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In the past week, some of the biggest names in the airline industry have expressed further gloomy sentiments about the state of the airline industry reports the Centre for Asia Pacific Aviation . Emirates President, Tim Clark, told the Financial Times, “we are in uncharted territory. This is the greatest crisis in aviation’s history – bigger than…
In the past week, some of the biggest names in the airline industry have expressed further gloomy sentiments about the state of the airline industry reports the Centre for Asia Pacific Aviation . Emirates President, Tim Clark, told the Financial Times, “we are in uncharted territory. This is the greatest crisis in aviation’s history – bigger than the Gulf wars, the attacks of September 11 2001, severe acute respiratory syndrome and past oil shocks…the overall view of our industry is dire. This year, many airlines have grounded aircraft or gone bankrupt and an estimated 100,000 jobs will be cut”.
Citing Mr Clark’s quote in an email to Qantas staff this week, CEO Geoff Dixon stated, “the facts are that oil prices staying at over USD140 plus a barrel has changed forever the way we do business”.
British Airways’ Chairman, Martin Broughton stated this week that the airline is “up to its neck in perhaps the biggest crisis the aviation industry has ever known”. He added, “I don’t want anybody to be under any illusions that in the current operating conditions, it will be a considerable achievement for British Airways to break even this year”.
But at the same time, airlines have ordered more than USD50 billion in new aircraft from Airbus and Boeing (let alone other manufacturers, engines, support and equipment) this week at the Farnborough Airshow. This is hardly an endorsement of an industry in crisis – or have the goalposts just shifted?
Airbus CEO, Tom Enders, has described the mood at Farnborough as “contradictory”. On the one hand, he said, “clearly we have a crisis, particularly in certain regions”. But on the other hand, “there are still some bullish, strong airlines who are investing into new aircraft”. The big decision facing Airbus is whether to increase – not reduce – production rates of new aircraft in coming years.
Overall, Mr Enders, stated it is a sign that “not all is doom and gloom, that the airline industry is not going down the drain, that we have to differentiate regionally”.
The Middle East and Asia (and lessors) have again spearheaded the ordering – as they have done at most of the airshows this decade – and are positioning well to dominate the global aviation market in the years to come. In this environment fleet ages (as opposed to airline business models) are a key barometer of the likely success or failure of an airline.
So in reality, there is perhaps no contradiction at all. The airlines with older fleets are in that position because they have been unable to finance newer aircraft. They have also grown to positions of strength under regulatory controls that are now being removed – allowing airlines like the new Gulf entrants to make inroads.
The gap between the haves (strong balance sheets, newer aircraft) and the have-nots will only continue to widen and the divide is broadly falling along geographic lines, with the strength in Asia and the Middle East and the weakness in North America and Europe.
Vicky is the co-founder of TravelDailyNews Media Network where she is the Editor-in Chief. She is also responsible for the daily operation and the financial policy. She holds a Bachelor's degree in Tourism Business Administration from the Technical University of Athens and a Master in Business Administration (MBA) from the University of Wales. She has many years of both academic and industrial experience within the travel industry. She has written/edited numerous articles in various tourism magazines.
