2010 and beyond

You may have noticed earlier this year that IATA cut its 2010 airline industry loss forecast in half - basically because of signs of a much stronger than expected recovery, with the good start to this year.

I would have to agree with their assessment, and I think we’re definitely starting to see tangible signs of recovery as I’ve mentioned many times recently.

image/photo

That’s the signpost up ahead. Next stop .. the recovery zone?

IATA sees a “two-speed” industry, led by Asia and Latin America right now, with North America and Europe lagging.

As it happens, I had the pleasure of being a guest contributor to the IATA Web site and submitted an article on how Boeing sees the market unfolding right now.

Here’s the download of the full article (pdf).

As I point out, “recovery” is a relative term. Certainly, a lot of airlines have not yet experienced any tangible rebound. But I do think there’s cause for optimism. Meantime, Boeing is taking steps to manage through the challenges in the market - as are our customers.

Now, you may be asking yourself, what will be the impact of the Icelandic volcano on the outlook? Well, it’s going to take time for us to understand. It’s an issue that might not yet be behind us.

Near term, the disruptions caused by the volcanic ash had a significant impact in Europe and adjacent area. But experience shows that air traffic rebounds quickly after events like these.

So I wouldn’t expect significant long-term reduction in air travel demand or impact to future deliveries. While there was substantial cost associated with the shut down of air space, I think we’re talking about a modest impact to the overall 2010 industry outlook.

Going forward, this remains a growth industry, with air travel projected to grow at 4.9% a year over the next 20 years.

Bottom line, 2010 will be a better year than 2009, but, of course, not without its issues.

I’d be interested in your thoughts and am particularly interested to learn whether you think we’ve indeed turned the corner as an industry.

Comments (3)

Thomas Horstmann, Jr. (Portland, OR):

While I see tangible gains in 2010 bookings over 2009, the biggest change is clients are pre-booking high end packages a lot further out than last year. This bodes well for the confidence factor of the traveling public World wide, which is a good thing.

So coming from someone who is directly involved in tourism and the travel trade, I see a definite uptick in travel. Further, the flights I have been on lately have been heavily booked.

In short, I think airlines will recover quicker than expected. I know first hand of a couple of airlines which actually made money in the first quarter, which is a solid indicator of things to come.

Norman (Long Beach, California, United States):

This is good news, the trend in orders is up as we have seen even US airlines order aircraft for replacement and growth even in the face of a slow recovery and the rumors of consolidation. I expect 2010 to be way better than 2009 and 2011 to be even better.

Felipe (São Paulo, Brazil):

Though I'm no expert in RPK growth, I really agree with the view that Latin America has been strong in the recent months. I'm not so sure about Asia due to China. Their economy depends a lot on the US. And China is a huge driver in Asian economy.

I would also be careful about this rebound. Governments have spent too much and there might be some artificial money in the market. In worst case scenario, I would expect a slight adjustment in the next couple of years. But nothing compared to what we saw back in 08 and 09.

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