American’s Parker calls the end of the aviation industry cycle

Dino D'Amore
By Dino D'Amore June 10, 2016 19:38

American’s Parker calls the end of the aviation industry cycle

American Airlines CEO Doug Parker has rather confidently stated that there will be no losses in the industry at all. “Our industry has been fundamentally and structurally changed,” Parker said at American’s annual meeting. “Things are different now… When down cycles come, you won’t see losses… The bad years won’t be cataclysmic. They will just be less good than the good years.”

Parker points to three sets of numbers that are the three biggest drivers of the airline industry: fuel cost, the state of the economy, and industry capacity. Stating numbers from 2005 compared to 2015, Parker argued that despite their similarity a decade apart, the U.S. airline industry lost $28 billion in 2005 and made $19 billion in 2015. In 2005, the cost of Brent crude oil averaged $55 and three-year average GDP growth was 3.4%. In 2015, the cost of Brent crude averaged $54, nearly the same; three-year average GDP growth was 2.1%, a bit slower; and industry capacity had gained about 7%.

“Those aren’t just two different numbers,” Parker said. “Those are life and death. This is the difference between an industry that was dysfunctional and on the edge of insolvency at all times to one that is vibrant and growing.”

Dino D'Amore
By Dino D'Amore June 10, 2016 19:38