2006 Outlook of US Airline Industry

As we near the end of 2008, you be the judge - is the industry on course?

This was the Outlook of the US Airline industry I wrote in December 2006 based on BOEING's Current Market Outlook 2006, FAA Aerospace Forecast Fiscal Years 2006-17, and ATA's 2006 Economic Report.

OUTLOOK
The Federal Aviation Administration (FAA) expected small gains in the aviation and airline
industry for the fiscal year 2006, but significant growth in the longer run. The FAA 2006-2017 forecast
report has hope in the increasing number of airline passengers in the recent years despite the various
obstacles the aviation industry faced since September 11. In 2005, the airline passenger number was a
record 739 million, up from 690 million the previous year. The FAA uses System Capacity - a relative
aviation activity measurement-to make forecasts about domestic and international gains. As a result of
legacy carrier cutbacks, domestic capacity is expected to shrink by 0.7 %. Nevertheless, the FAA
claims that U.S. commercial aviation is still on course to carry 1 billion passengers by the year 2015.
“In the long run, inexpensive tickets, a strong national economy, and increasing demand for seats
aboard aircraft should bode well for the industry and consumers.”8

The strength of the U.S. economy is an important determinant of the airline industry’s positive
fiscal outcomes. This can be seen from the correlation of the GDP growth rate to the Gross Output of
the airline industry. Also, the reduction or liberation from expenses such as leasing debts, high fuel
prices and tax burdens are key to the financial improvement of the industry. Even though rising
passenger numbers may be financially promising to major airlines, the airline/aviation industry must
still implement major reformations to its facilities, aircraft, and operations. Along
with an optimistic attitude, such implementations are key to the success of the airline
industry.