufthansa cut its profit target for the second time this year earlier this month.<br/>
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Record summer travel demand was tipped to translate into bumper earnings for airlines - but quarterly reports are looking less than stellar.<br/>While plenty of customers are flocking to travel destinations worldwide, airlines are finding an excess supply of seats in the price-sensitive end of the market has forced them to discount fares to fill their planes.<br/>This week, earnings from American and Southwest Airlines are expected to deliver more bad news following downbeat outlooks for the quarter from United, Delta, Alaska Airlines, and Ryanair. Airline executives attributed the overcapacity to an overoptimistic view of travel demand, which by most standards has been robust. Passenger traffic in the U.S. is hitting records levels this year. In the first six months, the U.S. TSA screened an average of about 2.46m airline passengers per day, up 6% from last year. "It was just that airlines were hoping that it (demand) was going to be even stronger," Alaska's CFO Shane Tackett said in an interview. In addition to the discounting pressure, new labor contracts and higher lease rates and maintenance costs have driven up the industry's operating expenses. In May, American slashed its second-quarter profit forecast, citing weaker pricing power in the domestic market, and while the Texas-based carrier has vowed a reboot, analysts say reversing course will be time-consuming and costly. "American's network leaves it more exposed to the markets currently most oversupplied and less able to offset the higher cost environment," said TD Cowen analyst Thomas Fitzgerald.<br/>
Global airline leaders are bracing for supply-chain challenges to last for at least another two years, as manufacturers struggle to meet demand from a growing industry. Speaking during a panel discussion at Farnborough air show on 22 July, the chief executive of British Airways and Iberia owner IAG, Luis Gallego, said “a couple of years minimum” when asked for how long those challenges will continue to be a factor for the world’s airlines. “We are in this together,” he says. “We want them to improve. We need aircraft, we need engines, we want to grow [but] we cannot do it right now on the path that we want.” Air India CE Campbell Wilson also expects two more years of supply-chain challenges. “The products themselves are okay; the pace of delivery is not,” he says. “Restarting an industry and a supply chain from scratch clearly is difficult and it’s difficult for all of us.” Wilson notes that the issues go beyond the delivery of new aircraft, with Air India having a particular challenge with the refurbishment of its fleet. “The things that can trip you up are maybe not the obvious ones,” he says. “We all know the airframers and the challenges they face, we all know about some of the engine manufacturers and the challenges they face. But seat supply is another bottleneck and in our case is probably the principal bottleneck,” Wilson says.<br/>
The new Labour government has signalled it is “open-minded” about airport expansion so long as it meets various tests — including on climate — in a move that will open fresh speculation about the revival of Heathrow’s long-delayed third runway. For nearly two decades the expansion of Heathrow has been a hugely fraught political issue as an emblem of the clash between economic growth and attempts to combat climate change. Yet Labour is now forging a pragmatic approach to aviation under which airports will be able to expand their runways if they can meet four specific tests. No runway expansion will be authorised unless it is compatible with meeting Britain’s climate targets, meets noise pollution and air pollution hurdles and provides economic growth across the country. “We are open-minded about any airport looking to expand,” said one senior Labour figure. “But it would have to pass those four tests.” The new government believes the growth of a fledgling market in sustainable aviation fuel (SAF) could provide the key to a greener airline industry, despite it costing more than conventional jet fuel. Last week’s King’s Speech included a SAF bill designed to provide subsidies to encourage the growth of that industry. There is not currently any application by Heathrow to build a third runway on its west London site, a scheme that has been hugely controversial for many years. Heathrow bosses remain convinced of the long-term need for a third runway at the UK’s only hub airport, but are far from outlining concrete proposals. CE Thomas Woldbye, who joined the airport in October, has instead prioritised smaller-scale expansion to increase the number of passengers the airport can handle. The airport believes it can raise passenger numbers from 80mn to 100mn before it requires a new runway — although it thinks one will be needed in the long term.<br/>
