The global airline industry is no where close to recovery according to the head of its largest trade association. “Oil prices are high, although moderating somewhat from recent peaks. The European sovereign debt crisis is unresolved and we are seeing signs that it is starting to affect Asia’s export-driven economies. And the largely jobless recovery from the 2008 global financial crisis is proceeding at a glacial pace. Passenger demand is strong, cargo is weak and the industry’s profitability remains razor thin,” said Tony Tyler, IATA’s Director General and CEO. The IATA is expected to revise downward its 2012 industry outlook for a $3.0 billion profit on $633 billion in revenues for a net margin of 0.5%.
The news means that carrier consolidations are not over. More and more airlines will seek saving in mergers meant to cut duplicate costs. Northwest and Delta (NYSE: DAL) and United (NYSE: UAL) and Continental have already done this in the US. US Airways (NYSE: LCC) has expressed interest in buying the American Airlines assets from its bankrupt parent AMR. That does not leave any room for more mergers in the US. Too much market share rests with too few carriers.
Douglas A. McIntyre