Investment in the aviation sector has been crucial for the aviation sector’s remarkable recovery from COVID-19. Revenue passenger kilometres (RPKs) and available seat kilometres (ASKs) are close to pre-pandemic levels, according to the International Air Transport Association (IATA). In the fourth quarter of 2023, traffic reached 98.2% of pre-pandemic numbers. The sector is expected to see record fleet and maintenance, repair, and overhaul (MRO) growth this year. This underscores the importance of investment in the aviation sector for sustaining and enhancing this recovery.

Global Fleet and MRO Market Forecast

Oliver Wyman’s latest Global Fleet and MRO Market Forecast predicts commercial aircraft worldwide will expand at a compound annual growth rate (CAGR) of 2.5%, reaching more than 36,400 aircraft by 2034. This represents a 28% increase over the current fleet of around 28,400 aircraft. The forecast also indicates global MRO spending will reach US$104 billion, surpassing the pre-pandemic peak in 2020. However, this spend will still fall short of demand. By 2034, MRO demand worldwide is projected to reach US$124 billion.

Growth in Africa

In Africa, the fleet will grow about 25% by 2034, reaching over 1,400 aircraft. The largest growth will occur between 2029 and 2034, with a CAGR of 2.7%. For example, South African Airways plans to expand its fleet to approximately 40 aircraft over the next decade, from just 13 today.

“The growth in Africa reflects an expected expansion of demand. Figures from IATA show that African passenger numbers will nearly double by 2035. This will require airlines to continue to invest in expanding their fleet and look at new routes to add to their network,” says Paul Calvey, Oliver Wyman Partner and Head of its operations in South Africa.
Setbacks and Slow Recovery

Global and African numbers reflect growth but fall short of pre-pandemic predictions. Before the pandemic, it was anticipated the global aircraft fleet would reach 36,000 by 2030. Now, it is unlikely to reach that size before 2036, resulting in a six-year setback in industry growth due to COVID-19. From an African perspective, this slow recovery is particularly understandable. Several African airlines folded due to the COVID-19 pandemic, and in 2020 alone, the continent’s aviation sector lost US$7.7 billion in revenue.

This highlights the magnitude of the setback caused by COVID-19. Additionally, the current global fleet size isn’t significantly higher than the 27,492 aircraft in service in 2019. To regain its previous trajectory, the aviation sector will require significant investment, much of which will depend on global economic growth.

Investment challenges in the aviation industry

Investment in the aviation sector is essential to address several challenges identified in the forecast, including the impact of COVID-19, inflation, and shortages of skilled labour, raw materials, and aviation maintenance technicians (AMTs) and engineers. The industry must modernize and optimize production along the supply chain, while the MRO support network faces similar challenges in keeping aircraft operational.

“While the industry must invest in overcoming those challenges, it’s important to remember that it’s not easy for it to do so at present, according to a number of trends,” says André Martins, Partner and Head of Transportation and Services for India, Middle East, and Africa regions (IMEA) at Oliver Wyman.

He continues that “rapidly rising interest rates have made borrowing far more expensive than it was pre-pandemic. Mounting inflation, meanwhile, has created significant wage pressure across the industry. In the US, for instance, captains’ salaries at mainline airlines increased by 46% between 2020 and 2023, while those flying for US regional airlines saw their wages rise by 86%. Furthermore, this inflationary environment has led to higher costs for aircraft components and other supplies compared to before the pandemic.”

Other cost factors, such as escalating conflicts in the Middle East and attacks on ships in the Red Sea, have led to increased aviation fuel prices. Although prices are lower than in 2022, industry players remain cautious about potential further increases.

Gearing up for global growth

Despite the current challenges, there are indications that conditions may improve, facilitating investment in the aviation sector. While global economic growth is currently at its lowest levels since the 1990s, the outlook is becoming more positive. Experts expect inflation to ease, and they project the US economy will experience a soft landing. Although major economies like China still face economic headwinds, the global economy is likely to avoid recession.

This positive outlook will eventually enable central banks to reduce interest rates, making borrowing cheaper and enabling crucial investments in the aviation sector.

“Investment is necessary not only to address labour and supply chain optimization challenges but also to meet the increasing pressure for environmental sustainability. This includes investing in sustainable aviation fuel (SAF), which can significantly reduce emissions,” Martins says.
Maximising available opportunities

By maximizing the available opportunities in Africa, such as collaboration on infrastructure development and investment in African airlines, the industry can not only recover but thrive in the coming years. Investors and policymakers also have a role to play in supporting sustainable growth through policies that incentivize investment in new technologies and skilled labour.

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