Airliners Spreading Their Wings Freely Once More

The recession and the price of oil have acted as two massive weights tied to each wing of airliners during that dark era of uncertainty and fear of bankruptcy. It seems today, things are slowly improving for the airline industry as customers flock back to the ticket counters and demand for air cargo follows the uptrend (U.S. cargo traffic surged 22% in March). However, if one asks airline operators worldwide how they managed to keep aloft when all elements around them suggested otherwise, the answers would be almost in unison for all of them -- cost management, increasing passenger load factor and capacity reduction.

So far, the airline industry has seen demand for business travel and air cargo slowly but surely picking up as businesses throughout the economic spectrum start to recover. Nonetheless, with unemployment still hovering above 9%, consumers are keeping their discretionary spending at a low minimum, meaning that leisure trips involving airlines are still out of the question. Industry professionals anticipate that leisure travel within the airline industry will take time to improve, and there is already a consensus that it will not happen in 2010. One of the key survival strategies the industry adopted as a result of the recession has been consolidation. The merger between Delta Air Lines Inc. (NYSE: DAL) and Northwest Airlines between 2008 and 2010 has been the apogee of this consolidation campaign, making Delta Air Lines the world's largest carrier by passenger traffic. Delta is now in a unique position to benefit from the recovering economic environment as it continues to experience an increase in business travel volumes.

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Another airline which is spreading its wings like a mighty pterosaur is UAL Corporation (NASDAQ: UAUA) which on Monday of this week announced that its traffic rose 7.5% in May. Revenue reports from the company have been in the green. UAL is also working towards a merger with Continental Airlines which can lead to the creation of the world's biggest airline in terms of revenue passenger miles. 

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The big surprise came early this week, when the International Air Traffic Association (IATA) announced that it is expecting the airline industry worldwide to deliver a total profit of $2.5 billion in 2010, reversing its March forecast of $2.8 billion loss following the aviation standstill in Europe due to the volcanic ash cloud blotting European air space.