Turbulent Times Continue

I actually enjoy pouring through economic news. So charged with a new industry to cover, I was the kid who got a cowboy outfit and a drum set on Christmas morning after one of my colleagues shared an article from The Economist on the global aviation industry. Any newbie has got to figure that filling up an airliner’s gas tank isn’t any easier on the wallet than his own trip to the gas pump. Add a buck to the price of a barrel of oil and the International Air Transport Association says that adds $1.6 billion to the costs of running the airline industry. What’s worse, the trade group expects that barrel, currently around $110, to cost $30 more this year over last. Rising fuel costs in 2010 are what put the brakes on the industry’s nascent recovery with net profits expected to drop from $18 billion last year to $4 billion this year. Although 2010’s profits were welcomed news, outgoing head of the IATA and former boss of Alitalia, Giovanni Bisignani reminded everyone attending the trade group’s annual meeting last month of just how fragile the industry has always been. For the past 40 years, he said, margins were at most a paper-thin average of no more than 0.2 percent. Even for 2010, “the best year of the decade,” Bisignani said the industry posted “a pathetic [net profit] margin of 3.2 percent.” Whatever their profits or prospects, airlines are pouring money into new, more fuel-efficient planes. A couple of weeks after the IATA show, airlines went shopping at the Paris Air Show and dropped $90 billion on 872 new planes. Much of the money was spent on what any of us would want:  fuel-efficient models. The Economist reports that a new plane from Airbus, for example, offering fuel savings of 15 percent is the fastest-selling new aircraft in history. Also not surprising is that many of these new planes will be heading to the Asia-Pacific region. The magazine reports the following: The Asia-Pacific region accounts for 40 percent of the air-cargo market and 26 percent of passenger travel. The region is expected to have 30 percent of the world air-travel market – adding 210 million passengers from China alone. China has built 45 new airports in the past five years and plans to add 52 more by 2020. To read the full report, click http://tinyurl.com/3uahkxy