HOW THE RECESSION HAS AFFECTED THE AIRLINE INDUSTRY
To understand why it hurts so much airlines, you must first major victims of recession and why it takes longer to recover.
The current recession began to bite in 2007 and was officially declared in 2008 in most countries around the world. Past recessions have never been in such a world, and affected not only individuals and businesses, but countries with the likes of Greece and most recently Ireland receives massive hand outs, just to make their payments and to maintain normal services.
First problems started in the banking and financial sector, where the business model point to the real estate prices still driven by higher lending rates depends criteria easier. After the customer does not meet its liquidity position in the dry and banks began to fail, because they were not in a position to make loans with the first major victim of Lehman Brothers, is one of the oldest and most respected international banking institutions in the world.
This failure has shaken the banking and insurance, and stop a global collapse and a run on banks, had to intervene to support the governments are pumping billions into the system and in some cases, the purchase of shares in the banks into trouble.
Banks and insurance companies supports many other important areas such as accounting firms, marketing companies, law firms and companies in the industry, comprehensive staffing structures and they are a good deal of air activity but the lack of liquidity and balance sheets battered credit banks not affected the economy of all -financial companies see their costs and an easy target flew.
For greater activity in the international airline business is the cornerstone for its business and disappeared almost overnight and airlines worldwide lost 9000000000 $ in 2009th Outside the company obviously on holiday as an important customer, but also unemployment, the threat of unemployment, reduced loss of overtime and in some cases, the work week consists of expenditure investors.
Airlines first reaction was to reduce the cost of staffing a major goal, do not take options on new aircraft and the abandonment of unprofitable routes. BA in Great Britain was in the strike by flight attendants from more than two years in the airlines involved to change the terms. This is still ongoing and planned no end in sight and more strikes.
He has also lead share for airlines like BA and Iberia merger with alliances in order to be beaten or reduce driving. The most important alliance, the American and British authorities between BA and American Airlines agreed and ratified by the European Union. These companies had pushed for this for many years against fierce opposition from other airlines and under normal circumstances it would have been harder to win recognition.
The victim was the other major governments themselves, their own record company has created massive deficits while they printed money to keep the economy on an even keel. Normally in a recession, government spending on capital projects would increase to boost the economy but, like banks, they now need to reduce and to demonstrate the international community to their home in order.
There are two drawbacks to this for the travel industry, first cutting back on public warehouse is in more layoffs and less spending on capital projects in the private sector to be distributed by spending less on luxuries like vacations.
Government cost-cutting in Spain and Greece has already led to air traffic controllers and airport air strike ends, because they know they are vital to their countries’ dependence on the tourism industry. However, it is the airlines, which in turn are affected by a conflict from the recession that began four years ago.
In the last quarter of 2010, air travel evidence has shown a recovery, but the recent unrest in Africa and the Middle East and the massive rise in oil prices could easily from many countries switch to the recession because increased energy affects everyone and no more than one airline.
Airline industry recession
HONG KONG/BRUSSELS — Airlines and their suppliers are reporting tentative signs a severe industry recession is bottoming out, sending shares higher on Tuesday.
Airbus, the world's largest producer of passenger jets, said airline traffic had possibly seen "the trough of the recession" and could start to rebound from next year.
"In 2009 we believe total traffic is down 2%. In 2010 we may experience a 4.6% growth rate," Laurent Rouaud, senior vice president of market and product strategy, said at the Asian Aerospace exhibition in Hong Kong.
In Europe, Air France-KLM said passenger traffic fell 2.9% in August but its planes were on average 84.8% full, a rise of 1.1 percentage points from the same holiday peak month a year ago.
Its shares rose 6.6%, helping push the DJ Stoxx pan-European Travel and Leisure index up 2.4%, with traders also citing catch-up by an underperforming sector.
Shares in Aer Lingus, British Airways, Ryanair and Lufthansa rose between 2 and 4%.
The Air France figures came as industry data for July showed airline passenger and freight traffic dropped much less sharply year-on-year than in the first half of 2009.
ACI Europe said after a survey of 106 airports passenger traffic at European airports fell 4.3% compared with July 2008, versus an average 9.6% drop during the preceding six months of this year.
Freight traffic — a widely watched indicator of economic health — fell 13.4% compared with July 2008, an improvement on the average 22.4% decrease during the preceding six months.
"That would fit with our picture," said economist Cristoph Weil at Commerzbank. "We believe we will see a strong recovery in Q3 and Q4 in the euro area."
Air France-KLM said its cargo business had in August confirmed signs of stabilisation seen in recent months.
Ireland's Aer Lingus said on Monday passenger numbers had risen 7.7% year-on-year in August.
Growth predicted
Economists say the global economy looks to be pulling out of recession, with the OECD predicting a renewal of growth for the United States and euro zone in the third quarter.
But, like the airline industry, the broader economy remains on life support and G20 finance ministers agreed on Sept. 5 to keep stimulus measures in place..
