Avinode Group

Category Archive: Market Insights

1. Get ready for fall season with our charter demand indications.

   September 28, 2023 10:13 am Comments Off on Get ready for fall season with our charter demand indications.

   By Harry Clarke – Head of Insights and Analytics

   European demand trends are changing

   The chart above outlines how far in advance buyers have been sourcing charter, broken down into groupings of days in advance. We see a significant change between the first half of 2022 and 2023. In 2022, about 25% of requests were for trips greater than 30 days in advance. The equivalent in 2023 was about 35%.

   That change meant that in summer 2023, demand accumulated earlier. In August and September so far, we have seen an increase in the amount of last-minute demand, compared to 2022.

   

   This chart shows the forward demand trends for the fall months in the European market, along with the completed figures for July and August.

   You can see the impact of the change in sourcing behaviour in this chart. All the departure months initially started performing well versus last year before steadily decreasing – because a higher proportion of sourcing happened early in 2023, compared to 2022. August did recover slightly in the late market, ending 14% down.

   What will happen in the Fall?

   We have continued to see demand accumulate earlier than 2021 and 2022. We expect future months to follow similar trends and end 5 to 15% down. Some trends over the next 12 weeks, starting mid-september, include:

   • Demand between the UK and France, up 20% vs. 2022. It is clear the Rugby World Cup is driving this, with increased demand to and from venue cities like Marseille and Paris.
   • Domestic flights in Spain, up 17%. Departures from Spain are up 6%.
   • Departures from Germany, down 22%. Demand to Spain is resilient but domestics, and international demand to the UK, France, and Italy are all down on last year.
   • Looking at demand between Europe and the Middle East for only the next 9 weeks (so that the figures aren’t clouded by the Qatar World Cup last year) – overall demand is flat. Strong demand between the UK, Dubai and Saudi Arabia is compensating for less demand elsewhere.

   

   Sourcing behavior in the US shows a similar trend to Europe with much higher advance sourcing during the first half of 2023 than in 2022. Even in August 2023, the figure was 4 percentage points higher than in 2022.

   

   The impact is shown in the build-up of demand for future months in the US – with demand for September and October at around 20% above 2022 early on, before decreasing closer to departure. I expect September to finish similarly to August, which closed at 6% down. October looks more positive and could finish better than September. November will decrease from its high position, which is caused by very early demand for this year’s Thanksgiving celebrations.

   Looking more granularly, for the next 12 weeks from mid-September:

   • Demand from the Western states is up 6%, driven by flights to and from Las Vegas. From across the US, demand into Vegas is up 25%. This is concentrated around the F1 Grand Prix weekend. The demand increase is highest from California, but Florida, New Jersey and Illinois are also contributing.
   • Demand between New Jersey and Florida is down around 20%. Miami and Orlando are the arrivals driving this, with more robust demand to West Palm Beach and Fort Lauderdale.
   • Notable increase in demand to and from Atlanta – so far about 35% up on 2022 for this period.

   

   For travel within Latin America, demand in Avinode is so far up 16% for the next 12 weeks, with the domestic Mexican market contributing the most to this increase. Cross-border traffic between Mexico and the US is down around 10%. In the Caribbean, the star performer is the Dominican Republic, with demand from the US up 33%.

   Transatlantic travel is flat. Elsewhere in the world, demand from Asia is notable, with trips to the US and Europe up around 25%. Ranking the top 50 countries for departures over the next 12 weeks, those displaying the highest percentage growth versus last year are China (up 200%) and Japan (49%).

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2. Air charter trends: What you need to know for spring and summer 2023.

   April 17, 2023 11:48 am Comments Off on Air charter trends: What you need to know for spring and summer 2023.

   Within Europe, we observed charter demand for March this year finish 6% down compared to 2022 – the same year-over-year decrease as we saw for January and February. So far April is showing a similar trend – I expect it to finish around 6% down as well.

   These months have all reflected a common pattern, that early booking has been higher than last year. People have been able to plan further in advance, meaning there has been proportionally less last-minute demand.

   The above column chart shows that the requests sent by European companies in Jan-Mar 2023 has longer lead times than in 2022.

   
   

   The summer peak is coming in Europe

   May is slightly different. Whilst demand for the month has so far totaled 12% above 2022’s levels, we see fewer early bookings compared to 2022 than previous months. The rate of decrease in year-over-year performance is lower too. May is always a month when we see European seasonality ramp up, and 2022 was even more so. How May performs should offer good indications for the rest of the summer.

   Our best estimate is that May will end with a similar decrease versus 2022, but it could surprise us.

   

   US demand levels decreasing

   Within the United States, the year-over-year declines are greater. Avinode usage was huge in winter 2021-2022, and the peak we saw was even larger than the actual increase in charter flights due to the challenges to find available lift.

