After Covid-19 swept across the globe in 2020, many were left wondering how long it would take for the aviation industry to bounce back to the demand levels seen in pre-Covid times. In 2023 already, air travel is predicted to reach 80% of the levels seen previously in 2019, and this resurgence has been strongly reflected in Rolls Royce’s full-year results, with a large portion of itsprofit increase driven by the company’s Civil Aerospace division.
Rolls Royce beat expectations, reporting a rise in operating profit in 2022, and generating an underlying operating profit of £652m. The profits were led by the engine flying hour recovery, £238m higher than the prior year. The company further noted that large engine flying hours in Civil Aerospace grew by 35% year on year as recovery in international travel continued. Along with this, Rolls Royce reported free cash flow from continuing operations of £505m, £2.0bn higher than the previous year.
Upon the glowing report of the full-year results, shares for Rolls-Royce soared in early trading to 19%. Looking ahead to the next fiscal year, the company is expecting to see underlying earnings of £0.8-1bn.
Tufan Erginbilgic, CEO said: "It is an honour to lead Rolls-Royce, one of the world's most trusted brands and a business with strong positions in growing markets. Our people take tremendous pride in our innovation and engineering solutions. Together, we must now move at pace and harness that pride to create a high-performing, growing and competitive business.”
In other good news from the industry, IAG, the parent company of British Airways, mirrored the impressive results shown by Rolls-Royce in their latest results announcement. In the final quarter of last year, the company reported that it expects its 2022 pre-exceptional operating profit to be approximately €1.1 billion, assuming no further setbacks related to COVID-19.
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Rolls Royce’s annual earnings and IAG’s most recent earnings demonstrate that the aviation industry is well on its way to reaching pre-Covid levels of demand. What’s more, IAG stated that their total revenue for quarter 3 in 2022 was €7,329 million, 0.9% higher than the same period in 2019.
According to the International Air Transport Association, airlines are expected to see their ridership levels return to ‘normal’, or a pre-pandemic level, by 2025, though recent data provided by Heathrow further demonstrates that international travel is already getting back into the swing of things. In January alone, over 5.4 million passengers traveled through Heathrow, which marked the busiest start of the year since 2020. Alongside this, 98% of passengers waited less than 10 minutes for security which lifted customer satisfaction rates to at or above pre-pandemic levels.
Though the aviation industry is making strides toward returning to the demand seen in pre-pandemic times, it can be argued that the industry is not entirely out the woods yet. The International Air Transport Association emphasised that their forecast has not factored in the possible effects of geopolitical concerns, such as the Russia-Ukraine conflict, which could have long-term consequences on the travel industry in the years ahead.
That being said, travel restrictions ensuing from these concerns are unlikely to mirror the large-scale restrictions imposed during the pandemic, and the industry can continue to enjoy a marked resurgence in demand.