Signs of recovery may be just around the corner
June 9, 2011, Toronto - While the economic situation in the aviation industry remains exceedingly fragile, economist Tim Coombs, Managing Director, Aviation Economics Ltd., sees signs of recovery.
Mr. Coombs addressed attendees at Navtech’s User Group Forum held in May in Coral Gables, Florida, identifying evidence of recovery and trends that will impact the industry over the next few years. Navtech is a leader in flight operations software and services. Its user group meeting gathered representatives from Navtech’s airline customers from around the world.
Mr. Coombs notes that the U.S.’ economic recovery is “clearly underway” and Asian GDP growth is “startling, nearly 10%.” However, worldwide recovery has been hampered by a number of “shock events” including natural disasters, such as the Japanese tsunami and floods in Australia, as well as political unrest in North Africa and the Mideast. Further, in areas where GDP has dropped – such as Greece and Ireland – air traffic has also fallen, underscoring a common link between economic growth and traffic growth. Conversely, dramatic traffic growth is occurring in Russia, Turkey and Denmark.
Air fares are continuing to mimic jet fuel prices — dropping quickly whenever fuel costs fall, revealing a highly competitive climate. In fact, Mr. Coombs believes the entire market has reached maturity and growth rates are slowing significantly. As a result, he indicates airline consolidation will continue to rise. Major alliances already account for 85% of trans-Atlantic flights and with normal margins dipping to single digits, “big” (as in airlines and airports) will dominate.
Mr. Coombs believes the outlook is “globally positive, but with regional disparities. We remain in extremely challenging times.”