Non-Subscriber Extract
What's in store for aviation?
By Keith Wilson and Norman Fraser
06 February 2009
If, as part of last year's investment presentation to management, you predicted oil topping out at USD145 per barrel but then collapsing to around USD45 by the year-end, the virtual collapse of investment banking as we know it and banks actually running out of cash before the airlines, then you are, of course, a genius who would have made a fortune if your intuition was backed by your management. Unfortunately, it is more likely that management did not share your bleeding-edge analysis and probably used both barrels when they fired you.
Last year proved to be an epic year for many reasons, so what could 2009 have in store for aviation?
Over the short term, more pain for the airlines looks certain as a steep decline in load factors and a steeper decline in international freight traffic look set to continue. The International Air Transport Association (IATA) reported a 4.6 per cent fall in load factors and a 13.5 per cent drop in freight traffic during November 2008. There is little evidence to suggest that these trends will turn around anytime soon.
Big increases in unemployment are a real prospect in all economic regions; discretionary dollars that would otherwise have been available for air travel and business budgets are simply not there right now and do not look likely to be returning in any scale. Aircraft operators have little choice but to continue cutting capacity through 2009, which will result in more aircraft being taken out of revenue-generating service. For the majority of operators, manufacturer delays in delivering new aircraft may be helpful - depending on where the oil price stays.
Image: Cathay Pacific Airways is the most notable of those carriers making hedging difficulties public. (Jane's/Patrick Allen)