The cost of oil spiked in mid 2008, quickly followed by the worst economic downturn in
over eight decades, causing an immediate downturn in the airline industry. Now,
with the economy on the mend, demand for air travel is increasing from preceding
year’s depressed levels.
In reaction to the recessionary effects, the airlines cut costs, slashed capacity
and increased load factor over the last few years. This momentum also prompted
the industry to begin the current trend of airline consolidation. Presently,
airlines are benefiting from the rebounding traffic volume, including an marked
increase in business and premium service demand.
While the airline industry has been reasonably disciplined in limiting the number of
aircraft in its fleet, increased demand will undoubtedly pressure the industry
to increase the number of seats available. This would help to keep fares in
check, besides making it easier for travelers to book last-minute seats.
Due to solid indications of sustainable economic growth, the International Air
Transport Association (IATA) has more than tripled its full year 2010 profit
outlook to $8.9 billion compared with the earlier outlook of $2.5 billion. The
U.S. airline industry is on track to be profitable this year after a very long
Airline Companies are continuing to improve their revenue structure while continuing to attempt to cut costs. The companies are implementing various ways to enhance
their profitability through add-on revenue streams such as increased fees, low
fares, expansion of their partner networks, optimizing routes, etc.
The worst appears to
be over for the industry as overall economic conditions continue to show signs
of improvement. There is continued and sustainable demand for air travel. Faster
growth is expected by experts in the next four years as the economy gathers
momentum, consumers and business sentiments recover and spending increases.