13 February 2010

Recovery? What Recovery….

So the first shoots of spring are around us. Lots of folks are very happy and walking with a new spring in their step. So what about January numbers? Well not so good actually. Yields are still in the toilet and transactions are not as healthy as they could be. We have two sources which should start ringing some alarm bells. OAG reports that capacity is up again for the 6th month in a row. It is continuing to rise at a time when restraint might be a better policy for economic health. And we still see yields in the toilet.

ARC’s numbers show an improvement over 2009. But the numbers are still way down on 2006/7/8. The legacy airlines are feeling the pinch. The LCCs are continuing to grab market share. Total pax numbers are up. More than the percentage of GDS based ARC bookings in the USA.

In looking at these number specifically for the USA we can see that the drop off in 2009 was 19%. For 2010 the drop off from 2008 was still 13%. More worrying should be the yield situation. While transactions are off 2010 vs 2008, revenues are still worse off at 17% when comparing the gross transactions and revenues for 2010 vs 2008. So while traffic is coming back the yield recovery is less. Thus GDSs and transaction model players will be a little happier but those whose livelihood depends on the revenue side of the equation must remain worried. Airlines clearly must think this is going to be a cause for little celebration yet. Long term the numbers tend to confirm the view that there has been a fundamental shift in the market on the revenue types. However there is one factor that ARC’s numbers do not illustrate. The value of the Ancillary Revenue. So if we look at the airlines they can be happy to know that if they are achieving AR revenue boosts of above 4% across the board then they are doing well. What will be interesting is that this is revenue that the Agency channel is missing out on. Perhaps now the agency channel will start to think more seriously at the value of AR to their bottom lines as well.

So this tells us that there is clearly a price being paid by the market and the recovery will be a lot slower than anyone wants. However there are some opportunities to be had if people are smart.


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