Air Transpor
1069917

5 May 2011

SFT 1007-1011 Introduction to air transport

The impact of recession in air transport(passengers demand, economic cycles, current developments)

The reports covers the entire aviation industry and will include the recession aspect and its consequences on the passengers demand, the economic cycle and also on the current developments.

1.0 Introduction
One of the biggest international industries, the air transport, has the largest sensitivity on the economic crisis. That crisis hit and still continues to effect the populations, industries and economic growth in developed and developing countries. Every sector has been effected by the crisis, every industry has had a reaction and an immediate research for solutions. Instability of revenue and expenditure in the airline industry was effected from the global change. That for is easy to deduce that these reactions are different from each other. This in according to available founds, resources and differences in management.

2.0 Impacts on demand
The demand aspect, is a factor that shows us the relationship between population and economic crisis. In fact, the perception of crisis brings different fears and uncertainty in people. Thus leading to an increase of the overall savings, with consequences under the economic factor, with less expenditure incurred by each person. This is one of the things that influenced more directly the airline industry, with a sharp drop in demand.
Taking into account only two points is easy to imagine on one hand the airlines in trouble. And their management of this crisis have a fundamental elements as the recovery and the re-growth in demand. On the other hand there is a greater fear caused by the global economic instability, with price increases and a equal or less salary for each one. This leads to a greater efforts on both sides.
As mentioned earlier, the renunciations are larger to cope with a greater willingness to increase their savings. That because given a perception of crisis for the first time, the fear of further decline in the future leads to a greater attention to be prepared for the possible next downturn.
The air transport sector is one of the main players, playing a key role in the global growth,.
This because stimulate employment, bring economic benefits for many sectors, guarantees trade expansion and is also essential for the social interaction and leisure travels. Its fundamental role, makes essential the analysis and the management to the sharp drop in demand. Which will bring less revenue and less outgoing from airlines companies.

3.0 The economic cycle

Starting from the assumption that in times of crisis and or of economic difficulty, people fly less often than they do in times of prosperity, both for business or leisure.
Is now possible to analyse the business cycle.
The 2007, was called by many, and especially from the same field of aviation as of the most prolific years in demand from passengers. And also in the terms of orders for new aircraft. (and this was pointed thanks to the market outlook of the major production companies such as the American Boeing and European Airbus).
However, in 2008 the industry prosperity has changed, due to an increasing fuel cost in the beginning of the year and the global economy downturn. By the end of 2008 the aviation industry and the global economy had worsened rapidly then had been anticipated with the forecast. In December 2008 the global international cargo traffic fell by 22.6%, the international passenger traffic fell 4.6% (IATA compared with December 2007).
The black down was also extended the 2009.
IATA said that airlines industry’s losses amounts 2.5 billion dollars during the year because the traffic dropped by 3%.(IATA)
The economic crisis has constrained the civil manufactures to provide customers financing, when the crisis effects the airlines companies. This in order to ensure financing for aircrafts demand.
Two of the most relevant companies in aircrafts construction, the Boeing and Airbus, reported and observed that the cancellation of the orders had passed the amount of the new orders. The result was that the manufactures cut their productions rates and the airlines froze or cancelled the orders, and the passengers became ghosts in every airport.
However despite the crisis and global downturn, airbus in 2010, delivered an incredible quantity of aircraft (497).
His main rival Boeing, was wrought again airbus had a total order accumulation of 3500 aircrafts and a profit forecast of 438 billion dollars.
On the other hand Boeing orders fell by 78% and the profit felled by 52%. It was the worst crash ever. Both are optimistic about a long term trend profitability.
The future forecast for the air traffic is really positive. A strong e prolonged care will help to face the future forecast on needs of people and businesses on timely, readable and efficient air transportation system. Harmonizing the efficiency of those needs will increase the demand.
Also the manufactures management decided to face the fuel price volatility and consequently the high costs that it bring. That providing a fuel efficient airplanes for the future (2010-2029 market outlook). So that development will be the key factor for the recovery in profitability starting from the 2012.
Is easy to see having analyzed this data that the aviation industry is very cyclical and also sensitive to the economic cycle.

4.0 CURRENT DEVELOPMENTS

We always talk about the continuing search for a lowest oil price, but data in hand its simple to understand that this is just a dream.
Now there is a research of new methods of fuel saving and for the first time in the aviation industry that they are considering “move to” a new fuel.
The international energy agency, taking into consideration the barrel price, raised the alarm.
“Eric Dautriat (2011) The executive director of the European clean sky initiative, said that in preparation of an oil peak and what will happened after, reducing fuel consumption is not only a must from the economical point of view, but also a societal and political one”. And moreover he points out that rays of hope can be found in the research and developments of new fuel saving and green airplanes. (Eric Dautriat)
In the last few years, aircraft fuel consumption has been already decreased by 70%. The major manufacturers such as Airbus, Rolls-Royce, Safran and Boeing have already invested billions for the development and research for a new “green” aviation.
For example the investments have already given results with the birth of the new 747-8 Intercontinental of Boeing. This aircraft will set new standards in the economic and environmental performance. That plane provide 16% better fuel economy and in the percentage of lower carbon emission per passenger, and not only but also a 30% smaller noise perception.
With that this new aircraft have achieved three major goals to reduce the environmental impact of air travel.
The problems of noise has already been solved, more properly reduced. However the research in the improvement of the sector are not yet completed. A second important step to reach is the air quality around airports.
It is important to remember that the air traffic forecasting for future years is positive. That means an increased presence of aircrafts. For that reason, the research should continue and reach the largest possible development to contrast the pollution and the fuel consumption.

BIBLIOGRAPHY Autor (?)-2011 Flying towards green Skies [on line] Available at:<http://www.aerospace-technology.com/features/feature116050/>
[Accessed 28 April 2011].

Autor (Boeing?)-(no date) Long term Market [on line] Available at:
<http://www.boeing.com/commercial/cmo/index.html>
[Accessed 26 April 2011].

Autor (Boeing?)-(no date) AviationIndustry-Market analysis and trends [on line] Available at:<http://www.qfinance.com/sector-profiles/aviation>
[Accessed 26 April 2011].

IMAGE http://www.boeing.com/commercial/cmo/fleet_developments.html