Five trends for the airline industry in 2010

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Five trends for the airline industry in 2010

Posted On : Mar-10-2011 | seen (545) times | Article Word Count : 795 |

In 2010, things are expected to look a lot brighter for the airline industry buffeted by one of the severest economic recessions in 2008-2009.

To cope, in the past year, airlines have been forced to respond by cutting back on flights, rescheduling existing routes and searching for new revenue streams such as charging for aisle seats and baggage. Some have also turned to business process outsourcing and outsource travel services.
According to IATA, the first green shoots of recovery are likely to be evident in 2010; passenger traffic is likely to reach the peak levels of 2007 even as airlines drive down non-fuel unit costs by 1.3 percent. As a result, there is likely to be a tempered optimism in the airline industry in 2010.
There are some key themes emerging in the ‘flight path' of 2010:
1. Increasing travel demand: Two of the top six U.S. airlines saw their best traffic results in 18 months this past November. While Southwest recorded a 12 percent increase, Continental registered a 2.8 percent increase, respectively, in miles flown per passenger. These figures represent absolute increases in ‘warm bodies' flown - a more reliable metric than passenger load factor.
Clearly, the slump in air travel is ending. IATA has now revised its passenger traffic estimates for 2010 upwards by 4.5 percent (as against the previous forecast of 3.2 percent in September 2009). An estimated 2.28 billion people are expected to fly in 2010, bringing the total passenger numbers back in line with the peak recorded in 2007.
2. Airline-supplier consolidation: As airlines improve services while implementing aggressive pricing strategies, many plan to forge new links with distributors, including travel management agencies that don't rely on the traditional GDS connections. A trend that first started two years ago, airlines are expected to continue to implement direct-connect models to manage products and inventories, and establish closer ties with their customers. For example, last October, American Airlines indicated its plans to move all indirect volume to direct connections.
This will change the nature of Airline-GDS relationships. One notable potential by-product of this trend could be GDS / TMC consolidation. With Amadeus and Travel port considering IPOs, the cash raised could be used to purchase a major global TMC. The GDS would like to have a more direct impact on their revenue potential from the carriers and, if this were to occur, a whole new dynamic will impact the already convoluted distribution model.
3. Environmentally-responsible aviation: By March 2010, EU-based airlines must provide carbon dioxide emission reports. That's why, over the last six months, several EU airlines have begun using bio-fuel either wholly or in part on certain routes. This trend is now spreading to North America where several airlines have indicated their interest in buying eco-friendly jet fuel. In addition, several EU airlines have begun developing carbon offset programs as well as implementing shorter routes and efficient landing operations as well as best practices in fuel management to reduce emissions.
Two years ago, Richard Branson spoke of coconuts as an alternative to fly his planes around the globe. His pioneering measures at Virgin Atlantic has raised the awareness about eco-friendly air travel. More incentive trips: After a year of bad press, travel incentives for top company performers are slowly coming back. This is good news not just for airlines and hotels but for businesses further downstream such as TMCs, car rental companies and restaurants, to name a few. According to the U.S. Travel Association, incentive trips make for sound businesses and jobs. Such trips, meetings and events account for 15 percent of all travel spending, which creates an estimated 2.4 million jobs, USD 240 billion in spending and USD 39 billion in tax revenue in the U.S. alone. Union challenges: The U.S. government is working on changing voting rules for unions which will effectively give them more bargaining power. The U.S. Federal Mediation Board is considering no longer requiring a majority vote amongst all potential members for unionization. For aviation, this would have negative implications such as higher operational costs and potentially increased disruption like delays and cancellations.
In 2009, some U.S. and global carriers experienced multiple slowdowns or ‘sickouts.’ Airline employees believe they have taken more than their fair share of the pain in the downturn and are now fighting to regain what they gave up. Even if strikes are not called, such smaller, targeted actions by the unions wreck havoc throughout the network at a time when we are starting to see the first good news in traffic growth in years. Even with signs of growth, the industry will not be out of the proverbial woods in 2010. IATA estimates that airlines will record losses of USD 5.6 billion this year – the good news is that this number is just over half 2009's estimated losses.