   This year, March ended 27% down versus 2022, and April and May are showing similar trends. This is driven by an actual decrease in charter demand compared to the very high levels in 2022, together with the increasing supply in Avinode this year.

   Whilst still early to be making predictions, the summer months look different. This is driven by the fact that sourcing issues had started to relent by June 2022 and demand started its return to more normal levels. That’s why we expect June and July 2023 to show more modest declines versus 2022.

   

   How to read the line charts:
   The coloured lines each represent a month. The vertical axis is the year-over-year percentage difference in the number of journeys being sourced through Avinode.
   
   The horizontal axis is the days before the end of the month, stretching from 180 days to 0. By following each line, you can see how demand is building for the month. This gives us early indications of how each month will perform.

3. Charter demand predictions for the start of 2023

   January 23, 2023 8:56 am Comments Off on Charter demand predictions for the start of 2023

   By Harry Clarke, Head Of Insight & Analytics

   This article will look at demand and pricing trends in Europe, the US and the Middle East, based on data from the Avinode marketplace.

   At the Avinode 20-year celebratory webinar in mid-November, we predicted that charter demand within Europe in December 2022 wasn’t going to be as poor as feared. We had seen several months of decreasing demand through the autumn, but forward demand for December was holding up reasonably well compared to 2021. That prediction came true – demand within Avinode finished down only 1% year over year, compared to down 15% in November.

   

   
   

   The chart above shows the forward demand trends for January and February 2023 in the European market, with November and December 2022 included for comparison. Each departure month is grouped, and cumulative demand is totalled by day; you can use this chart to understand how demand for a month is building over the course of 180 days. It gets more accurate as it gets closer to the end of the month due to so much private charter being sourced at short notice.

   January 2023 has dipped and sits between where November and December 2022 were at the same number of days before end of the month. We expect it to finish worse year over year than December, but better year over year than November. February 2023 was looking more positive, with numbers being boosted by stronger early demand for ski trips from the UK to Switzerland and France, outbound the weekend of 11^th February and returning a week later. However, it has started to drop more sharply and so we should expect it to end at a similar position to January, at this point.

   

   
   

   

   
   

   According to the Avinode Pricing Index, hourly rates increased substantially in the first half of 2022 in Europe and the US, before decreasing as the autumn wore on. Rates increased again over the Christmas and New Year peaks. Much of the pricing trend is driven by fuel prices, but as ever in Europe, we should expect to see pricing peak in the summer in 2023.

   

   
   

   Across the pond, the scale of year over year decreases in charter demand for US domestics for November and December 2022 were much higher, with December finishing 26% lower according to Avinode data. Both months seemed quite flat early on before dropping rapidly.

   January and February 2023 have been consistently down year over year for several months now. I think both months will see large year over year decreases, but February won’t be as severe as January. International demand to the Caribbean and Mexico looks to be more robust after a strong Christmas; Mexico and the Bahamas dominate.

   Looking more globally, transatlantic demand for January and February is flat year over year, sectors between the US and UK leading the way in volume but between France and the US showing the most growth. After the huge charter surge for the world cup in Qatar, demand between Europe and the Middle East is more normal again!

   Looking at January and February, demand is flat between the Middle East and Europe, dominated by demand between Dubai and the UK, Switzerland, and France. However, according to Avinode data, the most popular destination for the next two months from the UAE is Saudi Arabia. This has been driven by late demand, with the early demand favouring the Maldives. Saudi domestics are noticeably stronger than last year.

4. A look at business aviation in 2022 and the road forward

   December 20, 2022 2:34 pm Comments Off on A look at business aviation in 2022 and the road forward

   By Oliver King, CEO Avinode Group

   Back in the 90s, I worked for British Airways, and my American boss had an expression – “It’s OK to look back; just don’t stare.” He administered this advice when he thought the past had little to inform future decisions. In 2022, I reached for his expression. 

   I started in business aviation back in 2011. The preceding financial crisis of 2008/09 saw the curtailment of the fleet and activity, driven by new aircraft deliveries and cheap money. That ended, and it took several years to absorb the surplus with, ironically, new demand from Russia playing a role in the eventual recovery. This period was characterized by predictable, steady growth. 

   2020 – and the world changes over night

   Abrupt does not do justice to the momentous events we are experiencing. Let’s pause for a moment. The first global pandemic in 100 years severely curtailed travel and economic activity and had an unimaginable impact on lives across the globe. We then saw the sharpest demand expansion for business aviation in a generation, a 40% increase, driven by demand for services and significant degradation of the global commercial airline network. 

   As economics recovered, a worldwide supply crisis ensued. Only to see the Ukraine invasion by Russia trigger a humanitarian crisis on the doorstep of Europe and prompt a global energy crisis that remains unresolved. 

