Lately, we’ve been seeing airlines placing huge aircraft orders, not just in tens, but in the hundreds. The Indian aviation industry is a prime example, with Air India ordering 436 planes from both Airbus and Boeing, while IndiGo ordered 500 planes from Airbus. Recently, Turkish Airlines is rumored to be close to ordering 435 Airbus planes. Here in the Philippines, Cebu Pacific is eyeing an order for 100 to 150 narrowbody planes sometime in 2024. So, why are airlines placing such massive orders?
Demand Matching
Airlines are trying to keep up with the rise in revenge travel after three years of pandemic-induced lockdown. Just in September 2023 alone, there was a notable uptick in air travel. Airlines in the Asia-Pacific region experienced a significant 92.6% surge in traffic compared to September 2022, leading other regions in annual growth. Their capacity expanded by 82.1%, and the load factor rose by 4.5 percentage points, reaching 82.5%.
Airlines in the Middle East saw a 26.6% increase in traffic in September compared to the previous year. Their capacity increased by 23.7%, and the load factor rose by 1.9 percentage points to 81.8%. North American carriers experienced an 18.9% rise in traffic in September 2023 compared to September 2022.
European airlines reported a 15.7% increase in traffic in September compared to the same month in 2022. Their capacity grew by 14.9%, with a slight 0.6 percentage point increase in load factor, bringing it to 85.5%.
This clearly shows that the demand for air travel continues to surpass pre-pandemic levels and is expected to increase further in the coming years. Airports globally are expanding, allowing airlines to further expand their capacity. However, the situation at Manila’s Ninoy Aquino International Airport, which is operating beyond its capacity, is an exception.
Cebu Pacific believes that the Southeast Asia market is one of the fastest-growing in the world. The airline thinks it’s necessary to quadruple the fleet, considering the proposed privatization of NAIA and the upcoming New Manila International Airport in Bulacan.
Better Redundancy
The recent issue with Pratt & Whitney’s Geared Turbofan (GTF) engines, which led to a recall of 600 to 700 engines for inspection due to contamination in some components, forced airlines to ground some of their A321neo and A320neo fleets. This resulted in capacity cuts and canceled flights. Volaris had to lay off 200 employees due to a significant reduction in capacity. Cebu Pacific temporarily leased CFM56-powered A320s to fill the gap left by the grounded A320neo and A321neos. IndiGo had to ground about 50 A320neos powered by Pratt & Whitney GTF engines.
This experience has led airlines to think that having just enough planes to meet demand can be costly if issues like the GTF engine problem arise again. Hence, it might be better for airlines to have additional “reserve” planes, leading to decisions to order a little above the exact number needed to match demand.
The Need to Diversify Manufacturers
Having a single manufacturer for both aircraft and engines used to be more efficient for airlines. However, even low-cost airlines are now reconsidering this approach due to cost implications. The Pratt & Whitney issue is a case in point. Affected airlines were forced to cut capacity or lease used planes to keep up with demand. The savings from the PW1100G GTF engines were offset by maintenance costs and the grounding of planes.
Airlines now believe that having two aircraft manufacturers in the fleet will provide better redundancy and cushion the blow in case of similar future events.
The Construction of Better Airport Facilities
Airports play a huge role in an airline’s expansion. Across the world, major airports continue to expand. For example, Abu Dhabi International Airport recently opened its new Terminal A, which can handle 45 million passengers and service up to 11,000 passengers per hour. This allows Etihad and other airlines using AUH’s Terminal A to drastically expand their capacity. As a result, airlines are also expanding their capacity to maximize the airport’s capacity.
There are other strategic reasons why airlines continue to make large aircraft orders, but the reasons mentioned above are currently the most common. Now, with huge backlogs, how will aircraft manufacturers, particularly Boeing and Airbus, be able to deliver planes on time?
First love never dies. I fell in love with airplanes and aviation when I was a kid. My dream was to become a pilot, but destiny led me to another path: to be an aviation digital media content creator and a small business owner. My passion for aviation inspires me to bring you quality content through my website and social accounts. Aviation is indeed in my blood and blog!
