If you have been a frequent flyer during and after covid, there’s a good change you noticed there are fewer flights to go around.
While air travel has seen a sharp recovery in demand since the pandemic, airline capacity seems to still be lagging in some areas, especially in North America and Europe.
“There is going to be constrained capacity in Europe for the next four to five years,” O’Leary told CNBC. “The European industry is financially broken.”
“Is the industry keeping capacity low so the industry can keep raising prices?” CNBC’s Steve Liesman asked.
“Yes,” O’Leary replied.
May flight capacity between the U.S. and Canada is still down 10.7% from 2019 levels, according to aviation data collector OAG. Capacity from the U.S. to the UK is down more than 5%. Capacity between the UK and France is down 8%, Germany and the UK is down 25% and Germany and Italy is down 26% from 2019 levels.
During the pandemic, airlines slashed capacity — reducing the number and frequency of flights — in order to hang on to profits that are increasingly hard to achieve.
The Air Transport Association predicts that the global airline industry will see a profit of $4.6 billion on revenues of $779 billion in 2023. That works out to an operating margin of 0.4% for airlines and a per passenger profit of $1.1.
So in order to lower costs, most airlines are operating at between 90% and 95% of capacity, despite demand being high for air travel, and only looking to trend higher during the busy summer travel season.