THAT WAS THE YEAR THAT WAS

Dino D'Amore
By Dino D'Amore December 23, 2010 14:43

THAT WAS THE YEAR THAT WAS

When we look back at 2010 it would be easy to mark it out as a year of change that provided airlines with possibly one of the best markets on record for future building Not only did premium travellers return to the market in droves but the severity of the market collapse of 2008/2009 brought with it a silver lining for 2010, so many airlines were brought to their knees that governments across the globe finally realised that it was wrong to keep knocking back aviation through a sea of red tape and protectionist attitudes. 2010 has been the year of open skies agreements and mergers, wonderful leadership from many airline CEOs and outside the box thinking from many airline CFOs. We have had volcanic eruptions closing European air space during the Easter break and now snow closing the very same airports for the most part during the holiday season. British Airways boss Willie Walsh may wonder what he has done to deserve a year like 2010, but he has navigated these problems and union unrest with such great skill that he has managed to put BA in a far stronger position than it was in at the start of 2010, all credit to him.

In the Americas we have finally, after many years of trying, seen good market consolidation. Glen Tilton played a blinder with the Continental United tie-up, while the Southwest Airlines management team firmed up their reputation as the best in the business with a truly wonderful deal securing AirTran at a good price that not only gave it international coverage and strong Eastern seaboard connections, but also allowed it to order and operate gold standard 737-800s.

2010 turned out to be a year that Rolls Royce will want to forget but will not be able to for some time as Qantas (at least) is claiming damages against them for the engine blow out in November. 2010 will be the year that Airbus/EADS and Rolls Royce came so very close to total outright catastrophe. If the breaches in the A380 wing had been only slightly different then we would have had one of the worst aviation accidents in history with terrible ramifications. The Qantas flight crew deserve credit for their cool heads.

Looking forward:
2011 is an uncertain time for commercial aviation, austerity measures in many countries and increases in interest rates will hit home in 2011 with full force further dampening passenger demand. In the USA the commercial property subprime problem is growing and the foreclosure scandal is ongoing and will damage banks further, and the UK housing market is looking set for further falls next year. The introduction of Basel III, even though not in force for several years, will have an immediate impact on the way banks lend as capital becomes even more precious. We also have to worry about the Chinese economic bubble that has been building during 2010, the Chinese currency cannot remain at such low levels and a correction of some sort is likely. In India airlines will continue their investor roadshows and we may see a complete overhaul of both Kingfisher and Air India in 2011.

Look to Brazil as a great market undergoing expansion which will show in spades during 2011. Delta Air lines and Virgin Airways are the two airlines to keep an eye on in the short term while BA/AA and Iberia remain undervalued. Aer Lingus and Ryanair should be watched closely as their home market deflates further during 2011. Could Virgin Atlantic turn towards Aer Lingus for a partnership? This thought has a great deal of merit.

In 2011 expect more quality orders for the Mitsubishi regional jet MRJ90 and likewise look to Embraer for more high profile E190 and E195 orders.

Bombardier will remain firmly in the running with the C Series and Boeing, although hoping for better press in 2011, might find that 2010 was just a warm up for the full wrath of all and sundry in 2011 if the 787 program does not turn around at speed. While we are on the subject of aircraft orders one wonders if the A380 will receive further orders during 2011. The financing market will remain weak and Airbus will remain in the red on the A380 program but what of the A330-200? This aircraft is a stopgap that has turned out to be an impressive addition for many during 2010 and with aircraft delivery delays abound it is likely that the A330-200 will continue to gain ground and in so doing gain more fans.  There is no question that oil prices will be a problem during 2011 with most institutions agreeing that the $110 barrier will be broken before Easter, after that economic output issues should cool prices so airlines are in for a year of many pressures that could be as difficult to navigate as 2009 was, the consolidation of 2010 will help many and leave added pressure on others but the large scale capacity increases may have been too much too soon.

We will be back on 4th January 2011. Thank you all for your support and have a great holiday season. We wish you all the very best of regards.

Dino D'Amore
By Dino D'Amore December 23, 2010 14:43
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