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 downturn.
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.
