Fuel prices and future fuel hedging strategies will continue to heavily influence the financial performance of airlines in the coming year. And interestingly, the fuel price situation may present opportunities for carriers that have the financial resources to secure smart hedging deals.
But although fuel pricing will be a major factor in 2009, it won’t be the only significant thing affecting airline profitability. What also will be a critical part of the equation is consumer confidence and travel behavior.
U.S. consumer confidence right now is at a 40-year low. It isn’t just the airlines that are worried about the future. That means air carriers have to worry whether consumer travel will continue its downward slide in 2009.
Airlines will also face other challenges. Upgrading the air-traffic control system is a top priority, but of course, that’s on the federal government’s plate. There is a huge opportunity here, because the traffic congestion issue could be solved if only air-traffic technology would be modernized.
More challenges — and opportunities —- are entwined with the imminent second phase of the little-publicized Open Skies agreement. Open Skies can open U.S. domestic routes to foreign carriers, putting more pressure on U.S. carriers to redesign their pricing strategies. In turn, U.S. carriers will be permitted to fly between two points in Europe; however, the agreement precludes them from flying point to point within the same country. U.S. carriers haven’t yet embraced intramarket travel in Europe, perhaps because most already have alliances with European carriers.
If the next administration can make headway on the issues of air-traffic control and Open Skies, there still remains the local, county, and state government issue of upgrading and expanding airport infrastructure.
For some time now the U.S. has been moving sideways on these issues. The technologies exist to solve many of the challenges facing the airlines and the flying public. The path to adopting these technologies is never a straight line, though, and I think that will continue to be the case in 2009.
Airline Futurist • Miami • www.us.amadeus.com