How Rio de Janeiro is Building the City of the Future Sponsored This content is created collaboratively with one of our sponsors.
The airlines’ ability to raise profits from $2.50 a passenger to $4 demonstrates an impressive and rapid mastery of the new world of flying and fees.
Major airlines are making less than the price of a sandwich from each passenger they carry, the head of the aviation industry trade body said today.
Addressing the International Air Transport Association’s summit in Cape Town, Tony Tyler said that flagship carriers were making $4 (£2.62) profit a head.
Even this represented progress on the previous 12 months when each passenger was worth $2.50 (£1.64) – roughly the cost of a cup of coffee.
Overall the 241 IATA members made $12.7 billion (£8.32 billion) profit last year.
“Generating even these small profits under current conditions is a major achievement,” Mr Tyler added.
“The price of fuel, our largest cost item has increased 55pc since 2006 and we continue through the greatest period of ecomic stress since the 1930s.”
In 2006 oil was trading at $82 a barrel and global economies were growing at 4pc.
Last year carriers achieved modest profitablity despite oil averaging $130 a barrel and growth running at 2.1pc.
IATA has been heartened by increasing confidence among airlines over future prospects, even though they believe trading conditions remain tough. Airlines have enjoyed a resurgence in premium traffic and their books have also been boosted by a surge in what is described as ancilliary revenues.
In some cases these are new products. But much of the cash has been raised for charging for items – such as baggage or seat selection – which used to be included in the price of the ticket.
This now accounts for five per cent of airline revenues, ten times more than in 2007.
Airlines have also cut operating costs with initiatives including e-ticketing, where passengers download tickets from the internet. Cuts have also resulted from a series of mergers in which airlines have either disappeared or merged with former competitors.
Tom Horton, chief executive of American Airlines which has merged with US Airways, believes more could be in the offing. “I think the big question is whether there will be cross border consolidation,” he said.
Despite the mergers of BA with Iberia and Air France joining forces with KLM, Christoph Franz, Lufthansa’s chief executive, believed more were necessary.
“The industry still has undoubtedly too much capacity because of its inability to consolidate.” Asked if other traditional European airlines carriers could go, he replied: “I would not exclude it. ”Flag carriers could disappear , some may be looking to become part of another airline.”