The airline industry has seen better days and currently airline travel is down about 40% in 2009. Our global economic crisis has hit many nations and the world’s GDP is down over 8% on average. No nation is breaking any speed records or sound barriers. Many nations that claim to be doing well like China, whose government says they have a GDP growth of 7% are really fudging the numbers. We do that too in the United States as we try to prove that our economic stimulus plan or our economic levers are helping us through the rough waters of the business cycle.
Still, the proof is in the pudding and in America that has a lot to do with consumer confidence and consumer spending. It also has to do with business buying, layoffs, shareholders equity, and the dubious quarterly profits. When Airline travel is down and the airplanes are not filling up it’s hard for them to make money with their economies of scale. This means they must park airplanes in the desert and pull capacity from the system because it doesn’t make sense to fly an airliner around with only 60% occupancy.
You see, the cost of flying the airplane, fuel, crew, etc, as well as the fixed costs such as servicing the debt for the new aircraft, insuring the aircraft and all the facilities for maintenance, gates at the airport, and such are real costs. When Airline travel is down no airline will be breaking the sound barrier. It is expected by late 2009 or in 2010 that the airline industry will recover, but currently Boeing is not selling any new airplanes to any airlines, and even American Airlines posted one of the biggest losses in a single quarter in their company’s history.
Not only are people not flying in airliners, but air freight is also down to a trickle and UPS and FedEx have also had their profits cut short and their loads dwindle. Please consider all this and let’s look forward to 2010.