Airlines struggle with strikes and aircraft shortages: What does it mean for your travel plans?

This year's season has been very challenging for airlines and passengers in Europe. Strikes by ground staff, pilots and flight controllers thwarted holiday plans for many travellers and exposed carriers to losses.

But experts say these aren't the only challenges airlines have faced this year.

"In our industry, strikes are quite common. We run 15 branches of our Aviator ground handling business in Scandinavia, and in fact, there has not been a single year when we have not had major challenges in terms of strikes," says Gediminas Žiemelis, founder and chairman of Avia Solutions Group.

He points out that there are many more challenges facing the industry. Among the most important, he says, are the closure of airspace over Ukraine and Israel, which affects airspace congestion and lengthens flights on some routes, unexpected technical problems related to new-generation engines, and the long-term effects of the disruption caused by the Covid-19 pandemic.

The two major aircraft manufacturers, Boeing and Airbus, have struggled with the production of planes since the pandemic. Around 3,4000 narrow-body and 1,200 wide-body aircraft haven't been built.

"This means that airlines are extending the life of the current fleet, using aircraft two to three years longer because they need to handle the current record traffic. Airline capacity is lower than pre-pandemic forecasts, and demand has already caught up," Žiemelis says.

"Overall: record traffic, shortage of aircraft, deferred deliveries, unforeseen problems with new technology engines. These are the main problems in aviation today."

Read the full text of the interview with the founder and chairman of Avia Solutions Group below:

Euronews: The past holiday season was marked by strikes in the aviation industry. Ground staff, pilots and air traffic controllers protested. How did this affect the industry and business prospects?

Gediminas Žiemelis, founder and chairman of Avia Solutions Group: These problems occur every year, so everyone is adapting to them and getting better at dealing with them. Ideally, it would be possible to minimise them in order to reduce the inconvenience for passengers.

However, everyone is preparing for this eventuality. Air traffic is growing exponentially, so the outlook is very positive.

What condition is the aviation industry in at the moment?

Aviation is a vital part of the global economy, and nothing demonstrates this better than the industry's recovery from the COVID-19 pandemic.

As a result of the pandemic, air traffic worldwide fell by 66 per cent in 2020 compared to 2019, but the market has since seen a strong recovery. According to IATA, air traffic is expected to reach 5.2 billion passengers in 2025, an increase of 6.7 per cent compared to 2024. This shows that there is still huge potential for growth and expansion in all aspects of the market.

This exponential growth trajectory and the clear need to increase the supply of aircraft to meet growing demand make the industry very attractive to investors today. For example, Air Lease Corporation, a large lessor, has just been bought by a consortium led by SMBC Aviation Capital for around $7.4 billion (€6.3 billion).

Do EU regulations make it more difficult for carriers to operate in the European market?

Aviation is a highly regulated industry worldwide, and for good reason, as the safety of operations is absolutely crucial. In terms of regulation, the EU is no different to any other jurisdiction we operate in.

I also believe that the EU's SAF (sustainable aviation fuel) regulations are an overall positive piece of legislation, as they call for increased production of cleaner fuels.

What about regulations on minimum hand luggage sizes? There has been talk this year that this issue may be regulated at the EU level.

If it is regulated, it would be worth buying shares in suitcase manufacturers. And seriously, many low-cost airlines are able to offer cheaper tickets by charging for additional services such as baggage.

So if a ban were to be introduced, this could actually increase the average ticket price.

What are the main challenges in the global aviation market?

The challenge has been known for a long time. Airbus and Boeing are not able to deliver enough new aircraft. While I expect this problem to be solved by the end of the decade, with the rapid growth in air traffic, airlines need more aircraft to meet demand.

ACMI (Aircraft, Crew, Maintenance, Insurance) service providers like us play a key role here, as we can provide the extra capacity needed at short notice during peak season. This benefits the airlines in many ways, but in a market context, it is particularly important that by working with us, they do not have to lease or buy available mid-life aircraft on a long-term basis.

They receive the assets when they need them and then return them when they are no longer needed. This is more beneficial for their balance sheet.

What does this mean for airlines?

Airlines can either own the aircraft, lease them long-term - for about five to seven years - or use a full-service ACMI lease for a shorter period - usually about six months.

