Los Angeles, CA (PRWEB) January 23, 2013
The industry is pulling together after massive losses during the global downturn. Revenue for the Global Airlines industry is estimated to increase at an annualized rate of 2.9% to $636.0 billion over the five years to 2012. Industry revenue is expected to experience more stable growth during 2012 compared with the past five years, with revenue estimated to grow 5.0%. Conditions have greatly improved since 2009, which was one of the worst years for the airline industry. The easing of average airfares and declining passenger numbers resulted in declining revenue. “The total number of passengers flying in 2009 contracted 1.1%, with a stronger decline in international flights compared with domestic,” according to IBISWorld industry analyst Radia Amari. As consumers tightened their belts in light of a global downturn that decreased employment and disposable income levels, vacation and discretionary travel declined. In addition, businesses cut travel budgets, which placed considerable downward pressure on revenue because businesses tend to pay more per ticket compared with other travelers. (Business travelers usually pay a premium for their tickets because payment is usually made under the company's account or because last-minute bookings attract a higher price.) Consequently, airlines participated in aggressive price wars, offering record-low prices. The combined effect of fewer passengers and easing prices was a massive contraction in revenue (17.3%) in 2009.
Most major airlines soaked up losses during the global downturn. Airlines suffered an operating loss over 2008 and a slim operating profit in 2009. Airlines desperately attempted to improve margins through higher prices, increased fees, capacity adjustments and code-sharing agreements. Overall, the industry's profit margins declined from 3.9% of revenue in 2007 to 1.6% in 2012. However, margins and revenue are expected to rise over the next five years as economic conditions improve and oil prices become less volatile. Over the five years to 2017, industry revenue is expected to increase. According to Amari, growth will be favorable compared with the past five years, with passenger numbers expected to rise, as income levels increase worldwide. However, high global competition among airlines will hinder revenue growth. Increased merger and acquisition activity is expected over the next five years, with the number of airlines forecast to slightly decline.
The Global Airlines industry has a low level of concentration, with the top four industry players combining for about 19.9% of industry revenue in 2012. Market share concentration has increased as a result of merger and acquisition activity. For example, in 2010, United Airlines and Continental Airlines merged to create the world's largest airline, and in 2008, Delta Air Lines and Northwest Airlines merged. Additional consolidation and mergers are expected over the next five years. Market share concentration varies among regions and countries. For example, some airlines are monopolies in their country of operation and hold 100.0% market share, while countries with a wide variety of competing airlines will have a lower level of concentration. For more information, visit IBISWorld’s Global Airlines industry report page.
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IBISWorld industry Report Key Topics
Passenger airlines provide air transportation of passengers over scheduled or nonscheduled routes, domestically and internationally. Transportation of cargo is excluded from this industry.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
About IBISWorld Inc.
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