Tuesday, November 4, 2008

Economic picture for airline industry brightening

The Economic Times, 4 Nov, 2008

Commercial airlines' economic troubles will improve during the fourth quarter and the industry may even go into the black in 2009, the head of the carriers' main U.S. trade group said on Monday.

James May, president and chief executive for the Air Transport Association, said recent steps by U.S. airlines to cope with the high cost of jet fuel from charging passengers for checked bags and other services that had been free to dramatic cutbacks in scheduled flights have left carriers in an unexpectedly strong position to withstand the current economic turmoil, especially now that oil prices have dropped.

``The good news is we were prepared,'' May told the Air Traffic Control Association's annual conference. ``The net result is I think we're going to see a reasonably positive fourth quarter this year for commercial aviation and the very real chance we'll be operating in the black'' in 2009.

But airlines remained in the red in the recently completed third quarter. US Airways Group Inc. last month said it lost $865 mn due to high fuel prices. Although those results beat analyst estimates, the loss was the worst among the major carriers during the July-September quarter, topping United parent UAL Corp.'s $779 mn loss.

May, who said he'd recently returned from an aviation conference in Europe, also predicted there will be a significant amount of consolidation among European airlines, but no further mergers of domestic carriers like Delta Air Lines Inc.'s acquisition of Northwest Airlines. That stock-swap deal closed last week.

However, May forecast more strategic alliances among U.S. and European airlines like the partnership recently proposed by AMR Corp.'s American Airlines and British Airways. The airlines are seeking antitrust immunity for the deal, which would let them work together on pricing and scheduling for flights across the Atlantic.

Virgin Atlantic Airways has opposed the request, saying it would hurt competition. BA and American also want to add Spain's Iberia to the deal.``That will be the future of this business,'' May said.