Our business is predominantly ACMI-based and is essentially about providing airlines with short-term capacity during the peak season, usually during the summer in a particular region when demand for holiday travel is at its highest.

Most airlines generate the majority of their revenue just in the summer, so having the entire fleet on a long-term basis means that they will continue to pay for assets that are not optimally utilised. ACMI is a fleet management tool that solves this problem.

Our rule of thumb is that by choosing ACMI for up to 10 per cent of the total fleet for a maximum of six months, airlines can increase their profitability by around 2-3 per cent.

What are Avia Solutions Group's expansion and growth plans?

Our strategy is to increase our global reach. The reason why it is so important for us to have a global presence is precisely because of seasonality.

In Europe, which is the traditional market for ACMI, when the summer ends and demand for our products falls, in the southern hemisphere, the peak season, i.e. summer and school holidays, begins.

Therefore, by investing in the establishment of new airlines in places such as Indonesia, Thailand, Brazil and Mexico, we have ensured that we have the right foundation for the counter-cyclical model. Essentially, having a global presence means that we can move our fleet to where demand for our services is highest.

For example, we recently opened a service centre in the Philippines that will provide end-to-end remote workforce solutions to our subsidiaries around the world as part of this strategic global expansion. This new centre will also help us attract talent to the Group in Asia, where we are growing rapidly.

What are your plans for Poland and the Central and Eastern European region?

We plan to open a SAF and eSAF (synthetic jet fuel) plant in Latvia in 2030, which, once operational, will be the largest facility of its kind in Northern Europe. Demand for SAF will increase significantly over the next few years, especially given the EU requirements for its use.

I also believe that it is important that Europe is able to produce its own SAF for energy sovereignty reasons.

Poland itself is a rapidly growing aviation market where I expect demand for our services to increase. The figures clearly show this upward trend. In 2024, Poland will see significant growth, serving 59.5 million passengers, an increase of 15.6 per cent compared to 2023 and 22 per cent compared to 2019.

Who are your main competitors?

We are by far the largest ACMI provider in the world with a fleet of 209 aircraft, but we are also an air services group. I don't think of competitors because I see everyone as potential customers or partners.

Other lessors that offer long-term leasing are our partners because we lease some of our aircraft from them, and airports are also customers of our ground handling subsidiaries. Our aircraft maintenance subsidiary, FL Technic,s also repairs third-party aircraft, and we provide training for the crews and pilots of many airlines.

I and the entire group are focused on providing this range of best-in-class services to as many customers and partners as possible.

What are Avia's long-term business goals?

To continue our global expansion and grow our fleet to more than 700 aircraft over the next few years. An external consultancy has estimated that the global ACMI market is worth $30 billion (€25.5 billion) and will need 1,500 aircraft to operate.

We currently have 209 aircraft, so just in the provision of ACMI services, we have huge growth potential.

Last year, Avia Solutions Group ordered 80 Boeing 737 MAX aircraft. Could you say how this order fits into the company's broader strategic vision?

One of the reasons we are investing in the SAF production facility is the need to progressively make aviation greener. The order of the new Boeing 737 MAX aircraft fits into this strategy, as it means we can offer our customers the most modern and fuel-efficient aircraft.

More broadly, this is part of our plans to further develop and expand ACMI's business.

Certares and Impact Investment have invested in Avia. What is the capital structure currently like?

I am very proud that Certares, a US private equity firm, invested €300 million in the Group in 2021 and then decided to convert this amount into a 20 per cent equity stake last year. Equally beneficial is having Mike Pompeo as a strategic advisor.

The successful listing of our $300 million (€255 million) unsecured senior notes on Euronext Dublin in early 2024 was another clear demonstration of investor confidence in our Group and our long-term growth strategy.

I now personally own approximately 60 per cent of the Group, with the remainder held by other shareholders, including Certares.

You were listed on the Warsaw Stock Exchange, but then delisted. Why and are there any plans for the stock exchange in the future?

We withdrew from the stock exchange because we believed that, as a private company, we would be able to grow faster. This is what has happened.

As for plans to re-enter the stock market, we are always open to exploring market opportunities, but serious discussions about this will not take place until at least two years from now.