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Send  Share  RSS  Twitter  26 Nov 2009

TRAVEL: Airline Profits on the Mend

 





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There is an expectation that domestic air travel is to resume positive growth by the third quarter next year, outside of the World Cup tournament. There are also hints of a recovery clearly visible this year but that aviation is not out of the woods yet.

Even though he World Cup is commercially lucrative, it does not present a heal-all for the aviation industry. Domestic airlines are reliant on year round business and leisure travel, and such a recovery only seems highly likely towards the late part of next year. Even though signs of a recovery are visible, airlines should remain cautious and adopt a prudent approach to the current environment.

This does not mean they are out of the woods. The global forecasts remain bleak but the increased international trend of investing in emerging markets may hold positive spin offs for South Africa and its aviation industry.

Emerging markets have unleashed a massive growth surge in the world economy. Investor confidence, as the Financial Times reported last week, is evident in the tenfold increase of emerging market funds under management globally increasing to US$ 563 billion. Along with this, the potential that this new investment mentality holds for South Africa, and the African continent, is immense.

The two major economic blows, the fuel crisis and subsequent recession, have also fundamentally changed the way in which both business and consumers make purchase decisions.

The market has started to adjust to this value driven approach, but as conditions slowly recover, this trend will emerge even stronger. In aviation, low cost airlines will increase market share to well over 60-70% in the next decade.


 
 
 
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