   Economic shocks have stoked inflation and required central banks to intervene and raise interest rates. 

   So, when I was asked to summarize my reflections on 2022 and the road forward, it was difficult to know where to start.

   Let’s start with demand. I agree with the voices in the industry arguing that a fundamental step change in demand has occurred over the last two years. Yes, demand in Europe has weakened this fall, as it does each winter, given the seasonal nature of leisure demand. It is not a reversal but a return to “normal” patterns, albeit at a high point. Similarly, the US has weakened but remains considerably up. The good news is that many of those new end-clients are staying. 

   

   Avinode Pricing Index – US Domestics, rolling 28 days, jet aircraft

   

   Avinode Pricing Index – IntraEuropean trips, rolling 28 days, jet aircraft

   By now, every consumer from Germany to the US is aware that economic growth has slowed. For many countries, we are entering a recession. The good news for our industry is GDP contraction and business industry passenger numbers appear uncorrelated. As wealth inequality has grown, a buffering cushion of wealth protects our customers.

   The great resignation, anyone?

   We have also seen change forced on our industry in how we must do things. COVID remains with us. In the US, some estimates put the loss of available labor from deaths or long terms illness at over 1.6m people. The impact has been worldwide and felt in our industry. There is nothing like a pandemic followed by a tight labor market to leave many employees contemplating a change. Our industry has yet to escape this impact from pilots to ground staff; retaining and recruiting have proved challenging. Talent management is critical to successfully delivering for customers and shareholders.

   As employees leave and expectations for how companies work and function change, companies have scrambled to adjust. Nowhere was this more visible than in early 2020, with many employers executing a rapid shift to Working from Home. 

   The application of technology to support business evaluation became paramount in solving existing business problems, improving customer delivery, the efficiency and reliability of operations, and limiting the impact of knowledge walking out of the door. 

   Coming from a technology company, you will not be surprised to hear me say this. However, this has been an equal learning opportunity for the Avinode Group.

   Raising capital will be a new ball game

   It is, unfortunately, not all positive news for our industry. We are a capital-intensive industry, and over the last 15 years, this has not been a challenge in an era of cheap money. The shocks to the global economy I noted at the beginning mean the cost of capital, measured in interest rates, is now at the highest since the Financial Crisis of 2008. 

   As interest charges rise, some operators and overleveraged companies may struggle. Commercial aviation may feel this hardest as any downturn in traffic triggered by recession and reductions in household spending will happen first. The euphoria of the 2022 rebound in pent-up leisure demand may be short-lived.

   Similarly, raising money for business acquisitions or bringing new ideas into the market will be more challenging. We have already seen one aviation SPAC withdrawn from the market. Such conditions favor established players, and I can understand why some argue that we will see more consolidation. Equally, I can relate to those who may sigh relief that the years of competing against cheap capital may be closing. 

   Is business aviation immune to economic turbulence?

   So where do I end up having not followed my advice about staring at the past? Firstly, we are fortunate to be entering any downturn in an industry with high immunity. Toilet paper and business jets may be at opposite ends of the spectrum, but they are both resistant to the thrills and spills of economic turbulence. 

   Secondly, the last years have alternated many expectations and preconceptions about how companies function for employees and customers. Companies that successfully manage talent and technology will start the next economic cycle in pole positions. 

   We may have further turbulence before the next economic upswing gains momentum, but as the world has learned in 2022, surprises will come in many forms. Those that adapt and lean into those surprises have the best chance of succeeding.

5. What demand to expect for the festive season?

   December 14, 2021 3:27 pm Comments Off on What demand to expect for the festive season?

   The US domestic market has boomed this autumn. The Avinode demand index climbed steadily since the turn of the year and reached new heights over Thanksgiving, matching the record number of flights that took place. Our forecast – based on a mix of prior year data and forward-looking request data – is indicating that Christmas and New Year traffic could be even greater. The watch out is how reliable Christmas 2020 can be as an indicator for Christmas 2021, given the very different factors at play – including the vaccination roll out, commercial aviation schedules and the community spread of omicron.  

   

   
   

   Looking at the festive period in detail, Boxing Day – which falls on a Sunday this year – is the big travel day, with return journeys focused on Sunday 2nd January. There is a large flow of demand taking folks back up to the colder northern states after some time in the Florida sunshine. Trips to ski breaks in the mountains are showing a similar pattern but with some earlier demand too – arrivals into Aspen are very strong on 17th and 18th December. The big international markets are Mexico, the Bahamas, Sint Maarten, Turks & Caicos, and the Dominican Republic.

