The aviation value chain analysis conducted by McKinsey reveals that all subsectors within the industry experienced recovery in 2022, though the overall aviation sector still exhibits significant losses. Key highlights include:
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Financial Performance: The aggregated economic performance for the aviation full value chain saw a decrease in the sector's net loss from $159 billion in 2021 to $69 billion in 2022.
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Airlines' Performance: Despite the recovery, airlines continue to be the main contributor to losses, generating a net economic loss of approximately $45 billion in 2022. This is notably higher than the performance of other subsectors, even those in North America, where demand recovery is considered the strongest.
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Industry Trends: All subsectors demonstrated improved performance compared to the previous year, except for Air Navigation Service Providers (ANSPs), which maintained a static performance. However, the industry has not yet fully recovered to pre-pandemic levels, with seven out of eleven subsectors recording a return on invested capital (ROIC) below that of 2019.
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Value Creation: The airline sector, particularly, stands out for its lower and more volatile returns, attributed to factors such as a large fixed cost base, variable revenue streams, high exposure to external shocks, low entry barriers, high exit barriers, and consolidation in supplier markets.
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Regional Impact: Surprisingly, North American airlines, despite experiencing the highest traffic recovery, also reported losses comparable to other regions. Historically, North American carriers have often dominated profitability, but this year saw only five out of ten most profitable airlines being from North America.
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Profitability Outlook: While there are signs of improvement, notably passenger yield growth, only a few airlines managed to create economic profit in 2022. This contrasts sharply with the broader trend of widespread losses across the sector. Steps can be taken for airlines to emulate the strategies of those few carriers that consistently achieve strong results.
