It’s 2024, Here We Go Again!

Will 2024 be the year that aviation starts reaping huge rewards, setting the stage for massive wins for years to come, or will it simply be the calm before the storm??

Why is this important: There is quite a lot of enthusiasm surrounding 2024 for the US economy to include the aviation industry, partly because of the anticipated lowering of interest rates by the Federal Reserve, and partly because of developments within the aviation industry that started in 2023. As a result, many are anticipating the aviation industry to reap massive rewards in 2024 as it relates to aviation industry growth, airline mergers, travel, jobs, and technological development – such as sustainable aviation fuel (SAF) and electric vertical takeoff and landing (E-VTOL) aircraft (aka Air Taxis). While all of the above are exciting developments that one could expect to continue in 2024, a few areas of caution are worth highlighting.

• The anticipated airline mergers, if allowed by the US Department of Justice (DOJ) to go through, might have the opposite effects that were initially intended.
• Given investors' caution surrounding SAF, we can expect that private sector investment will continue to be a problem for the NetZero initiative leading to governments supporting the initiative even more financially.?
• While virtually all of us are excited about E-VTOL/Air Taxis, we must be mindful of the fact that this industry is driven primarily by the private sector. And enthusiasm for the technology may wane if the good times expected in 2024, do not continue beyond that.

Get Involved: Given the ‘good times' being projected for the US economy in 2024, do you believe there are clear skies ahead for the aviation industry from here on out? Why or why not? Please share your thoughts in the comments below.?

Anticipated effects of US airline mergers.

• Much is expected of airline mergers within the United States for this year. Partly because airlines themselves are looking to merge and expressly stated what their intentions are. For the most part, they argue that they are looking to create greater competition for the larger legacy carriers to provide even better pricing for customers, as well as being able to take advantage of economies of scale to lower costs.
• If the four airlines looking to merge at this time are successful, we might see effects that we are not anticipating. Effects such as increased prices given the economic conditions that we’re heading into towards the end of 2024 and beyond.
• That being said, there are still benefits to be had largely by the airlines themselves, and we believe that some of those benefits will be passed through to the consumers. What is important to note here is that there are effects that are not readily seen from these potential mergers that must be taken into consideration by the traveling public.

On Aviation? Note: Many believe that the potential increases in prices is largely because there will be fewer players in the industry due to the mergers. However, we believe that it is not primarily the mergers that are going to lead to higher travel costs, but underlying economic factors.

Increasing financial support of SAF by governments.?

• In 2023 there has been a buzz and height around SAF, I’ll be not as great as it was the prior two years. This is because the private sector is slowly losing interest in investing heavily in the technology, given its cost-prohibitive nature.
• Therefore, in 2023 we saw governments increasingly supporting the initiative to drive the initiative forward to meet net 0 mandates by 2050.
• What we might expect in 2024 is that governments around the world will increasingly add support to the initiative since the private sector is slowly backing off, making the taxpayers the ultimate patron of this massive undertaking.

On Aviation? Note: The private sector has realized the cost-prohibitive nature of sustainable aviation. Therefore, they have been more cautious with their investments in the initiative. Recently, it has been alleged that Rolls-Royce is scrapping its electric propulsion research and development, focusing on more feasible initiatives such as hydrogen propulsion.?

The Air Taxi Buzz.

• Virtually all of us are excited about E–VTOL/Air Taxis and are looking forward to what the technology may bring in the future. Interestingly, many believe that this year could be the year that we see massive development in this sector.
• This sector is primarily funded by the free market, and these entrepreneurs are quite aware of the challenges that lie beyond 2024. Therefore, we see them doing whatever they can to boost their stock price to attract more private sector investments, while at the same time, seeking out federal military contracts to help keep their developments going.
• We believe that there’s a future for the technology, however, one should be tempered by the fact that the technology is capital intensive and requires economic conditions that are not only good but great for the sector to fully develop and thrive.?

On Aviation? Note: We believe that there is a lot of potential in the E–VTOL space, but like with any new development it requires good economic conditions to thrive. In this case, it requires great economic conditions. given the nature of the technology. Unfortunately, where we are headed beyond 2024 is not that.

Conclusion

Given what the Federal Reserve here in the United States is expected to do regarding interest rates at least for the beginning of 2024, it is accurate to assume that at least the first half of the year will appear to be good times. This will undoubtedly lead many to believe that the challenges that I’ve been forecasted for the past 2+ years are behind us and that only good times are ahead. We caution our readers against this viewpoint. While 2024, or most of it may not be the year of severe economic challenges, if this indeed is the case, we believe it’s artificial. The true underlying factors that will lead to challenges are still there and are increasing. Therefore, it is advisable that we view this time within the economy as simply a calm before the storm, and act accordingly.

Thank you for reading this week's On Aviation? full article. Given the ‘good times' being projected for the US economy in 2024, do you believe there are clear skies ahead for the aviation industry from here on out? Why or why not? Please share your thoughts in the comments below. Remember to check out our On Aviation? Podcast and continue the conversation on our Twitter and Instagram.

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