Aviation: The good news is that there is no more bad news
03 November 2009
The view that getting better is "not getting worse" is cheering airline CEOs who, after having cut planes, routes and staff, can't do more except wait for the economic recovery, writes CNN anchor and London corespondent, Richard Quest, in an exclusive column on domain-b
It's a rum world when your definition of ''getting better'' is ''not getting any worse.'' That though is the cheering view of many CEOs from the world's top airlines. ''Some momentum off the bottom'' sings Glenn Tilton from United Airlines. ''A flattening out …'' whistles Jeff Smisek of Continental.
I heard all of this at Newark Liberty International Airport last week where I joined the jamboree celebrating the arrival of Continental Airlines into the Star Alliance. Continental becomes the 25th full member of Star. It is unique in being the only major airline to have switched alliances, having previously been in Skyteam. At this point regular readers will know that as a self professed airline geek I am just warming to my subject … so I shall try to get back to the point.
IATA, the aviation body, has depressingly but confidently forecast that the industry will lose $11 billion in 2009 on top of the $16 billion lost last year. All airlines have watched their revenues collapse. For instance Continental saw its third quarter revenues down 20 percent on last year. ''Tell me about it …'' said Continental's President and CEO-elect Jeff Smisek, reminding me that as revenues collapsed, capital costs for planes remained fixed.
It gets worse. When we do fly, we are paying less for our seats. The so-called yield is horrible. There may be fewer planes flying nearly full, but, the airline is actually making less money in the process. Think about it. When did you last buy a full fare refundable ticket? We are staying Saturday nights, using throw-away returns, booking online.
So every CEO is looking for signs that this is changing when there will be a return to some sort of pricing power. Glen Tilton the CEO of United Airlines, says ''each month is a little better, in all markets we are seeing some improvement.''
Singapore Airlines CEO, Chew Choon put it another way: ''Demand has stabilised,'' he noted cheerfully, then dashed rising hopes by adding: ''But it is too early to say whether this recovery will be sustained for much longer.'' So much for the good news.