The Eurozone troubles failing to vacate the continent for several years now have left many of its carriers no choice but to lick their financial wounds or exit the stage completely. January has been the most ferocious month for the aviation industry yet – Malev and Spanair – two considerably large European airlines went bankrupt, many other substantial companies, such as AirFrance/KLM, had to significantly cut costs and look for new ways to maintain stability. The bankruptcy of Spanair also had an intense impact on SAS. After the bankruptcy, the company, having owned 11 per cent of Spanair shares, incurred losses from the fallen share value. Other carriers currently facing difficulties are TAP Portugal and AirFrance/KLM. These airlines are eagerly awaiting the much needed financial injections from external investors. From the Eastern Europe side, for the last couple of years the financial troubles of AirBaltic has been a major headache for its main shareholder – the Latvian government which had to place its national carrier on costly life support for most of the time during the recession. But it’s not all doom and gloom. The global air passenger numbers have increased by 6 per cent constituting an even faster growth than the predicted long-term rate tendency. So what is really going on in the aviation market?

Eurozone troubles aside, the aviation industry is faced with three major threats. Firstly, the Iranian crisis might force the oil prices up, putting the slowly recovering profits into jeopardy once again. Secondly, the unexpected problems faced by the two largest aircraft manufacturers Airbus and Boeing have delayed the deliveries of a large number of ordered aircraft. Finally, if carriers decide to increase their capabilities by adding more new aircraft instead of substituting the older ones, many flights would be half-empty.

‘Despite the increasing number of passengers and rapidly expanding fleets, the dropping profits, increasing losses and small competitors vanishing from the aviation map every day spell another hard year for aviation companies worldwide. In the best case scenario, they should be content with moderate profits. According to the IATA prognosis made in the beginning of the year, the expected losses to aviation companies carrying passengers and cargos may reach USD 8 billion,’ said the CEO of Skaiste Knyzaite.

The tumble in the European market has created the perfect medium for the Asian aviation companies which are readily establishing their market position in the old continent, particularly in the segment of long-haul flights. The companies based in the rapidly emerging Asian-Pacific region are swiftly increasing passenger flows from Asia to Europe and North America. had noticed that most of the North American and the Asian-Pacific airlines will most likely find the ways to shield themselves from the blows of the recession. Despite the far from overly optimistic prospects, carriers are planning to introduce 830 new routes this year. Emirates will launch flights from Dubai to London, North America, Ireland and Japan, Etihad is set to carry passengers from Abu Dhabi to China and Nairobi, Qatar Airways – to Georgia and Azerbaijan.

It is safe to say that airlines will seek ways to accelerate development and in Europe. The aforementioned bankruptcies of Malev and Spanair created the opportunities that were quickly snatched by low-cost carriers. Wizzair undertook the role of the rescuer for the stranded Malev customers whilst Ryanair and Vueling fixed their eyes on the suddenly much more airy Spanish market. Ryanair has expressed its plans to create more than a thousand jobs, increase its current fleet and establish several new bases this year alone. AirBaltic is also talking about the possibilities to expand their fleet. The belief that the development plans are definitely in the air is also confirmed by the results announced by aircraft manufacturers. For example, net orders logged by Airbus so far in 2012 reached a total of 230, while its overall backlog increased to 4,388 aircraft.

All in all, global aviation companies will definitely have to cooperate as only those with low expenditure have a bright future in the market. The Spanair and Malev cases fully illustrate the common tendency: smaller carriers are swiftly forced out of the market by low-cost airlines and well-established large aviation companies. According to S.Knyzaite, whilst talking about modern airlines, more and more of them will soon be called ‘new generation carriers’ – the concept describing companies which operate highly efficient fleets, react fast to the market changes, adapt liberal HR policies, develop effective route networks and maintain low expenditure.

‘It would be plain silly to talk about the full recovery of the entire aviation industry. It is just too turbulent, as it has always been. As long as the air passenger traffic continues to grow, the map of aviation will continue to change. Whatever challenges the European aviation market will face in the future, a good empty space does not remain empty for long. The same goes for all other continents. As concerns the situation today – the growth in the USA and across the Asia-Pacific will counterbalance the abating demand in Europe. Maybe one day it will flip-flop. As long as aviation continues to grow, no matter in what region, the demand for aviation specialists – pilots, cabin crew or engineers – will follow. No aircraft can fly without them,’ concluded S.Knyzaite.

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