The potential merger between British Airways and Qantas underlies deeper troubles with the industry, as the global economic crisis weakens demand for air travel.
More than 25 airlines - most of them from the United States - have collapsed this year. Of these, the biggest are Britain's XL airline, and American ATA Airlines, who employed nearly 4000 people between them.
The lion's share of collapsed airlines are low-cost domestic carriers, but as the financial crisis continues to dampen demand, there are fears of further turmoil.
Media commentator Blake Fleetwood says in
a recent article that the fallout of the global economic crisis is bad news for air travellers.
"The world is heading for a two or three airline cartel, which will then systematically eliminate all remaining carriers, opening the way for astronomical price hikes," Fleetwood says.
"When a single carrier dominates a market, bad things happen."
And there's evidence to suggest the big players are cashing in on the grim economic forecast.
Before entering into merger talks with Qantas, BA had announced it was in discussions with several airlines, including Spain's Iberia.
If the merger between the two continues, it will form the third most valuable airline in the world.
BA Chief Willie Walsh has also indicated the airline is interested in buying troubled carrier Alitalia.
Likewise, earlier in the year German carrier Lufthansa made a bid for Brussels Airlines. The carrier has previously acquired Swiss International airlines.
Low-cost giant Ryanair is also in negotiations with rival Aer Lingus.
Some analysts say consolidation of the industry is overdue.
Heymann says government regulation has stopped a much-needed contraction of the sector.
"Mergers have been hampered by numerous bilateral agreements."
"The state should make a faster and more consistent exit from the aviation market and allow also former flag carriers to fail instead of repeatedly propping up such hopless cases," he says.
Despite the consolidation of the sector, industry leaders warn of tough times ahead.
The International Air Transport Association predicts the industry will be more than $5 billion in debt by the end of the year.
The body says there is a drop in the number premier and business clients flying. They also note a downturn in the short-haul market, though the long-haul market has remained constant.
Moreover, unpredictablity in determining oil prices has created further turmoil for the industry.
"Just ten years ago jet fuel costs accounted for ten percent of airlines' total expenditure," Heymann says. "This year the figure will rise to around 33 percent."
Heymann says the "deadly cocktail" of high overheads and low demand will mean the industry is likely to stay in debt well into 2009.
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The potential merger between British Airways and Qantas underlies deeper troubles with the industry, as the global economic crisis weakens demand for air travel.
More than 25 airlines - most of them from the United States - have collapsed this year. Of these, the biggest are Britain's XL airline, and American ATA Airlines, who employed nearly 4000 people between them.
The lion's share of collapsed airlines are low-cost domestic carriers, but as the financial crisis continues to dampen demand, there are fears of further turmoil.
Media commentator Blake Fleetwood says in
a recent article that the fallout of the global economic crisis is bad news for air travellers.
"The world is heading for a two or three airline cartel, which will then systematically eliminate all remaining carriers, opening the way for astronomical price hikes," Fleetwood says.
"When a single carrier dominates a market, bad things happen."
And there's evidence to suggest the big players are cashing in on the grim economic forecast.
Before entering into merger talks with Qantas, BA had announced it was in discussions with several airlines, including Spain's Iberia.
If the merger between the two continues, it will form the third most valuable airline in the world.
BA Chief Willie Walsh has also indicated the airline is interested in buying troubled carrier Alitalia.
Likewise, earlier in the year German carrier Lufthansa made a bid for Brussels Airlines. The carrier has previously acquired Swiss International airlines.
Low-cost giant Ryanair is also in negotiations with rival Aer Lingus.
Some analysts say consolidation of the industry is overdue.
Heymann says government regulation has stopped a much-needed contraction of the sector.
"Mergers have been hampered by numerous bilateral agreements."
"The state should make a faster and more consistent exit from the aviation market and allow also former flag carriers to fail instead of repeatedly propping up such hopless cases," he says.
Despite the consolidation of the sector, industry leaders warn of tough times ahead.
The International Air Transport Association predicts the industry will be more than $5 billion in debt by the end of the year.
The body says there is a drop in the number premier and business clients flying. They also note a downturn in the short-haul market, though the long-haul market has remained constant.
Moreover, unpredictablity in determining oil prices has created further turmoil for the industry.
"Just ten years ago jet fuel costs accounted for ten percent of airlines' total expenditure," Heymann says. "This year the figure will rise to around 33 percent."
Heymann says the "deadly cocktail" of high overheads and low demand will mean the industry is likely to stay in debt well into 2009.
[start_date] => 03 December 2008 | 03:51:30 PM
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