Airline Weekly - December 18, 2006
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Airline Weekly - December 18, 2006

Looking Back, Looking Ahead: Airline Weekly looks back at ten key developments from 2006, and what to look for in ’07

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Looking Back, Looking Ahead: Airline Weekly looks back at ten key developments from 2006, and what to look for in ’07

Following twelve months of flying, airlines are once again on final approach to another new year. Here, in no particular order, are Airline Weekly’s top 10 airline industry developments in 2006, as well as a quick glance at the year ahead:

Glory days in Latin America: Latin America’s airlines were once known for their inefficiency and chronic inability to compete with their larger and more productive U.S. rivals. Throughout 2006, however, four airlines solidified their reputations as some of the best managed—and most profitable—airlines worldwide. Chile’s LAN, buttressing its passenger business with a large cargo operation, penetrated the Argentina market and beyond. In Brazil, Gol and TAM delivered a knockdown punch to Varig (though it’s slowly rising from the canvas) and produced record earnings. And in Panama, Copa continued to build its highly-profitable hub for the Americas. Further north, meanwhile, deregulation in Mexico introduced many promising new startups, forcing other carriers to reform.

Workers suffer in the West, prosper in the East: In the giant North American market, airline workers continued to suffer layoffs, furloughs, pay reductions, pension cuts, benefit losses and adverse work-rule adjustments as their employers restructured and looked to offset higher fuel prices. Airlines in Europe, too, looked to stay competitive by lowering labor costs. But it was a completely different story in Asia and the Middle East, where capacity growth, deregulation and expanding trade and tourism led to a pressing need for trained personnel. Some American and European pilots, in fact, found themselves moving to cities like Dubai or Kuala Lumpur to take advantage of ample job opportunities.

The cost of selling airline tickets decreases: For all the pain and heartache associated with higher fuel costs, one expense item that’s consistently fallen during the past few years is the cost of distribution. In... (321 of 1285 words)

Also Inside this Issue:

Merger talk filled the airways last week, reaching a boiling point following reports of United-Continental talks and a bid by AirTran for Midwest Airlines. By week’s end, though, none of the rumored and proposed deals were certain.

In Australia, a consortium of investors led by Texas Pacific sweetened its deal for Qantas and won support from the airline’s management and board of directors. The mega-takeover isn’t finalized yet, however, with some stakeholders calling for an intense regulatory review.

Texas Pacific, meanwhile, also used its ample cash to buy parts of Sabre and India’s SpiceJet. Will it surface as a funding provider for a U.S. merger?

As 2006 nears its end, airlines worldwide are poised to record their best annual financial results since 9/11. That’s especially true for U.S. carriers, which are enjoying the fruits of massive restructuring efforts. Nevertheless, competition remains fierce and earnings far from satisfactory. Elsewhere in the world, carriers continue to enjoy the robust global demand for travel that’s characterized most of 2006.

Will the favorable demand trends persist in 2007? Stay tuned for the answer to these and many other pivotal questions. It’s sure to be another drama-filled year in the always-exciting airline business.

About Airline Weekly

Airline Weekly is a subscriber-supported publication, paid for by readers who want a more interesting, more valuable read about the airline business. Each Monday, Airline Weekly reports who's flying where, new marketing approaches, fleet, finance and key airline and airport data. And, most importantly, Airline Weekly readers enjoy a critical context, insightful analysis and new ideas found nowhere else.

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