The likely losses sustained by airlines in 2009 will be yet another new and unenviable record. The dramatic collapse in passenger numbers across the globe has maintained enormous pressure on all sections of the industry, prompting a spate of co-operation talks and mergers.
However, year-end gains, which have continued in early of 2010, have encouraged the International Air Transport Association to revise its forecasts and provide a glimmer of hope for its beleaguered members.
The recovery in demand, driven by the emerging markets of Asia-Pacific and Latin America, together with better managing of capacity, has enabled the association to lower its 2009 loss estimate to $9.4 billion and to halve its 2010 estimate to $2.8 billion.
If realised, this would be a major turnaround after two years of great hardship, but IATA cautions that important risks remain. "Oil is a wild card," says IATA's director general Giovanni Bisignani. "Overcapacity is still a danger, and costs must be kept under control."
Oneworld carriers Iberia, BA and American have finally won US approval for anti-trust immunity, but face opposition from non-aligned airlines like Virgin Atlantic
Bisignani has also aired his frustration at the lack of significant progress on the second stage of the Open Skies agreement between the USA and the European Union, singling out in particular the issue of ownership.
The North Atlantic and intra-Europe, which have been contracting since mid-2008, are the weakest international markets, expecting losses in 2010 of $2.2 billion and $1.8 billion respectively, largely due to faltering consumer confidence. Only Asia and Latin America are driving the recovery, backing up IATA's assertion that "we are seeing a two-speed industry".
Asia-Pacific carriers will record a $900 million profit, turning around a $2.7 billion loss in 2009, with Latin American carriers expecting to post an $800 million profit for the second consecutive year. Both regions are witnessing economic recovery. Airlines in the Middle East and Africa will remain in the red, although at a reduced level.
While the precarious financial situation has not resulted in the total collapse of any high-profile airline, some have come dangerously close to it before being rescued. None was closer than Japan Airlines, the country's largest international carrier, which entered bankruptcy protection earlier this year after its $10 billion turnaround plan failed in January.
Others have resorted to rationalisation, increased co-operation and mergers, of which the £4.3 billion ($6.61 billion) merger between British Airways and Iberia has been the most discussed and dissected. The marriage will create Europe's third-largest airline and sixth-largest in the world, although both companies will retain their brands under an overarching holding company. The carriers are hoping that synergies to be realised will enable both to return to profitability.
Another significant boost to both carriers was provided by the US Department of Transportation, which in February, after many years of debate, tentatively approved antitrust immunity in the transatlantic market to BA and American Airlines, as well as to Iberia and other Oneworld alliance members.
Even though the approval is subject to both airlines relinquishing valuable slots at London Heathrow, Sir Richard Branson, chairman of BA rival Virgin Atlantic Airways, has been vigorous in his opposition to the deal and disputes the DOT assertion that antitrust immunity would increase competition and benefit the consumer. He has labelled the decision a "kick in the teeth" for non-aligned carriers. The European Union has yet to rule on the Oneworld application.
A surprising development is under way in Russia, harking back to its Communist days when Aeroflot was not only the world's largest carrier, but was in sole control of all aviation activities. In February Prime Minister Vladimir Putin approved the proposed merger of six airlines controlled by Rostekhnologii, which he had set up in late 2007 as a state corporation, into Aeroflot.
The consolidation of Kavminvodyavia (KMV), Orenair, Rossiya, Sakhalinskiye Aviatrassy (SAT), Saravia and Vladivostok Air was initially envisaged as a two-stage process with the five smaller carriers initially combined into one based on Rossiya, but managed by Aeroflot. This would be followed by a merger between Rossiya and Aeroflot, once again creating a giant carrier against which others such as S7 Airlines, Transaero Airlines and UTair Aviation would find it most challenging, if not impossible to compete.
The long-running struggle for survival of Greek flag carrier Olympic Airlines has forced the indebted government to sell its airline to a private investment group. There may yet be another twist in the tale. In February, the new shareholders of Olympic Air and the shareholders of Aegean Airlines agreed to merge the two airlines to create a strong carrier better able to compete, although EU approval is awaited.
In October 2009, Grupo Taca and Grupo Synergy (owner of Avianca and its subsidiaries) announced a strategic merger to create Latin America's leading airline group. The airlines involved will retain their separate branding and independent operations. For Avianca, which has not had the easiest time in recent years, this will provide renewed encouragement for the future.
In spite of the challenging economic climate, Flightglobal data shows that 80 new airlines entered the market last year, although they were of only limited regional importance with no global significance. Newcomers are located almost exclusively in Europe, Asia-Pacific and Latin America, with only one taking its chance in North America.
Set against the start-ups is a large number of failures, with half of the 70 or so carriers registered in Europe. The financial crisis and recession has also hit the holiday charter and low-fare business, with Scottish airline FlyGlobespan, Air Comet of Spain, Blue Wings of Germany, Myair of Italy and SkyEurope of Slovakia, all succumbing to poor passenger loads. Spanish carriers Clickair and Vueling have avoided a similar fate through merging their operations under the Vueling brand.
© Star Alliance
Can global alliances like Star help drive further consolidation for the industry?
On 31 January 2010, one famous name was finally consigned to history. Following its merger with Delta Air Lines in 2008, Northwest Airlines is no more. Among its many pioneering efforts was the co-operation with KLM across the North Atlantic, which can be said to have been the forerunner of today's airline alliances.
With US Airways - itself having recently merged with America West - in talks with fellow Start Alliance partner United Airlines, it remains to be seen if further consolidation among the industry's heavyweights will lead to more famous names disappearing forever.
- Our new-look World Airlines 2010 directory, containing details of 1,500 operators, is published as a stand-alone supplement free with this week's Flight International. Additional copies, priced at £25 (€35/$50), can be purchased from our shop