James Stamp, KPMG’s Global Head of Aviation, comments on the back of IATA’s updated profit forecast for the global airline industry published today:
“We also believe that intense competition will continue to provide benefits to customers in terms of both choice and price, as the industry has historically passed on cost savings to passengers."
“Cost savings will be driven by consolidation, primarily in the form of enhanced alliances and joint ventures, and investment in new aircraft, with airlines around the globe currently replacing their fleet at unprecedented levels."
“Much of the order activity by legacy airlines is driven by the desire to cut operating costs. With fuel costs representing percent of the airline cost base, and a new aircraft generation on the market which is up to 20 percent more fuel efficient, this trend should not come as a surprise. Significant fleet expansion in the low cost sector, particularly in Asia Pacific, will drive record levels of lower cost capacity."
“Assuming that the orders are fulfilled (and this is a major “if” with orders standing at up to eight years of production), the increase in capacity, even allowing for replacement of aging fleet, will be significant. In this event, falling operating costs and competition to fill capacity would result in further downward pressure on ticket prices, which would be good news for airline passengers.”
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This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.