International Routes Will Lead The Charge

Even as economists continue talking about the US housing slump, unemployment, impending recession and record oil prices, the US airline industry is talking about 2008 in optimistic terms.

The Air Transport Association estimates the industry will make between $3.5 and $4.5 billion this year, completing the industry's first three consecutive profitable years since before 9/11. Reported profits were $5 billion in 2007, and about $3 billion in 2006.

ATA's John Heimlich credits the cheerful financial outlook on a reduction in seats, as carriers trim unprofitable routes, a 2.4 per cent increase in demand, and added service to markets such as China and India, where airline passenger volume growth is far outpacing the US.

"In 2008, ongoing passenger and cargo revenue strength -- particularly in the international arena -- will help offset a sizeable increase in fuel expenses and a modest increase in nonfuel expense," Heimlich wrote in a report. "That would make 2006-2008 the airlines' first profitability 'three-peat' since 1998-2000.

"Passenger and cargo demand is surging globally," he added. "The reality is that the world economy, led by China, India and other developing economies, is growing at twice the rate of the US economy."

Heimlich cautioned that continued high fuel prices and an economic downturn in the US could, however, force marginal operations and some regional carriers out of business.

FMI: www.airlines.org