Air Travel Forecast to 2030: The Recovery and the Carbon Challenge

In May 2020, we began making regular forecasts of how soon aviation demand would recover from the effects of the Covid-19 pandemic. Now, even as the pandemic’s impact on air travel diminishes, inflation and lower disposable incomes have emerged as constraints on future growth. Meanwhile, the effect of the airline industry’s CO2 mitigation costs has already begun to reshape medium- to long-term demand.

We’ve developed this next generation of our model to take these new factors into account, and we’ve extended our forecast to the end of the decade. We intend to publish regular updates using the latest information.

Here is the outlook as of the first quarter of 2023:

• Air travel demand remains on pace to surpass 2019 levels next year, with the long-term trajectory dependent on CO2 costs, market-specific competitive pressures, and macroeconomic growth (see Figure 1 above). We expect inflation, geopolitical uncertainties, and the low-growth environment to weigh on demand until 2025.
• Looking ahead to 2030, we anticipate demand varying significantly between geographic regions. Europe–North America travel could increase about 20% from its 2019 demand volume in the baseline scenario, while Asia intraregional travel could jump 60% (see Figures 2 and 3).
• We expect airlines’ cost of mitigating carbon emissions will cause material increases in ticket prices starting in 2026. By 2030, these costs will reduce demand by 3.5% on average across regions, according to our model.
• European airlines have less room to lower prices to stimulate demand, given cost inflation, low-cost carrier competition, and tougher carbon regulation. We expect this regulatory environment will reduce demand for long-haul flights to and from Europe.
• The great unknown in Asian markets will be how carbon regulation evolves in each country. Asia clearly has a stronger outlook for long-term disposable income growth, and low-cost carriers also continue to accelerate growth.
• North America’s short-haul flight outlook, even beyond its recent strong recovery, remains considerably better than Europe’s and has less downside risk.

Projected market and financial information, analyses, and conclusions are based (unless sourced otherwise) on external information and Bain & Company’s judgment. They are intended as a guide only and should not be construed as definitive forecasts or guarantees of future performance or results. No responsibility or liability whatsoever is accepted by any person, including Bain & Company, Inc., or its affiliates and their respective officers, employees, or agents, for any errors or omissions.