Aviado comments on the sustainability of the current travel boom

Airlines are experiencing a rare boom in air travel during 2023. After 3 decades of rare profits, the current boom is a dream for airlines. But with most airline executives not having led airlines through past crises, are airline executives too bullish on the current good times? Aviado Partners believes the boom will not last.

Aviado believes the boom is driven by pent up demand during the pandemic, combined with cheap fares offered in 2022. The current boom is widely being driven by leisure traffic while business traffic remains down 30-50% across many markets.

Considering air travel is well outpacing economic indicators, Aviado is concerned that a disproportionate level of leisure travel is being financed through using savings or through borrowing on credit. Neither of which bodes well when the economy isn't supporting a positive outlook on incomes, inflation and borrowing costs in the near term.

Aviado is quoted commenting that while many have ignored the outrageous pricing, at some point in the near future reality will set in. As much as airline executives may not like to admit it, price elasticity of demand is a real phenomenon. And the middle class is starting to feel the pinch with disposable income not being stretched as far as it used to be, considering inflationary pressures and job insecurity.

Image credit: Wirtschaftswoche