1. Briefly describe the trends in the global airline industry.

a) Increasing travel demand
Two of the top six U.S. airlines saw their best traffic results in 18 months this past November. While Southwest recorded a 12 percent increase, Continental registered a 2.8 percent increase, respectively, in miles flown per passenger. These figures represent absolute increases in ‘warm bodies’ flown – a more reliable metric than passenger load factor.

Clearly, the slump in air travel is ending. IATA has now revised its passenger traffic estimates for 2010 upwards by 4.5 percent (as against the previous forecast of 3.2 percent in September 2009). An estimated 2.28 billion people are expected to fly in 2010, bringing the total passenger numbers back in line with the peak recorded in 2007.

b) Airline-supplier consolidation
As airlines improve services while implementing aggressive pricing strategies, many plan to forge new links with distributors, including travel management agencies that don’t rely on the traditional GDS connections. A trend that first started two years ago, airlines are expected to continue to implement direct-connect models to manage products and inventories, and establish closer ties with their customers. For example, last October, American Airlines indicated its plans to move all indirect volume to direct connections.

This will change the nature of Airline-GDS relationships. One notable potential by-product of this trend could be GDS / TMC consolidation. With Amadeus and Travel port considering IPOs, the cash raised could be used to purchase a major global TMC. The GDS would like to have a more direct impact on their revenue potential from the carriers and, if this were to occur, a whole new dynamic will impact the already convoluted distribution model.

c) Environmentally-responsible aviation

By March 2010, EU-based airlines must