LCC traffic and profits to boom in 2009 as legacy airlines suffer: CAPA

Mumbai: According to a Centre for Asia Pacific Aviation (CAPA) report, Low Cost Carriers (LCCs) will outpace their full service rivals in terms of traffic growth and earnings in 2009, according to International Air Transport Aviation (IATA) and International Civil Aviation Organisation (ICAO) projections. Storm conditions in 2008 have already helped the LCC segment gain a larger slice of global aviation. Now predicted tougher economic conditions and lower fuel prices will give the LCC sector a major advantage in 2009. These conclusions emerge from an analysis of the respective forecasts from the world's airline association, IATA (whose members are almost all Full Service Carriers) and the world government body, ICAO, whose forecasts cover all airlines of all shapes, sizes and models from 190 Contracting states.
Falling premium demand and pressure on revenues will drive further merger and acquisition activity in the full service sector in 2009. The LCC sector meanwhile will focus on organic growth via fleet and network expansion. The result: a shift in the balance of world aviation.
The world’s efficient and focused LCCs will successfully press home their cost advantages in 2009 against their retreating full service counterparts in short-haul and some medium-haul markets. New-generation long-haul LCCs, such as AirAsia X and Jetstar, will be emboldened by lower fuel prices, but the extent to which they can grow in long-haul markets depends on their fleet choices. For those that have ordered A330s, growth is virtually assured. For the B787 customers, further headaches are ahead. The leasing market however is easing up for wide-bodies, as several carriers, particularly in Asia, have over-ordered aircraft for delivery over the next two years.
2008 will be remembered for many reasons – many of them negative. The sub-prime financial disaster spilled into the wider economy, bursting the commodity price bubble and taking most leading world economies into recession. Record fuel prices played havoc with airline cost structures, while rapidly slowing world economies bit into airline demand in the second half of 2008. The emerging markets of China, India, Brazil and Russia all stumbled in 2008.
30/12/08 TravelBizMonitor

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Categories: Indian Aviation- In General Dec 2008, Low Cost General Dec 2008