Malaysia Airports Group’s local airport network saw a 40% year-on-year increase in international traffic in the first half of 2024 (1H24), fuelled by the addition of six new airlines. In a statement yesterday, Malaysia Airports Holdings Bhd (MAHB) named the airlines as Cambodia Airways, Flydubai, Iraqi Airways, Juneyao Airlines, Thai Lion Air and Turkmenistan Airlines. MAHB reported that these airlines contributed to a total passenger movement of 45m in 1H24, reaching 87.9% of pre-pandemic levels from the same period in 2019. “The recovery in total seat capacity reached 85% in 1H24, amounting to 57m seats compared to 67.3m in 1H19,” it said. Furthermore, MAHB noted that the average load factor for 1H24 was 78.8%, surpassing the 1H19 level by 3.4 percentage points. “This sustained growth throughout 1H24 indicates robust demand, potentially prompting further expansions in seat capacity offerings,” it added. It said the overall performance of Malaysia Airports Group’s local airports in 1H24 showed resilience, with total passenger movements reaching 45m, marking a notable 15.5% increase over 1H23 and achieving 87.9% of the passenger levels seen in 1H19.<br/>
Boeing dominated the first day of dealmaking at the Farnborough International Airshow, sealing an estimated $12.6b in aircraft sales at the aviation industry’s biggest event of the year. As expected, widebody jets were at the center of the action at the venue just outside of London, after airlines coming out of Covid-19 disruptions loaded up on narrowbody aircraft last year. Korean Air led the slate for Boeing on Monday with an order for 20 777-9 and 20 787-10 Dreamliner jets, plus options for 10 more of the largest 787 variant. Boeing, whose outgoing CEO Dave Calhoun isn’t in attendance, has toned down its presence at Farnborough, a marquee event that alternates with Paris each year. The company is focused on addressing manufacturing quality issues that have kept it in crisis for months. Yet the US planemaker came away with a clutch of new business that underscored its longtime edge over Airbus SE on the biggest and most expensive aircraft. Altogether, Boeing’s Monday haul totaled 78 planes, including 56 firm orders and 22 options, while its European rival signed a deal for 20 twin-aisle A330s. Boeing’s firm orders alone have a real-world value of about $9.39b, based on market value estimates provided by Ishka, an aviation consultancy that tracks aircraft sales. Airlines typically receive large discounts to Boeing and Airbus list prices. In addition to the Korean Air deal, Boeing firmed up a widebody order with Japan Airlines Co. that was announced in March, adding options for up to 10 787s, and signed smaller agreements with Luxembourg’s Luxair and Florida cargo firm National Airlines. VietJet Aviation provided Airbus with its only firm contract of the day, ordering 20 of its A330neo aircraft with a list value of $7.4b. The world’s biggest planemaker also reached a memorandum of understanding with Drukair - Royal Bhutan Airlines covering five A320-series narrowbodies, including two of its long-distance A321XLR.<br/>
Brazilian meatpacker JBS is supplying animal waste from its operations abroad for the production of renewable aviation fuels and is studying a similar initiative in Brazil through the Friboi brand, the company said on Monday. According to JBS, the world's largest meatpacker, in two years 1.2m metric tons of beef tallow and pork lard from its units in the United States, Canada and Australia have already been directed to the production of sustainable aviation fuel (SAF) and other renewable fuels. In Brazil, Friboi began studies to test the feasibility of supplying animal waste for local production of SAF, which is seen as an important solution for commercial aviation to reduce its carbon emissions. "By reusing animal waste, we contribute to the environment and help this critical sector in its decarbonization process," JBS's global chief sustainability officer, Jason Weller, said in a statement. The initiative, he added, reinforces the company's commitment to responsible waste management and circular economy. JBS is also studying the feasibility of producing renewable fuel for ships as an alternative to bunker oil through Biopower, its company focused on manufacturing biodiesel. Biopower has three Brazil plants for the production of biofuel from organic waste from cattle processing. JBS is controlled by J&F, a holding company owned by Brazilian billionaire brothers Joesley and Wesley Batista. It has been seeking to expand its initiatives in sustainable energy.<br/>