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Global Airlines

Global airlines market: $848.2 billion industry forecast by 2018

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2014-04-15 17:58:03 - Global Airlines - a new market research report on

The Global Airlines industry has taken off after suffering massive losses during the global economic downturn. Despite the large decline in revenue at the beginning of the period, industry revenue is estimated to increase at an annualized rate of 2.9% over the five years to 2013. A sense of normality has returned to the industry and revenue growth is expected to be more stable in 2013, increasing 2.8% to $711.0 billion.

Conditions have greatly improved since 2009, which was the industry´s worst year in at least two decades. The easing of average airfares and declining passenger numbers during the recession resulted in decreasing revenue. The total number of global tourist arrivals declined 3.8% in 2009, with a stronger decline in international



flights compared with domestic. As consumers tightened their belts in light of a global downturn that decreased employment and disposable income levels, vacation and discretionary travel declined. In addition, the number of business travelers, who usually pay a premium for tickets, decreased as businesses cut travel budgets, which placed further downward pressure on revenue. Consequently, airlines participated in aggressive price wars, offering record-low prices. The combined effect of fewer passengers and easing prices was a massive contraction in revenue, amounting to 17.3% in 2009.

Most major airlines soaked up losses during the global downturn and returned to profitability by the end of 2009, although margins were extremely thin. Airlines desperately attempted to improve margins through higher prices, increased fees, capacity adjustments and code-sharing agreements. Overall, the industry´s profit margins improved from -0.2% of revenue in 2008 to 3.4% in 2013. Margins and revenue are expected to rise over the next five years as economic conditions improve and oil prices, which directly impact jet fuel prices, become less volatile.

Over the five years to 2018, industry revenue is expected to increase at an annualized rate of 3.6% to $848.2 billion. Growth will be favorable compared with the past five years, with passenger numbers expected to rise as income levels increase worldwide. However, high global competition among airlines will hinder revenue growth. Increased merger and acquisition activity is expected over the next five years, with the number of airlines forecast to decline at an annualized rate of 0.2%.

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Mike King
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