Business travelers are giving the airline industry a reason to be hopeful … which is strange. Usually, those guys are such a drag. Trust me; I was one of them for a while. Business travelers aren’t much fun at parties or anywhere else. Nonetheless, their presence on planes means more cash in the till for the airline industry, following two years of economic mayhem (and years of management that is what it is).
At a recent meeting of the International Air Transport Association, 700 industry leaders seem to have decided that the biz is headed in the right direction, though they remain cautious. Translation:
Cautious optimism means most airlines expect to make money this year after a couple of years of staggering losses, precipitated by the oil price run-up in 2008 and the global recession in 2009. A profitable airline industry could also be good news for business travelers as airlines restore the capacity they removed from the network during the last two disastrous years, putting many more seats on sale and offering a wider array of flight options on many routes.
According to IATA, the industry lost $80 billion in the last two years, four times the amount it dropped following the terror attacks of 9/11. Yet, the corner appears to have been turned. Originally, IATA predicted a $5.6 billion loss for the airline industry in 2010, but it has since changed the forecast to a $2.5 billion aggregate profit. This really only amounts to a margin of 0.5 percent (on revenues of $545 billion), which is basically irrelevant in light of the last two years’ losses, but at least it provides a glimmer of hope.
The suits are the reason for this mild form of airline economic bliss:
The rapid turnaround has been led by business travel. During the combined oil/economic crisis, business travel took the greatest hit with passengers traveling in international first and business class down by as much as 25% in May 2009 from the previous year. In contrast, the number of passengers traveling in international economy class was only 10% lower at its bottom point in March 2009 vs. the previous year.
Now that business travelers are back on planes, many problems are creeping toward resolution. Asia and Middle East are leading the recovery, but Europe is expected to lag, with an aggregate loss of $2.8 billion despite a forecasted passenger traffic increase of 2.9 percent.
You may not be crazy about all those cell phone-toting pricks lingering at the gate … but the airlines sure are.