Millions of Chinese tourists are thirsting to return to the world’s holiday destinations after years of Covid lockdowns. But there are too few planes for the increasing tourism. That’s not the only problem that will make your summer vacation more expensive.
“It’s great, I can finally make concrete plans,” Tom Guo told Handelsblatt. The businessman in Beijing speaks on behalf of millions of Chinese who will be able to get visas for stays abroad again from January 8th. Within just 30 minutes after the announcement of the freedom to travel as part of the corona easing in the huge country, search queries on Chinese travel platforms increased tenfold. The most frequent searches were for trips to Japan, South Korea and Thailand.
Not only China is gripped by the travel fever, also in Europe and the USA the tourism industry is awakening from its long-standing corona rigidity. The German industry expects to exceed the sales level of 2019 again for the first time – despite high inflation and energy prices. Although we Germans would probably book more cheap package tours, we would still like to put the available money back into a holiday.
But the trips will not be cheap, on the contrary. Flight prices in particular have risen by more than 50 percent in some cases and will hardly get any cheaper throughout the year. There are two reasons for this: First, the aviation industry is also suffering from the high energy prices. Kerosene accounts for around 30 percent of the total cost of operating an aircraft. The share has thus doubled within two years. It is unlikely that the prices for oil and thus also for processed products such as kerosene will fall in 2023.
The second problem: Because raw materials are expensive and supply chains are disrupted, the two major aircraft manufacturers Boeing in the USA and Airbus in Europe have not been able to maintain production in recent years. Now that the travel industry is picking up again, several airlines have placed large orders that manufacturers will not be able to process for years to come. The New York investment bank Jefferies has calculated that 12,720 jets now have to be built to meet demand. Boeing and Airbus are fully booked until 2029.
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This number is still based on good assumptions. Any further increase in energy costs not only makes production more expensive, but also delays it, since some suppliers can no longer afford production at guaranteed prices. This applies above all to the manufacturers of energy-intensive components such as the shell. Delivery problems with computer chips, but also metals, continue to delay production. According to airlines, not a single aircraft has been delivered on time in the past two years. In some cases, the provision was delayed by up to seven months.
For consumers, this means higher prices as more passengers want fewer seats and in this competition prices rise. In this respect, it doesn’t help German vacationers that the masses of Chinese tourists who are now pushing back onto the market want to travel to their home country of Asia and not to Spain, Italy or Greece. Aircraft that are used there are simply not available in Europe.
The lack of aircraft is exacerbated by a second effect. Because the aviation industry was literally on the ground during the corona pandemic, airlines had to park hundreds of planes somewhere. To avoid the high cost of hangars at major airports, they were often parked in deserts or other deserted areas. In Teruel, Spain, or in Tucson, Arizona, in the USA, there were sometimes several thousand planes.
It’s not so easy to put them back on active duty now. Although simple maintenance work was also carried out in the parking lots, many of the aircraft would now have to go through major checks in workshops before they can take off again with passengers. This not only costs money, but also time. After all, the workshops of the airlines are not designed for a mass rush. Some machines were also parked, which airlines assumed they could slowly take out of service – now they are suddenly needed again.
So while consumers will probably have to pay even higher prices for air travel at least in 2023, the airline industry can look to the future with great optimism. Even a worldwide recession would hardly spoil business for Boeing, Airbus and their suppliers. Specialists in the industry benefit from this not only with secure jobs, but also with good salaries.
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