Unisys Predicts U.S. Legacy Airlines will be Profitable in 2006
BLUE BELL, Pa., January 18, 2006 – The legacy carriers in the U.S. market will emerge from the financial woes that have plagued them since 2000 and will achieve 5-6 percent growth in passenger demand and revenue this year, according to predictions by Unisys Transportation experts.
“U.S. legacy airlines, which were already burdened by post-September 11 challenges, were nearly crippled by rising oil prices in 2004 and 2005,” said Olivier Houri, president and general manager, Unisys Global Transportation. “The airlines learned valuable lessons in the last two years especially in dealing with the high cost of oil. Those airlines that were able to deal with the impact of higher fuel prices in the form of higher fares or fuel surcharges generally maintained profitability albeit with reduced margins as was the case with some European and Asian Airlines. We expect that on the whole, the industry will return to profitability.”
Today, air travel is at an all-time high and demand will continue to grow throughout the year, according to Unisys. Legacy carriers have also taken actions to better compete. They’ve recently reduced fleet and manpower to better align capacity to market demand, enabling some airlines to increase fares in key, high-demand markets. They’ve also lowered costs by approximately $9 billion annually, narrowing the cost gap between legacy and low cost carriers. According to recent reports, carriers have increased productivity by more than 33 percent and reduced labor costs by more than 35 percent.
“While we believe passenger demand will continue to increase, our outlook for air cargo is mixed,” continued Houri. “The Asia Pacific region has great potential based on economic growth in China, but a broad-based economic turndown would clearly impact air cargo growth and the general profitability of airlines.”
As passenger traffic increases, Unisys sees issues arising with Air Traffic Control (ATC). There continues to be an urgent worldwide need to update ATC systems and procedures in order to minimize delays due to traffic capacity – especially in the peak travel summer months. Unisys encourages open dialogue between airlines and airport authorities that address security issues, expedited passenger facilitation and improved passenger satisfaction. There is also a need to continue discussion on airport charges to airlines.
Unisys forecasts that airlines will begin to look for new ways to compete through more streamlined and secure business operations in 2006. They will focus on more self-service operations, radio frequency identification (RFID) tags and open source technology.
Self-service operations
RFID tags
Open Source technology
“This year will be monumental as many U.S. legacy carriers are emerging from bankruptcy and on a path for growth,” said Ron Kuhlmann, R2A consultants, Unisys Global Transportation. “They will benefit from lessons learned and will continue to look for new ways to compete through lowering costs and increasing customer satisfaction.”
Houri warns, “However, an avian bird flu outbreak, another major terrorist attack or higher than anticipated oil prices (e.g., more than $70 per barrel) would likely create unexpected pressures and stunt airline growth.”
About Unisys in the Transportation Industry About Unisys Unisys is a worldwide information technology services and solutions company. We provide consulting, systems integration, outsourcing and infrastructure services, combined with powerful enterprise server technology. We specialize in helping clients use information to create efficient, secure business operations that allow them to achieve their business goals. Our consultants and industry experts work with clients to understand their business challenges and create greater visibility into critical linkages throughout their operations. For more information, visit www.unisys.com.
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