CAPA data: aviation labour may have become more cautious post-COVID

Summary

• The number of strike-related CAPA articles fell from 1,228 in 2016 to less than 100 in 2020 and 2021. It rose to 280 in 2022 - still low by pre-COVID standards.
• Numbers were up again in 1H2023 vs 1H2022, but Jul-2023 is so far below Jul-2022.
• The number of 'strike' articles varies with the airline profit cycle.
• IATA forecasts margins to increase in 2023, but 'strike' articles may not rise in line.

The number of strike-related CAPA articles fell from 1,228 in 2016 to less than 100 in 2020 and 2021

The number of news articles on CAPA - Centre for Aviation's website that mention the word 'strike' reached a peak in 2016, with 1,228 such articles.

The number then fell steadily to just under half of this by 2019, when it was 616. This was the lowest number since 2009's 381.

In 2020, the number of articles mentioning 'strike' plummeted by 85% to just 95, which was by far the lowest since CAPA - Centre for Aviation started recording the annual number.

The number remained virtually the same, at 97, in 2021.

The very low incidence of the 's' word in 2020 and 2021 is not surprising, given that the industry had very low levels of activity during the COVID-19 crisis.

Numbers rose to 280 in 2022 - still low by pre-pandemic standards

In 2022, however, the number of articles rose by 189% year-on-year to reach 280, although this was still low by pre-pandemic standards.

Furthermore, the total of 112 articles reported in 1H2023 was 53% more than in the equivalent period of 2022, but this was also low compared with the period 2009 to 2019.

Number of CAPA articles mentioning the word 'strike', 2009 to 2022 and for 1H2022 and 1H2023

Source: CAPA - Centre for Aviation

The 2022 increase was driven by 2H2022

Drilling down into the monthly number of articles, this averaged 73 per month in 2018 and 51 per month in 2019.

The monthly average plummeted to just 8 in both 2020 and 2021.

Monthly levels remained very low until May-2022, but then jumped to 28 in Jun-2022 and 59 in Jul-2022 as COVID-19 restrictions started to recede in most of the world.

The annual increase in 2022 compared with 2021 was driven largely by 2H2022, when the total of 207 was almost four times the number of 2H2021.

The monthly average in 2022 was 23, but it was 47 in 2H2022.

Numbers were up again in 1H2023 but so far, Jul-2023 is below Jul-2022

As noted above, numbers in 1H2023 were higher than in 1H2022, off a low base, but there has not yet been the same sharp increase into the start of 2H2023.

In the first 24 days of Jul-2023 there were 24 articles, which is an average of one per day, but the total of 59 in Jul-2022 was close to two per day.

Number of CAPA articles mentioning the word 'strike', monthly, 2018 to 2023

Note: Jul-2023 is first 24 days of the month only
Source: CAPA - Centre for Aviation

The annual number of 'strike' articles varies with the airline profit cycle

The number of CAPA - Centre for Aviation articles mentioning the word 'strike' and the annual operating profit margin of the global airline industry have been tracked by CAPA - Centre for Aviation since 2009.

Throughout this period the broad correlation between these two variables has held - although the COVID-19 pandemic and its aftermath have perhaps loosened the link a little.

Both indices followed a largely upward path between 2009 and 2016, after which both declined.

This correlation supports the hypothesis that labour often becomes more demanding of an increased share of the rewards when the profit cycle nears the top.

By contrast, when the airline industry is more economically challenged, labour groups' bargaining power is reduced, and hanging onto jobs becomes their sole focus.

This makes talk of strikes extremely rare when airline are at the bottom of the profit cycle.

The previous low point in the annual count of strike-related articles was in 2009, during the global financial crisis, when the airline industry operating margin was only 0.4%.

In 2020 the new record low of just 95 strike-related articles coincided with a record negative operating margin of -28.8% for the world airline industry.

The industry's operating margin improved to -8.9% in 2021, which was still significantly below any previous cyclical trough, and the number of articles mentioning strikes remained very low.

The operating margin improved to 1.4% in 2022, when the number of strike-related articles also increased somewhat.

IATA forecasts airline margins to increase in 2023, but the number of strike articles may not rise in line

International Air Transport Association (IATA) forecasts that the world airline operating margin will increase to 2.8% in 2023.

The evidence of previous years suggests that the number of strike-related articles might also be expected to increase this year, although it is extremely difficult to forecast this.

As noted above, the number in 1H2023 was 53% higher than in 1H2022, but Jul-2023 looks like falling short of Jul-2022.

At this stage of the year, the total for 2023 seems very unlikely to return to the 10-year annual average of 905 in the period 2010 to 2019, or even to 2019's level of 616.

If the average of one article per day seen in the first 24 days of Jul-2023 were to continue throughout the rest of the year, there would be 183 in 2H2023 and 295 in 2023.

This is not much higher than 2022's total of 280 articles.

This is not a forecast, but the chart below takes this number as an illustrative projection for 2023.

Number of CAPA articles mentioning the word 'strike' (left hand axis) and world airline operating margin (percentage, right hand axis), 2009 to 2023e*

*Number of articles for 2023e is an illustrative CAPA projection based on 112 already in 1H2023 and the rate of one per day seen in the first 24 days of Jul-2023 continuing throughout 2H2023
Source: CAPA - Centre for Aviation and ICAO

Strike-related articles cover a range of geographies and sectors of aviation

CAPA - Centre for Aviation news articles including the word 'strike' in Jul-2023 cover a wide range of geographies.

They also cover different parts of the aviation supply chain, including air traffic control, airlines, ground handling, car parking, flight attendants and pilots.

Companies mentioned in these articles include Swedavia, Asiana, London Luton, London Gatwick, American Airlines, Birmingham Airport, Air Tahiti Nui, ITA Airways, Ryanair, Air Antilles, Air Guyane Express, easyJet, CMA CGM and Widerøe.

In many cases these articles describe situations where strikes have been averted, or are only a future possibility, so by no means do they all report that a strike has actually taken place.

Labour may have become more cautious post-pandemic

The airline industry's EBIT margin is expected to improve in 2023 to 2.8%, similar to levels last seen in 2011 and 2013.

However, it seems unlikely that the number of strike-related articles will return to the 800 and more that were reported in those years. Moreover, the number may not even be very much higher than in 2022, based on the evidence of the year (2023) so far.

This does not mean that the correlation is breaking down, but it indicates that the relationship is not perfect.

There can be no doubt that industrial relations are throwing more challenges to the aviation industry than during the pandemic, as profitability returns and labour becomes more emboldened

However, the scale of the shock experienced during the COVID-19 crisis and the geopolitical uncertainties still faced by the industry appear to have made labour more cautious than in the past at similar points in the profit cycle.