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<h1>Five trends for the airline industry in 2010</h1> Author: <a href='http://www.articleseen.com/profile_wnsglobal.aspx'>wnsglobal</a> To cope, in the past year, airlines have been forced to respond by cutting back on flights, rescheduling existing routes and searching for new revenue streams such as charging for aisle seats and baggage. Some have also turned to business process outsourcing and outsource travel services.
According to IATA, the first green shoots of recovery are likely to be evident in 2010; passenger traffic is likely to reach the peak levels of 2007 even as airlines drive down non-fuel unit costs by 1.3 percent. As a result, there is likely to be a tempered optimism in the airline industry in 2010.
There are some key themes emerging in the ‘flight path' of 2010:
1. Increasing travel demand: Two of the top six U.S. airlines saw their best traffic results in 18 months this past November. While Southwest recorded a 12 percent increase, Continental registered a 2.8 percent increase, respectively, in miles flown per passenger. These figures represent absolute increases in ‘warm bodies' flown - a more reliable metric than passenger load factor.
Clearly, the slump in air travel is ending. IATA has now revised its passenger traffic estimates for 2010 upwards by 4.5 percent (as against the previous forecast of 3.2 percent in September 2009). An estimated 2.28 billion people are expected to fly in 2010, bringing the total passenger numbers back in line with the peak recorded in 2007.
2. Airline-supplier consolidation: As airlines improve services while implementing aggressive pricing strategies, many plan to forge new links with distributors, including travel management agencies that don't rely on the traditional GDS connections. A trend that first started two years ago, airlines are expected to continue to implement direct-connect models to manage products and inventories, and establish closer ties with their customers. For example, last October, American Airlines indicated its plans to move all indirect volume to direct connections.
This will change the nature of Airline-GDS relationships. One notable potential by-product of this trend could be GDS / TMC consolidation. With Amadeus and Travel port considering IPOs, the cash raised could be used to purchase a major global TMC. The GDS would like to have a more direct impact on their revenue potential from the carriers and, if this were to occur, a whole new dynamic will impact the already convoluted distribution model.
3. Environmentally-responsible aviation: By March 2010, EU-based airlines must provide carbon dioxide emission reports. That's why, over the last six months, several EU airlines have begun using bio-fuel either wholly or in part on certain routes. This trend is now spreading to North America where several airlines have indicated their interest in buying eco-friendly jet fuel. In addition, several EU airlines have begun developing carbon offset programs as well as implementing shorter routes and efficient landing operations as well as best practices in fuel management to reduce emissions.
Two years ago, Richard Branson spoke of coconuts as an alternative to fly his planes around the globe. His pioneering measures at Virgin Atlantic has raised the awareness about eco-friendly air travel. More incentive trips: After a year of bad press, travel incentives for top company performers are slowly coming back. This is good news not just for airlines and hotels but for businesses further downstream such as TMCs, car rental companies and restaurants, to name a few. According to the U.S. Travel Association, incentive trips make for sound businesses and jobs. Such trips, meetings and events account for 15 percent of all travel spending, which creates an estimated 2.4 million jobs, USD 240 billion in spending and USD 39 billion in tax revenue in the U.S. alone. Union challenges: The U.S. government is working on changing voting rules for unions which will effectively give them more bargaining power. The U.S. Federal Mediation Board is considering no longer requiring a majority vote amongst all potential members for unionization. For aviation, this would have negative implications such as higher operational costs and potentially increased disruption like delays and cancellations.
In 2009, some U.S. and global carriers experienced multiple slowdowns or ‘sickouts.’ Airline employees believe they have taken more than their fair share of the pain in the downturn and are now fighting to regain what they gave up. Even if strikes are not called, such smaller, targeted actions by the unions wreck havoc throughout the network at a time when we are starting to see the first good news in traffic growth in years. Even with signs of growth, the industry will not be out of the proverbial woods in 2010. IATA estimates that airlines will record losses of USD 5.6 billion this year – the good news is that this number is just over half 2009's estimated losses.

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Keywords : trends, airline industry, Travel & leisure, Airline-supplier, consolidation, travel demand, eco friendly, incentive trips,

Category : Business : Business

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