by John F. Infanger, Editorial Director
SARASOTA, FL – It will be several years before the U.S. airline industry returns to traffic levels seen in 2000, according to analysts speaking at the Forecast: 2003 airline forecasting conference hosted here in October by The Boyd Group, ASRC, Inc. Meanwhile, the U.S. carriers are projected to lose more than $7 billion this year and could lose another $3 billion in 2003 before reapproaching profitability in 2004. By then, say industry reps, a new airline industry will have emerged with a new aircraft mix. For airports, the message is to better target new air service markets and be willing to share in the risk.
According to Sam Buttrick, a Wall Street analyst who is the managing director for UBS Warburg, the U.S. airline industry will lose another $2-3 billion in 2003 and "if lucky" will break even in 2004. War with Iraq could negatively impact such projections, he says. Over the current two-year period, the carriers will have removed ten percent of capacity by retiring or parking aircraft, he adds.
Mike Boyd, president of The Boyd Group, based in Denver, says that what the industry is seeing is more than a slump, but rather a total change in the air transportation marketplace. "There’s no chance of a 2003 rebound," he says. "There just aren’t going to be the seats out there."
Mike Boyd of the The Boyd Group foresees very slow U.S. air carrier growth for the next several years, with the Northeast market lagging behind the rest of the country. Regarding hubs, Boyd says DIA and SFO are in the most trouble long-term, while bright spots should be CVG and PHX. One question: the impact of the South American economy on MIA.
Boyd, who consults air carriers and airports on future growth and air service development trends, foresees a continued decline through 2003, with the period from 2000 to 2008 being marked by no net growth in traffic. During that time, the industry will experience losses of some 100 million passengers a year and of revenues of $11-15 billion per year.
"There’s no chance of a 2003 rebound. There just aren’t going to be the seats out there."
Mike Boyd, president, The Boyd Group
In effect, he says, we will see a changed industry, marked by the retirement of older model aircraft, the introduction of Embraer’s line of 70-110 seat aircraft (see sidebar), a defined but limited regional jet impact, and fewer fare variations. Two other trends will have an impact: the hassle factor caused by security delays at terminals will lead passengers to continue to use their cars for shorter routes; and, many businesses will rely on the automobile and videoconferencing as alternatives to expensive and time-consuming air travel.
The Government’s Impact
Carol Hallett, president of the Air Transport Association, which represents the air carriers, puts much of the blame for airline losses on the government. "There are ominous signs," she says, regarding governmental decisions made post-9/11, pointing to new taxation and an unwillingness to accept the cost of securing the transportation system.
Hallett says that one "conservative estimate" of new taxes and security costs to the industry is at $3.8 billion. Another study, she says, estimates that some 27 percent of passengers have identified the hassle factor brought on by new security measures as a reason for not flying, resulting in a loss of some $2.5 billion in airline revenues. Combined, the numbers account for the bulk of current airline losses, says Hallett.
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