By Jeremy Bowen, CEO Cirium
Some things never change. In 2007, the last full year before the global financial crisis (GFC), the US and China were the world’s two largest airline markets. That was still the case in 2019, the last full year before the COVID-19 crisis. It’s still the case today.
A closer look at the world’s top 20 airline markets, however, reveals changes of great significance over time. They provide a window on how different national airline sectors have evolved over the last half decade. Some even reflect broader changes in the global economy.
Diio by Cirium, which houses 99% of worldwide airline schedules going back 20 years, shows the total number of departing seats from US airports exceeding 1 billion in 2007. That was almost four times as many as those departing from China. Fast forward to 2019, and the U. market was only about 40% larger. What happened? China, of course, experienced accelerated economic growth following the global financial crisis, triggering a surge in air travel both within the country and across its borders.
In fact, the rise in outbound Chinese tourism was a central engine of economic and aviation growth for many of the other countries seen below. Chinese tourism helps explain, for example, why Thailand’s airline capacity grew 139% in the decade-plus following the GFC.
In the meantime, the US economy grew more slowly, and its airline industry barely at all. US seat capacity, as you can see above, increased a mere 12% in the 12 years to 2019.
Put another way, US real GDP grew on average of about 1.7% annually during this period, while the country’s airline capacity grew just 1% annually. But the explanation goes far beyond GDP.
A more important factor was industry consolidation—five big mergers occurred between 2008 and 2016. This enabled carriers to close undersized hubs like Cincinnati, Cleveland and Memphis. High fuel prices during the first half of the 2010s were another factor depressing US airline growth (this was less a factor in countries with strong currencies or oil-export economies). Still another factor was airport congestion in certain markets. Growth of such minimal magnitude was surely an unfortunate trend for US travelers and US businesses. For US airlines though, the slow-growth era coincided with uncharacteristically strong and stable profits.
Europe experienced similar if not quite so impactful consolidation in the post-GFC era. In the U.K., rapid expansion of LCCs like Ryanair and easyJet contributed to 21% seat capacity growth from 2007 to 2019. That figure would have been considerably higher, however, had London Heathrow had sufficient airport capacity to meet demand. The fate of individual airlines can influence growth figures too—Air Berlin’s collapse, for one, depressed Germany’s numbers.
Now look at the rise of India. Just the tenth largest country market in 2007, it subsequently jumped over seven other countries to become number three by 2019.
Turkey’s spectacular growth is largely tied to the rise of Turkish Airlines, which turned Istanbul into a Dubai-like global mega-hub. Indonesia’s growth got a boost from strong GDP growth, deregulation, the arrival of LCCs like AirAsia and the voracious aircraft buying of Lion Air. Japan’s growth, by contrast, barely outpaced that of the US, despite a large influx of inbound tourists.
The pandemic, as the chart also shows, brought a new set of drastic changes to the global airline landscape. Worst hit among the major markets is the U.K., with seats down almost 70% from their pre-crisis level. On the other hand, countries with large domestic markets have fared better, as have several Latin American countries like Mexico and Colombia. These new realities might prove short-lasting though. As the recovery takes and borders reopen, new trends will emerge, surely resorting the ranks of leaders and laggards once again.
