Airlines recovering as fares improve
Its not exactly happy days are here again time, but better results are being forecast for the international air transport industry. The International Air Transport Association (IATA) is now predicting the industry will make a small profit this year of $2.5 billion.
That’s quite a turnaround from airline losses of $9.5 billion recorded in 2009. It’s just a drop in the ocean of the $63.35 billion losses incurred by just the 6 major US carriers between 2001 and 2009, as reported by the US Transportation Department. So there’s a long way to go, but a start has been made.
And today Aer Lingus reported that operating losses for the first half of the year fell from €93 million to €19 million. This was an excellent performance particularly in light of the major disruption caused by the ash cloud in April and May. Aer Lingus Chief Executive, Christoph Mueller, expects an operating performance for the full year of not less than break-even.
Aer Lingus – Flying back to profitability
But back to global air transport, the progress toward profitability varies from region to region around the world. Asia Pacific, North America, and Latin America are showing the strongest recovery, while Europe lags this, and European airlines are expected to lose $2.8 billion this year, according to IATA.
The principal reasons for the move towards recovery include improved economic conditions globally, reduction in capacity leading to increased load factors, with fares being reported up by as much as 18% this summer compared to a year ago, and more stability in fuel prices.
But this is not all good news for consumers, as airlines are pulling back on deeply discounted fares, and cheap fares will become increasingly difficult to find. Airlines too, have become hooked on "fees" and a new study shows that worldwide carriers took in $13.5 billion from fees in 2009, a 43% jump in just one year. The company which carried out this study also predict that fees are going to stick around and become even more pervasive.
IATA is predicting a return on invested capital of 2.8% this year, less than half peak levels and still far from reaching the industry’s cost of capital. Still, investors are taking a positive outlook on airline financial prospects with share prices up 7% so far this year.
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August 24th 2010
September 1st, 2010 at 12:37 pm
It might be good news elsewhere, but traffic in and out of Ireland continues to plummet. There are a few reasons for this:
1. Reduction in competition – Dublin Airport has lost a lot more airlines than it’s gained in recent years, resulting in a lot less competition and higher fares. Of course withdrawals are rarely publicised but behind the scenes they’ve been relentless. Plus many of the remaining airlines are reducing frequencies and capacity. Take bmi for example – an airline that used to fly A321′s up to 8 times a day from Heathrow to Dublin. Now they fly 4 times a day with predominantly A319s, a much smaller aircraft.
2. The self-defeating Government departure / tourist tax which doesn’t help but probably isn’t as influential as Michael O’Leary would have us believe.
3. Costs in Ireland – We’re still far too expensive and cannot justify this by lazily claiming we’re a ‘high cost economy’. The world is not rushing to adopt our costs, minimum wage rate, welfare rates etc. Therefore as a small nation that’s heavily dependent on exports and tourism, we have got to lower our costs across the board and a lot more than has been done to date.
For tourists the price of food and drink (not to mention Irish citizens) are still far too high. Plus there’s no point in attracting people with great value accommodation rates only to screw them in bars and restaurants. Because all they’ll remember is how much they paid for a drink or a very average meal and vow not to come back.