   

   
   

   With high demand and low supply mixing with high fuel prices, it is no surprise that rates are increasing. The Avinode hourly rates pricing index for the US has been rising since the start of the year and is at record levels for all aircraft bar super midsize jets, which peaked in October. With such record activity and increasing rates, it has become more challenging to get quotes that reflect the final price of a trip.

   To counter this effect, we added a price estimate column in search results last year, creating transparency between our brokers and operators. When sorting on estimate price, it gives buyers a better idea of the final price. In this challenging market situation with low supply and high demand, I recommend using the estimate when searching for aircraft.

   Intra-European charter demand through Avinode has followed its typical seasonal pattern but with a shallower slope down from the summer peak than previous years. The Christmas holiday peak is expected to follow the same daily pattern as in the US, with an added busy travel date on Sunday 9th January. Looking further forward, the UK to Alps ski peak on Saturday 12th February – with return a week later – is already taking shape. Chambery and Innsbruck are most popular.

   

   
   

   From Russia, demand is focused on Sunday 2nd January with the return taking place on Sunday 9th January. France and Switzerland are in the top 3 most popular destinations, with the Maldives in second place. Dates between 25th-29th December are also busy, but for this period it is the Maldives and Dubai that are the most popular destinations. Despite their popularity, the Maldives and Dubai are down 30-50% compared to last year – ski holidays are back in demand.

   Hourly rates within the intra-European market are slightly higher than November 2019, having rebounded throughout the summer. Rates are most robust in the Entry Level Jet category – up around 10% on 2019. Hourly rates are also high for Light Jet and Super Light Jet categories, up around 4%.

   

   
   

   Of course, the big question mark is how much tighter travel restrictions may get. Undoubtably the tougher restrictions are, the longer it will take commercial aviation to recover. This could mean a continuing opportunity for private charter to woo new clientele into 2022.

6. High demand and low supply = higher rates

   July 27, 2021 11:20 am Comments Off on High demand and low supply = higher rates

   Various commentators have spoken about the huge surge of private charter movements in July 2021 compared to 2019 data, particularly in the USA. The increase in demand coupled with constrained supply is causing hourly charter rates to recover from their COVID lows and even surpass the levels seen pre-pandemic for some categories.

   

   
   

   In the US domestic market, heavy and ultra-long-range jets are recovering but still behind where they should be. Smaller categories of jet are all doing well and are broadly similar to pre-pandemic rates. The category really surpassing historical rates is super midsize jets (up 15%), an interesting symmetry given that this category dropped by far the most in the immediate aftermath of COVID restrictions in Spring 2020. The operators of these aircraft have been very reactive to market conditions and optimizing their rates for them.

   The patterns in the intra-European market are a little different. Here rates have been recovering rapidly in July but are still below pre-pandemic levels for the summer season. The exception is for entry-level jets, which have rocketed in recent weeks to around 7% above pre-pandemic rates. This could be caused by first-time flyers entering the market choosing the most affordable jet option and so driving up the prices. As with the US market, it could also partly be due to the operators of this category more quickly optimizing their revenue when the opportunity allows.

   

   

   
   

   Intra-European charter demand through Avinode has just reached its summer peak and is now trending down again; it appears that we are returning to the traditional summer pattern of 2019, rather than the elongated demand into late August that we saw in 2020. However, the Russia to Europe market is still following its 2020 curve; looking at the routes being requested, we should expect to see extra demand from Russia to the Adriatic and Eastern Mediterranean in the next couple of weeks.

   Within Europe, Greece has been the star attraction this summer. Early demand patterns, compared to at the same stage of 2019 and 2020, suggest that will continue until at least mid-September. France, Italy, Spain, and Germany all show robust demand compared to 2019 over the rest of the summer. Compared to normal levels, UK demand to France remains poor for the next few weeks, with domestics taking up some of the slack.

   

   
   

   In the US, demand for charter through Avinode continues to increase, albeit more slowly than a few weeks ago. When trips are being requested for has changed. The percentage of trips being requested within 4 days stands at 43% in July 2021 – compared to 34% in July 2019. These figures support the commentary that it is proving challenging to source charter to meet jet card demand in such a low supply environment.

   It is the shortest duration trips that are recovering most strongly versus 2020, for example between Las Vegas and California. Last year the most popular charter routing was from the Southeast up to the Northeast, whereas this summer that pattern has reversed and demand is from the Northeast again. Of the major cities, demand from airports around New York City and Dallas is most notable compared to 2020, for the next 5 weeks. Travel to the Caribbean is led by Mexico, the Bahamas, and the Turks & Caicos.

   Despite the threat of the spreading Delta variant that caused cases to rocket again in the UK, pent-up leisure demand has been released in Western markets. European demand is robust but still very seasonal. In the USA the boom is continuing and with business travel still to fully return, it looks like we could be witnessing a step-change in the size of the US market – further increasing its significance in our global industry.