Winnipeg Free Press - PRINT EDITION

Nothing but blue skies for airlines

Industry forecasts massive growth

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As school lets out and the holidays bear down on us, this week represents one of the busiest air-travel periods of the year.

Every indication is that load factors for Canadian carriers will be very high, not only during this season, but into the future as well.

The airline industry has gone through a number of years of extreme turbulence but, for the most part, that's becoming no more than a bad memory.

Reflections of that new confidence can be seen in the recent share prices of our two most dominant carriers. At the time of this writing Air Canada's shares had reached $7.62, up from their 52-week low of only $1.50. Similarly Westjet Airlines' recent high was $28.71, from its 52-week low of $19.13.

While some airlines like Qantas Airways are still on the verge of bankruptcy, and it took a merger with US Airways for American Airlines to survive, the future looks extremely bright for the industry sector in whole.

The International Air Transport Association is the club most of the major carriers belong to worldwide.

Just this month, IATA, as it is better known, unveiled its airline industry forecast for the next four years.

To the end of 2017 passenger counts are projected to grow to just under 4 billion. This would represent a growth spurt of 930 million passengers. This, if the forecast holds, will reflect a 5.4-per-cent compound annual growth.

Next year, global airline profits are expected to peak at $19.7 billion. How is this possible after such a bleak period for the industry?

Experts suggest cost-cutting, revenue from new ancillary fees, lower fuel prices and a real increase in travel demand are the reason.

IATA suggests that 2013 will see global airline profits reach almost $13 billion, which is 2-1/2 times their profits for 2012, which were less than $7.5 billion.

Few economic discussions have resonance without reference to China. With more flights to this country being added all of the time, and ever more domestic routes being opened in China itself, these routes will see the greatest growth at around 24 per cent.

Likewise, the Middle East and Asia Pacific will be the drivers for a significant percentage of international passenger growth at 6.3 per cent and 5.7 per cent respectively. Africa and Latin America will not be laggards either, with 5.3-per-cent and 4.5-per-cent increases.

Notwithstanding these lofty increases, the United States has been, and will continue to be, the biggest carrier of domestic passengers. Even though it will only increase its passenger numbers by 70 million between now and 2017, it will carry an estimated 667.8 million domestic passengers by the end of the IATA forecast period.

Airline confidence in the future can be underscored with the recent unveiling by Air Canada of its new Boeing 787 Dreamliner series of aircraft.

For international flights, Air Canada will offer three classes of service. Although once a concern that business-class clients would no longer be willing to pay the higher tariffs, that fear appears to have gone. The business-class section will feature the now popular 180-degree flatbed seats and other excellent amenities.

In addition, Air Canada will be offering three classes of service that afford a little extra luxury and better seating than the lower-priced hospitality class, without the heavier costs of business.

And it's not just airlines that are experiencing a turnaround in profits.

Over the past few years, the economy has not been kind to some of our Canadian tour operators either. Sunquest Vacations, a division of Thomas Cook, was sold off at pennies on the dollar and converted to an organization that bears little resemblance to what it was.

One of the major carriers from Manitoba, Transat Holidays, reported a net loss of $16.7 million in 2012. But with its fiscal year 2013 completed, Transat just reported a profit of $58 million, a dramatic recovery achieved only through significant cost-cutting and margin improvements.

What does all this mean to you and I?

On one hand, it means we don't have to fly with the fear the airline or tour operator we have chosen is going to go bankrupt while we're in the air, leaving us to fend for ourselves. This has happened in the past.

But it also means that as much as we want prices to go lower, early indications are that they are rising. Although fuel prices have remained consistently lower than projected, those nasty, if not despicable, fuel surcharges are likely to remain, as will the taxes and service charges from tour operators.

Notwithstanding that, many suggest that what we pay for the joy and convenience of travel is fair and just -- without a reasonable return on investment, we would not have the opportunity to explore our planet.

That desire for exploration helps develop understanding and friendships from around the world and, at this special time of the year, it's worth contemplating.

I wish you all the best for the holiday season with friends and family.


Forward your travel questions to askjourneys@journeystravel.com. Ron Pradinuk is president of Journeys Travel & Leisure SuperCentre and can be heard Sundays at noon on CJOB. Previous columns and tips can be found on www.journeystravelgear.com or read Ron's travel blog at www.thattravelguy.ca

Republished from the Winnipeg Free Press print edition December 21, 2013 E4

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