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The state of air transport markets and the airline industry after the great recession

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  • Pearce, Brian

Abstract

This paper examines the state of air transport markets and the airline industry following the recession of 2008–2009. It finds that demand for air transport has proved robust in the face of repeated shocks. Following the recession, international air travel and airfreight regained pre-recession levels less than 18 months after the recession low point. Air travel remains income elastic. Globalized business supply chains continue to depend upon fast air cargo services. Airlines found adjusting their fleet to this demand shock challenging, given commitments to take delivery of new aircraft, ordered at the peak of the previous cycle. Capacity was cut but largely by underutilizing aircraft, which accentuated financial losses. Cash flows have now rebounded in many regions. But returns on capital remains well below the industry’s weighted average cost of capital, representing shareholder value destruction that persists even in the good years. There is a lack of competition in parts of the supply chain but that is found not to be the main source of inadequate airline profitability. Rather the value created by the air transport industry is being captured completely by its consumers and the wider economy.

Suggested Citation

  • Pearce, Brian, 2012. "The state of air transport markets and the airline industry after the great recession," Journal of Air Transport Management, Elsevier, vol. 21(C), pages 3-9.
  • Handle: RePEc:eee:jaitra:v:21:y:2012:i:c:p:3-9
    DOI: 10.1016/j.jairtraman.2011.12.011
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    Citations

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    Cited by:

    1. Chen, Min & Zhu, Zhaobo & Han, Peiwen & Chen, Bo & Liu, Jia, 2022. "Economic policy uncertainty and analyst behaviours: Evidence from the United Kingdom," International Review of Financial Analysis, Elsevier, vol. 79(C).
    2. Tolcha, Tassew Dufera, 2023. "The state of Africa's air transport market amid COVID-19, and forecasts for recovery," Journal of Air Transport Management, Elsevier, vol. 108(C).
    3. Fuellhart, Kurt & Dai, Liang & Grubesic, Tony & Derudder, Ben, 2021. "The U.S. Essential Air Service Program and SARS C0V-2, 2019–2020," Journal of Transport Geography, Elsevier, vol. 96(C).
    4. Wang, Yanzai & Hao, Chengzhi & Liu, Dawei, 2019. "The spatial and temporal dimensions of the interdependence between the airline industry and the Chinese economy," Journal of Transport Geography, Elsevier, vol. 74(C), pages 201-210.
    5. Hanson, Daniel & Toru Delibasi, Tuba & Gatti, Matteo & Cohen, Shamai, 2022. "How do changes in economic activity affect air passenger traffic? The use of state-dependent income elasticities to improve aviation forecasts," Journal of Air Transport Management, Elsevier, vol. 98(C).
    6. Gudmundsson, S.V. & Cattaneo, M. & Redondi, R., 2021. "Forecasting temporal world recovery in air transport markets in the presence of large economic shocks: The case of COVID-19," Journal of Air Transport Management, Elsevier, vol. 91(C).
    7. Carol C. Huang & Chris C. Hsu & Emilio Collar, 2021. "An Evaluation of the Operational Performance and Profitability of the U.S. Airlines," International Journal of Global Business and Competitiveness, Springer, vol. 16(2), pages 73-85, December.
    8. KİRACI Kasım, 2018. "Analysis Of The Determinant Factors Of The Historical Development Of Air Transport: An Empirical Application To Turkey," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 13(3), pages 74-90, December.
    9. Tretheway, Michael W. & Markhvida, Kate, 2014. "The aviation value chain: Economic returns and policy issues," Journal of Air Transport Management, Elsevier, vol. 41(C), pages 3-16.
    10. Sibdari, Soheil & Mohammadian, Iman & Pyke, David F., 2018. "On the impact of jet fuel cost on airlines’ capacity choice: Evidence from the U.S. domestic markets," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 111(C), pages 1-17.
    11. Min Chen & Zhaobo Zhu & Peiwen Han & Bo Chen & Jia Liu, 2022. "Economic policy uncertainty and analyst behaviours: Evidence from the United Kingdom," Post-Print hal-03628930, HAL.
    12. Kristjanpoller, Werner D. & Concha, Diego, 2016. "Impact of fuel price fluctuations on airline stock returns," Applied Energy, Elsevier, vol. 178(C), pages 496-504.
    13. Dinçer, Hasan & Hacıoğlu, Ümit & Yüksel, Serhat, 2017. "Balanced scorecard based performance measurement of European airlines using a hybrid multicriteria decision making approach under the fuzzy environment," Journal of Air Transport Management, Elsevier, vol. 63(C), pages 17-33.
    14. Zietsman, Davina & Vanderschuren, Marianne, 2014. "Analytic Hierarchy Process assessment for potential multi-airport systems – The case of Cape Town," Journal of Air Transport Management, Elsevier, vol. 36(C), pages 41-49.
    15. Mayer, Robert, 2016. "Airport classification based on cargo characteristics," Journal of Transport Geography, Elsevier, vol. 54(C), pages 53-65.
    16. Heshmati, Almas & C. Kumbhakar, Subal & Kim, Jungsuk, 2016. "Persistent and Transient Efficiency of International Airlines," Working Paper Series in Economics and Institutions of Innovation 444, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.

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