A recent analysis of the global aviation value chain reveals many subsectors are now outperforming 2019 levels, with significant shifts reshaping the industry. The airline sector, for instance, recorded its best performance in decades, almost achieving its cost of capital in aggregate.
The aviation value chain comprises airlines, original equipment manufacturers that produce aircraft and engines, aircraft lessors, air navigation service providers, jet fuel producers, airports, catering suppliers, ground services companies, maintenance, repair, and overhaul organisations, freight forwarders, and providers of global distribution systems and travel technologies.
Airports in certain regions are still grappling with post-pandemic recovery challenges. Traffic recovery remains uneven, putting pressure on revenues for airports, whose fixed costs are high and, in many cases, regulated.
Conversely, the aging commercial fleet, resulting from disrupted aircraft manufacturing supply chains, has created growth opportunities for the aircraft maintenance sector.
Cargo demand, a bright spot for aviation during the pandemic, has remained strong, driven by robust e-commerce activity. Increased availability of wide-body aircraft has expanded capacity, leading to a 32 percent drop in cargo yields.
However, Kenya’s perishables export sector faces a significant challenge due to limited freighter capacity on traditional EU routes. This crisis, exacerbated by the Red Sea conflict and seafreight backlogs, has created an urgent demand for airfreight services, leaving local exporters grappling with steep freight rates and limited alternatives.
The most tangible measure of value creation in the aviation industry is economic profit, which considers the returns from equal-risk investment opportunities available to investors.
Freight forwarders maintained their position as the largest economic profit generators in 2023, contributing about $5.1 billion—though this marked a decline from $7.2 billion in 2022.
While all-cargo airlines were the sole value creators among airlines in 2020, they accounted for two percent of value-creating airlines by 2023.
Airlines have managed to raise prices amidst slower capacity recovery, while airports face a contrasting scenario of stagnant revenues and high costs.
Ownership models further complicate the picture, particularly in North America, where most airports are publicly owned and treated as community utilities, unlike their profit-driven counterparts in Europe and Asia.
Although still recovering from economic challenges created during the pandemic, many subsectors in the aviation value chain demonstrated resilience in 2023.
They exhibited performance that was significantly improved from the previous few years. A continuing recovery across subsectors could generate opportunities to outperform for organisations that can identify the right market positions, strategies, and operational approaches.
Despite lingering challenges from the pandemic, many subsectors demonstrated resilience in 2023, with performance significantly improving over recent years.
The ongoing recovery could create avenues for organisations to outperform—provided they identify the right market positions, strategies, and operational approaches.
