There's plenty to worry about if you run an airline. Angry passengers, demoralized employees, expensive jet fuel. But these days, there's one thing keeping the CEOs up at night: it's the economy, stupid.
The Boyd Group, a respected aviation consulting firm, says the recession is going to hit the airlines harder than Vitali Klitschko wailing on a sparring partner. The resulting decrease in travel will create "massive declines in aviation revenues" and suggests things may not get back to normal (whatever that means) until 2014.
Mike Boyd has never been one to mince words, and his report, Airline Traffic: 2009 Prospects Going South (.pdf), pulls no punches, starting with his warning: "The potential for a major free-fall in air travel demand in 2009 should not be discounted."
Major free fall. Interesting choice of words.
'Regardless of your feelings on air travel, the numbers in Boyd's report are scary. He says that in total, airports will see over 185 million fewer "enplanements" - industry jargon for the number of people boarding planes - during the next three years. He predicts a drop of more than 41 million fewer from 2008 to 2009. It could drop another 20 million between 2009 and 2010. 60
million fewer in 2010.
That will bring a disastrous loss of revenue for the airlines. Boyd predicts that the industry will take in almost $7 billion less this year than last and lose another $2 billion on top of that in 2010. That may not seem catastrophic for an industry that rang up sales of $160 billion last year, but all those planes, hangers and airport gates cost money whether they're being used or not, so lost sales really hurt. "The airline financial neutron bomb we've been warning our clients about... may be on it's way," Boyd's report suggests gloomily.
Boyd notes a huge drop in revenue will ripple out to other parts of the economy. Plunging sales mean airlines will pay less in federal taxes, to the tune of $4.9 billion cumulatively through 2011.
Not good at a time when the FAA is considering a pricey revamp of the air traffic control system and other infrastructure investments need to be made.
If you think that a collapse in passenger traffic means a near empty plane with plenty of room to stretch out next time you fly, think again. Boyd says airlines will try to stay on top of things by cutting capacity to match the drop in passenger numbers, which means that while there will be fewer planes in the sky, they'll be as packed as ever.
With this latest airline crisis, there doesn't seem to be much of a silver lining.
Photo: Flickr: TomNatt
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