No commercial event in 2015 can have an impact as massive as the recent, continued, slide in fuel prices. Oil’s fall from grace in 2014/15 will influence global airline profits more positively than any single event in modern history, at least for now.
In recent years, the airline industry has posted higher levels of profits, thanks to a combination of network realignment, and fleet and schedule rationalisation, which can be apportioned to greater industry consolidation and the resulting control in capacity and pricing. [By Nawal Taneja]
The economic backdrop in Western Europe was sluggish in 2014 and remains fragile into 2015. In particular, the eurozone nations continue to struggle to recover fully from the global recession. A Jan-2015 poll of economists conducted by the Financial Times suggests that most experts expect GDP growth in the eurozone to be around only 1% in 2015.
A capacity truce in Australia’s domestic market - A return to profit for Qantas and Virgin Australia
When Qantas and Virgin Australia recently ended their capacity war in the domestic market by tapering the high growth of past years, there was quiet jubilation in many quarters. But Qantas and Virgin now have many battle scars to address before they right themselves.
India’s beleaguered aviation industry is starting to show signs that could mark the beginning of a structural turnaround in its fortunes. The sharp decline in fuel prices is a major source of relief in a market where aviation turbine fuel (ATF) is subject to some of the highest taxes in the world.
Southeast Asia is a market of both challenges and promise. 2015 will mark the second consecutive year of slower growth and potentially the second consecutive year when most airlines ended in the red.
2015, the year of the sheep, may not sound the most auspicious for Northeast Asian aviation. But it is a reflective mode, offering prudent advice that should be taken sooner rather than later.
Countries within North America enter 2015 with a solid economic outlook compared with Europe and some regions in Asia and Latin America. GDP growth in the United States is forecast at 2.5% to 3%, while Canada should approach growth of approximately 2.5%.
The Middle East enters 2015 still on the high notes of 2014 that saw the delivery of Etihad’s first 787 and A380, and Qatar’s first A380 and the world’s first A350. Both airlines are using their new aircraft to secure a stronger service positioning, expand their networks and realise the benefits from next-gen technology.
Overall there are still huge prospects for growth in Latin America despite the recent headwinds. Slumping resources prices are hurting and the gloss has fallen off many of the region’s emerging markets. But as fuel prices fall, the region’s leading groups and its relatively small number of LCCs are eager to reaccelerate expansion.
In geographical terms, most countries in the eastern part of the European continent are classified as developing or emerging economies. IMF forecasts GDP growth of 2.9% for emerging Europe in 2015, hardly rocket-fuelled by comparison with emerging markets in other parts of the world, but certainly faster than the 1.8% growth forecast for the European Union and 1.3% for the eurozone countries.
In 2006 and 2009, CAPA published a management report on low-cost airports and terminals (LCATs). At the time, LCATs were very much in favour within the budget airline business as that segment grew rapidly worldwide. Less than a decade on, the segment is still growing, albeit less rapidly in the last year, as seen from the chart on the right.
Africa has huge growth potential, particularly if liberalisation accelerates. But challenges remain in some of the region’s major markets. The continent’s largest airline, Ethiopian Airlines, continues to pursue rapid expansion in 2015 while SAA and EgyptAir restructure, and LCCs are starting to make inroads as cracks appear in the protectionist barriers to entry.