Market Trends of uk aviation Industry
More people are traveling domestically now, leading to an increase in demand from domestic travelers
- The UK-based airlines were responsible for uplifting a total of 206.35 million air passengers who traveled through the UK in 2022, compared to 189.64 million in 2021. The growth between 2022 and 2021 was 8.8%, and the growth between 2022 and 2020 was 566%.
- In 2022, British Airways handled 11.66 million passengers, the most among all UK-based airlines. It was followed by EasyJet, which handled about 11.4 million passengers. Overall, in 2022, National Air Traffic Services (NATS) managed 1,062,945 flights, similar to the 1,028,254 flights in 2020, both significantly less than 2019 flight numbers, which were more than 2.5 million. The UK's recovery has lagged in Europe, primarily due to government restrictions and European restrictions on UK travel.
- The war between Ukraine and Russia resulted in the UK imposing its own overflight and landing ban on Russian aircraft. The sanctions mean that UK airlines will have to divert flight routes to avoid Russian airspace, resulting in longer flight times. For instance, Virgin Atlantic announced that avoiding Russian airspace will add up to an hour to its flights between the UK, Pakistan, and India.
- Longer flights will cause an increase in fuel consumption and can result in a sharp increase in operating costs for certain routes. The increasing fuel costs will particularly impact airlines, thus resulting in increased costs to passengers through higher ticket prices. Re-routing and longer flights may also cause inconvenience for air passengers, with an increased risk of flights being canceled completely and may decrease passenger confidence. The unpredictability of the situation in Ukraine is likely to be a major challenge for UK airlines and further delay the recovery in air passenger numbers.
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Rising geopolitical threats are the driving factor for rising defense expenditure
- As a member of NATO, the United Kingdom is committed to spending 2% of its GDP on defense each year. The country's military budget for 2022 was USD 68.5 billion, a rise of 3.7%. Out of the total government spending, the country has allocated 2.2% of its share to the military. At present, the United Kingdom spends more than 2% of its gross domestic product (GDP) on military expenses.
- According to the recently published Defense Equipment Plan for 2021-2031, the United Kingdom plans to modernize its armed forces to combat future threats. The nation plans to spend USD 321 billion (GBP 238 billion) on equipment procurement and support over the next 10 years, starting from 2021 to 2022. The Army Command allocated USD 55.7 billion (GBP 41.3 billion) to aircraft procurement, including an allocation for AH-64 Apache attack helicopters.
- For the purpose of expanding the naval fleet, the British Navy plans to spend USD 43.2 billion (EUR 38.1 billion). Fundings of USD 39.7 billion (EUR 35 billion), USD 58.8 billion (EUR 58.1 billion), and USD 24.4 billion (EUR 21.5 billion) were provided to the UK Strategic Command, the Defence Nuclear Organization, and the Strategic and Combat Air Program, respectively. The UK Ministry of Defence also announced its plans to procure additional F-35s and A400M aircraft in the coming years. The Air Command plans to retire equipment that is becoming increasingly obsolete in the digital and future operational environments.
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OTHER KEY INDUSTRY TRENDS COVERED IN THE REPORT
- The rapid growth of e-commerce is fueling the demand for air freight services
- Increased disposable incomes resulting in higher demand for air travel
- An increased defense budget is expected to help with the procurement of more aircraft and helicopters, thereby boosting the country’s active fleet size
- Rising economic growth is expected to support the country's growth
- The country's economic growth is being negatively affected by a high inflation rate
