KPMG report predicts fleet replacement volume will lead to lower airline ticket prices

TESTCustomwebLP TESTCustomwebLP
By TESTCustomwebLP TESTCustomwebLP March 18, 2014 17:46

KPMG report predicts fleet replacement volume will lead to lower airline ticket prices

Increased competition among airlines due to continuing capacity growth may lead to lower airline ticket prices in the coming months and years, according to KPMG’s Transport Tracker a new quarterly publication which looks at the latest market indicators and trends.

Airlines worldwide are currently replacing their ageing fleet at unprecedented levels. According to the report, full-service airlines currently have 5,168 aircraft on order and low-cost carriers 3,582. Aircraft manufacturers Airbus and Boeing have also published record levels of order backlogs. At the end of 2013, Airbus had orders for 5,559 aircraft (representing more than eight years of sustained production), and Boeing had 5,080 unfulfilled orders in its backlog.

And although airlines continue to carefully manage capacity (with the growth in the number of seats available currently tracking marginally behind passenger demand) the capacity expansion (if the order book translates to delivery) may soon outstrip demand:

James Stamp, KPMG’s Global Head of Aviation comments: “Airlines around the globe are currently replacing their fleet at unprecedented levels. Much of the order activity by legacy airlines is driven by the desire to cut operating costs. With fuel costs continuing to be at record levels and a new aircraft generation on the market which is up to 20 percent more fuel efficient, this trend should not come as a surprise.

“Assuming that the orders are fulfilled, and this is a major if, the increase in capacity, even allowing for replacement of aging fleet, would be significant. In this case, falling operating costs and competition to fill capacity would result in further downward pressure on ticket prices, which would be good news for airline passengers.”

According to the study, low-cost carriers are expanding their fleet more aggressively than full-service airlines and are now having almost as many aircraft on order as they are currently operating. And while delivery of aircraft for full-service airlines will decline from 2015, deliveries for low-cost carrier are projected to stay at current levels until 2021. This suggests low cost carriers worldwide may further extend their market share.

The report also finds that low-cost carriers continued to outperform full-service airlines in 2013. A look at last year’s share price performance showed a rapid divergence in relative performance between low-cost and legacy carriers in April last year, which continued until the end of 2013.

Considering the continued regulatory and foreign investment constraints that deter traditional M&A based consolidation in the sector, one of the key trends for 2014 will be further sector consolidation in the form of global alliances (including “equity alliances”) and joint ventures, the report predicts.

TESTCustomwebLP TESTCustomwebLP
By TESTCustomwebLP TESTCustomwebLP March 18, 2014 17:46
Write a comment

No Comments

No Comments Yet!

Let me tell You a sad story ! There are no comments yet, but You can be first one to comment this article.

Write a comment

Only <a href="http://www.aviationnews-online.com/wp-login.php?redirect_to=http%3A%2F%2Fwww.aviationnews-online.com%2Fairline%2Fkpmg-report-predicts-fleet-replacement-volume-will-lead-to-lower-airline-ticket-prices%2F"> registered </a> users can comment.