’CAUTIOUSLY optimistic’ – that’s the term on the lips of many in the aviation industry right now, with promising signs that a corner is soon to be turned. Figures from the International Air Transport Association (IATA) for the first half of the year were positive; BAA handled record passenger numbers in July; Airbus took huge orders at the Paris Air Show in June; and airlines continue to expand their networks and fine-tune their onboard product in a bid to win a greater slice of the corporate pie. What’s more, as financial results for the first
half of the year trickle in, many airlines are posting better than expected operating profits too. And all this despite what feels like a familiar pattern of catastrophic natural disasters, strikes, currency crises, ash clouds, unrest in the Middle East and North Africa, and rising oil prices. “The air transport industry emerged from a decade of crises and shocks with an US$18billion profit in 2010,” said outgoing IATA director general Giovanni Bisignani at the organisation’s June AGM. “But the events that marked the first half of 2011 will see profits fall to US$4billion. For a US$600billion industry, that is a pathetic 0.7 per cent margin. It’s another tough year for a very fragile industry.” Bisignani’s speech in Singapore made for fascinating listening, offering a comprehensive review of the industry over the last decade as well as an examination of the potential challenges that lie ahead for airlines. “Airlines have spent a decade in survival mode,” he said. “They transformed themselves by slashing costs, increasing fuel efficiency and improving labour productivity.” And it is fuel efficiency that remains uppermost
on airlines’ agendas right now, with the cost of oil directly impacting air fares and Bisignani referring to the price of oil as a ‘volatile demon’. “Surviving with oil over $100 a barrel went
from unthinkable to normal,” he said. “Fuel management has evolved into a fine art, impacting the bottom line.” IATA represents over 230 airlines worldwide which between them account for around 93 per cent of scheduled international air traffic. Its figures for May showed a 6.8 per cent increase in passenger traffic over May 2010, with international load factors rebounding by 0.8 per cent to 75.8 per cent. Although demand for leisure travel was down, IATA reported that “less price-sensitive premium travel demand has been more robust in the face of rising prices and continues to be driven by growing world trade and business investment.” The business travel community reports similar anecdotal evidence, with that phrase, ‘cautiously optimistic’ – or words to that effect – spoken by the majority of travel management companies and airlines we spoke to. “After a difficult couple of years, businesses
are certainly travelling more than during the peak of the recession, with a marked increase in passenger numbers and the money being spent on air travel,” says Adrian Parkes, chief commercial officer at Portman Travel.
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