From Recession
to Inflation — June 2022

Every recession is recessionary in its own way. When the aviation industry experienced the largest by far collapse in demand in its history, we expected that the consequent surplus of aircraft, personnel and airport slots would cause the price of these inputs to fall sharply, maybe creating the conditions for radical restructuring. The opposite has happened, the industry is experiencing the highest cost inflation in decades.

Government support throughout the pandemic meant that there have been no airline collapses of real significance no Chapter 11-type restructurings (outside of Latin America and SE Asia), little reallocation of resources, and no significant new entrants (with the exception of long-planned Breeze and various reincarnations like Norwegian and ITA). The alternative — governments allowing their airline sectors to implode — was just unacceptable, but the industry has missed out on the benefits of creative destruction.