ACI Europe's numbers were helped slightly by weak comparative figures in July 2008, when the economic downturn first started to bite and passenger data entered negative territory for the first time in six years.
But weak comparatives account for only about a fifth of the improvement in freight volumes, ACI archive figures show.
Airbus and rival Boeing Co are headed for their worst annual order tally in at least 15 years as struggling airlines cancel or defer almost as many planes as they buy.
The world's airlines are expected to post total 2009 losses of $9 billion including at least $6 billion in the first half, says the International Air Transport Association..
A Boeing executive said any recovery in the economy would not translate into recovery in demand for aircraft until 2012.
"Next year will be a year of economic recovery, 2011 will be a year of airline industry recovery and then in 2012, airlines will probably increase their demand for new airplanes," Randy Tinseth, vice president of marketing for Boeing Commercial Airplanes, told Reuters in a Hong Kong interview.
Air France-KLM last week announced 1,500 voluntary redundancies, adding to thousands of airline job cuts worldwide.
Even once airlines fly out of recession, they will be haunted by big questions on costs, especially fuel, Rouaud said.
At $67.90 a barrel, benchmark North Sea Brent crude futures prices have risen 38% since the end of March.
How a recession will improve air travel
As I sat on a plane last year, covering my ears to block out the cacophony of a half-dozen deal jockeys barking into their cell phones and even more screaming children—as well as pounding my seat tray in rage as the captain informed us that our plane, parked on a LaGuardia runway, was 22nd for takeoff—a fellow passenger began singing the praises of a passengers' bill of rights. That sure sounded nice, I responded. But the only thing that will really improve the experience of flying in America is a recession. Let me explain.
When the economy goes south, as it is doing now, the green-eyeshade types reassert themselves. In corporate America, business trips are among the first budget items to get slashed. (I'm guessing the number of people flying to subprime-mortgage-broker conventions is waaay down this year.) Among consumers, travel (especially to visit in-laws) frequently leads the list of discretionary items sacrificed on the altar of frugality. Hundreds of Bear Stearns bankers surely downgraded spring-break plans from a beach week at Atlantis to a weekend at Grandma's.
In the fall of 2001, the last time the economy slumped—a state of affairs aggravated by the events of 9/11—the number of monthly aircraft departures plummeted about 15 percent from the prior year's totals. That's not likely to happen this time around. The most recent data are from January, when the slowdown was just beginning. (Is it really a surprise that government reports on flight delays are delayed?) That month, the Bureau of Transportation Statistics reported, U.S. carriers operated 1.5 percent fewer flights than they had in January 2007.
January marked the third straight month of year-over-year declines in commercial flights. The trend has since accelerated as many airlines have involuntarily reduced capacity. In the past month, Aloha Airlines and ATA both filed for bankruptcy and ceased operations. When it went bust last week, discount airline Skybus knocked 74 more daily flights out of the system.
The failure of these marginal airlines removed only a marginal amount of flights. But larger, still-solvent airlines are following suit. US Airways has KO'd 30 percent of the overnight flights that had turned Las Vegas into a hot after-hours hub. Delta and Northwest have said they plan to cut capacity by 10 and 5 percent, respectively, later this year. And should the two airlines resume merger talks, the parking lots for jets in the Arizona desert could be expanding.
Since a Gulfstream V carrying a half-dozen fat cats essentially takes up the same amount of runway and airspace as a jet carrying 160 middle managers, the rapid growth in the private-jet market has helped contribute to the misery of the middle-class flier. While data on the use of corporate jets are hard to come by, the FAA reports that "general aviation" flights (the category into which corporate jets fall) at airports with control towers fell 1.8 percent from January 2007 to January 2008.
That trend has likely intensified as well. After all, many such planes are booked by dealmaking executives visiting clients, and kicking the tires on companies they want to buy. But mergers-and-acquisitions activity is way off, with the value of deals in the first quarter of 2008 down 50 percent from the first quarter of 2007, according to Thomson Financial. Far fewer hedge-fund managers are booking charters from New Jersey's Teterboro Airport to Cabo San Lucas to celebrate the conclusion of a deal.
With fewer planes in the air, and fewer passengers pushing their shoes through security machines, the flying experience should theoretically be improving. And in my half-dozen trips this year, I've noticed some improvement: smaller lines, four planes on the runway at LaGuardia instead of the customary 22. Two flights actually arrived early, sending several fellow passengers into a mild state of shock. In February, the on-time arrival rate of U.S. carriers rose modestly, to 68.6 percent from 67.3 percent in February 2007.
Of course, every trend can be taken to extremes. And it's possible that some companies may have become overzealous in their drive to free up gate slots. Last week, American Airlines canceled more than 2,300 flights, including nearly half of those scheduled for Wednesday, so it could inspect wiring on MD-80 planes. This voluntary effort surely did wonders for reducing aerial logjams, and made it possible for thousands of fliers to reach their destinations on time. Alas, it did little for the hundreds of thousands of American Airlines passengers inconvenienced. The airlines may succeed in reducing capacity, but they're going to have a more difficult time reducing air rage.
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