The Airlines Industry, 2010 in Perspective

As 2010 approaches its final days it is so appropriate to look back and put the year's events and highlights in perspective. 2010 is a memorable year.

Globally, 2010 was a stellar year for the airline industry with post tax profits of about 15.1 Billion dollars in profit as per the latest figures from  IATA. The best in this decade. Of course these profits have been partly driven by the dreaded ancillary fees and the tight reign airlines especially in the USA have exercised over capacity. The tight control of capacity caused fares, load factors and yields to go up.

Among the spectacular developments is the ascendancy of Social Media as an essential communication tool in emergency response and crisis management. This was displayed when the Ash Cloud hit Europe, AA handling of the bomb threat in San Francisco last August and the way the numerous snow storm caused disruptions and airport shut downs were/are being handled. Twitter and Facebook are now tools used by airlines and indeed other aviation organisations to engage, manage and capitalize on events that would have otherwise turned into a Public Relations nightmare. Social Media is an important tool to be used in branding.

As airlines tightened capacity, those in the GCC/MENA region have lead in capacity 13.2% vs an industry average of 4% in ATKs and in revenue 18.6% vs 8.5% ytd Oct 2010. The increase was lead by Emirates, Etihad and Qatar Airways. However, OMAN Air, Royal Jordanian, Gulf Air, Saudia, Flydubai and Air Arabia among others expanded their fleets. Almost every airline in the region has expanded their network by opening new stations. The profitability of the airlines in the region has improved lead by Emirates. Of interest is Etihad that has projected profits this year and Qatar Airways that announced an IPO in 2012 after 3 years of profitability implying 2010 may be a profitable year.

The success of Ultra Range flights by Emirates, Etihad and Qatar Airways that connected the world from the Americas to Australia and New Zealand through their hubs in Dubai, Abu Dhabi and Doha has triggered  violent reactions from major legacy carriers. European carriers lead by Air France asked their governments not to grant traffic rights and additional authorities to the region's airlines. The ATA and US and European carriers asked their governments not to grant export credits to the region's airlines. Air France called for the defense of Europe's position as the "crossroad of aviation" signalling the realization of European airlines that they no longer can control the shift of the Global Hubs from Europe to the GCC and MENA. Perhaps the most significant event this year is the deterioration of  diplomatic relations between Canada and the UAE over additional flights for Emirates and Etihad. With the Canadian Government claiming the potential loss of tens of thousands of jobs in Canada if they have accepted to Air Canada claiming Dubai is not a destination and no Canadians live in the UAE, a clear case of protectionism.

Last but not least is the coming of age of the LCC market in the region after 7 years from the launch of Air Arabia. The segment is expanding as more and more people are flying with the low fare carriers. The latest Travel Tracker from YouGov Siraj showed  a surge in business travelers (64% in 2010 vs 48% in 2009) and and increase in leisure travel (67% in 2010 vs 61% in 2009). Travelers are looking for value for money as they anticipate a hike in Air Fares in 2011. As far as business destinations India remains the most popular at 7% followed closely by KSA, Qatar and Jordan at 5% each. The sector witnessed the first airline failure, SAMA Airlines in KSA filing for bankruptcy and Bahrain Air withdrawing from the market and becoming a legacy type airline.

All in all 2010 has been a good year for the airlines and hopefully 2011 will be as good.