For the airline industry, 2017 is starting off as an unpredictable year. Amid worldwide political changes, an increase in terrorist threats across the Western world and recent OPEC news, many in commercial aviation are uncertain of what lies ahead. While these outlined factors are by no means a guarantee of losses to airlines in 2017, they have brought questions and potential challenges to the industry.
Terrorism and Tourism
An uptick in terrorism, marked by incidences at airports in Istanbul, Brussels and, most recently, Florida, as well attacks using vehicles in Berlin and Nice, have left many speculating over the effects of terrorism on the travel industry. According to the BBC, popular holiday destinations for Britons, such as Tunisia, Egypt and Turkey, have been experiencing a sharp decline in tourism. And with many Western countries on high alert for terrorist activities, demands for air travel (and effects on commercial aviation) are shaky.
Politics as Usual (or Not)
Changing political climates, including the election of Donald Trump, the “Brexit” and upcoming elections in Italy and Germany have led to economic uncertainty. Because air travel is tied closely with economic performance, there is a “wait and see” attitude for 2017. Will these new, more nationalist sentiments help or hinder the global economy? Nearly everyone, including airlines, are anxious to find out.
With the recent news of a Russia-OPEC agreement, there’s little question that the cost of oil will rise. However, the effect these cost increases have on airline profits is not as clear-cut as it was once understood to be. While higher oil prices obviously affect airline bottom lines, the industry as a whole has developed innovative methods (like “rightsizing”) to counteract these increases. It’s the effect of a combination of factors, including political instability and terrorism, that could intensify the effects of rising oil costs.
2017 is already proving to be a year of uncertainty for commercial aviation. While many unknowns exist, the airline industry has also developed proven methods of combatting past challenges. Our hope is for a profitable year for aerospace, and as always, our goal is to help keep you moving. Because time matters.
Read More from the Kapco Global Blog