The state of air transport markets and the airline industry after the great recession

Brian Pearce

Journal of Air Transport Management, 2012, vol. 21, issue C, 3-9

Abstract: This paper examines the state of air transport markets and the airline industry following the recession of 2008–2009. It finds that demand for air transport has proved robust in the face of repeated shocks. Following the recession, international air travel and airfreight regained pre-recession levels less than 18 months after the recession low point. Air travel remains income elastic. Globalized business supply chains continue to depend upon fast air cargo services. Airlines found adjusting their fleet to this demand shock challenging, given commitments to take delivery of new aircraft, ordered at the peak of the previous cycle. Capacity was cut but largely by underutilizing aircraft, which accentuated financial losses. Cash flows have now rebounded in many regions. But returns on capital remains well below the industry’s weighted average cost of capital, representing shareholder value destruction that persists even in the good years. There is a lack of competition in parts of the supply chain but that is found not to be the main source of inadequate airline profitability. Rather the value created by the air transport industry is being captured completely by its consumers and the wider economy.

Keywords: Economic recession; Air transport demand; Airline profits (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaitra:v:21:y:2012:i:c:p:3-9

DOI: 10.1016/j.jairtraman.2011.12.011

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