Optimism returns to aviation

London celebrating New Year . Photo courtesy Reuters

London celebrating New Year 2013 . Photo courtesy Reuters.

THERE is renewed optimism for the airline industry, going by the latest International Air Transport Association (Iata) forecast that 2013 will see an improvement in global airline profitability from US$6.7 billion to US$8.4 billion. This has been revised from an earlier estimate of US$7.5 billion.

Iata chief economist Brian Pearce said: “I think we are past the low point, which was earlier this year.”

The positive mood was encouraged by slightly higher economic growth and slightly lower fuel prices than expected. Of course, there remains the caveat that fuel prices continue to be volatile and susceptible to hikes and the world economy is moving slowly, if at all it is recovering. So, do not raise your hope too high.

Iata director-general Tony Tyler admonished: “It is of course good news that the outlook is moving in a positive direction, but let’s keep the figures in perspective. The industry is keeping its head above water. But only just.”

Indeed, the past few years have demonstrated how the industry has been saddled with more uncertainty than confidence moving forward. But starting the New Year on a positive note may in itself give a needed boost to the morale as the airlines in general may have for too long tried to adjust to the gloom and stay with it rather than shake themselves out of it.

In the next couple of years, the industry will be invigorated with airlines making plans to upgrade cabin products to include more comfort in premium class and enhanced in-flight entertainment in all cabins. Major US carriers such as United, Delta and American will introduce seats that can be converted to flat beds that are already available on international flights, on cross-country domestic flights. Ground facilities such as airport lounges will get a makeover.

United Airlines chief executive Jeff Smisek said: “In 2013, you will start seeing a lot of product development. We have to catch up for many years of underinvesting.”

In Asia-Pacific, airlines such as Qantas, Cathay Pacific Airways and Singapore Airlines have also announced plans to improve cabin products. The New Year is likely to see a re-focus on the premium product even as budget travel continues to grow in the region.

According to Iata, US airlines will continue to improve their profitability while European carriers collectively will break even. Now that’s good news especially for Europe, considering its long-running saga of the euro debt crisis. Asia-Pacific, hitherto touted as the region of growth, will turn in mixed performance but “overall profitability has not deteriorated as much as expected, despite weakness of cargo markets.” With 40 per cent of the global cargo market, the region’s carriers are most exposed to weak cargo demand. All other regions are also expected to show improved profitability, even if it is marginal.

I reiterate: It is always good to start the New Year on a positive note. For now, it is still a long year ahead to be concerned about unexpected turns in the road.

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About David Leo
David Leo has more than 30 years of aviation experience, having served in senior management in one of the world's best airlines and airports. He continues to maintain a keen interest in the business, writes freelance and provides consultancy services in the field.

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