The near-term future of air travel likely to be quite turbulent

Filed under: Uncategorized | Tags:

Americans are beginning to avoid air travel in significant numbers. This fact is in part responsible for the airlines announcing substantial cutbacks in service to a wide variety of U.S. cities. Across the globe, airlines that expected to earn sizeable profits this year will instead have gigantic losses … in the billions.
“The industry is in crisis, perhaps the biggest crisis we have ever faced,” said Giovanni Bisignani, secretary general of the International Air Transport Association.
IATA members account for over 90 percent of air travel worldwide. According to a survey commissioned by the Travel Industry Association, Americans are looking for ways to stay away from air travel because of higher fares, security hassles, and chronic schedule and service disruptions. Ask frequent flyers and they will tell you that not only is air travel not “fun” anymore, but it is a downright chore.
The member airlines of the IATA face losses of $2.3 billion during 2008 because of sky high fuel costs. Moreover, it was only a few weeks ago that the organization forecast profits of $4.5 billion for the industry. However, oil prices topping $135 a barrel turned their profit projections into huge losses.
After recovering from the enormous losses resulting from the Sept. 11, 2001, terrorist attacks (about $40 billion), the industry finally posted profits of $5.6 billion dollars last year.
The TIA study found that travelers avoided 41 million trips during the past few months. These trips cost the U.S. economy $26.5 billion during the past year, including lost ticket sales, travel-related business expenses and tax revenue.
These reductions in trips, the increasing fuel costs and the slowing U.S. economy are the basis for virtually all U.S. airlines decreasing their numbers of flights, even to popular vacation destinations like Honolulu, Las Vegas and Orlando.
Expect more cuts and service disruptions as airlines get rid of experienced employees to hire lower-cost contractors in a misguided effort to reduce expenses.
These reductions in service will also affect the attractiveness of U.S. destinations to foreign tourists.
From The Herman Trend Alert, by Joyce Gioia-Herman, strategic business futurist.