The airline industry has been hit from both sides. Back in May, the Air Transport Association announced that 14 million less people would travel by air this summer. This translated into an expected 7% air travel decline during the summer, reported CNN Money.
Not only has the airline industry been hit with falling demand, but it’s also facing rising oil prices. As hope surges for an economic recovery, so does oil speculation… and that’s driving oil prices higher than forecasted.
Both of these elements have caused the International Air Transport Association (IATA) to up its projected losses for the industry this year. Instead of the $4.7 billion predicted in March, the new estimated airline loss is $9 billion, reported the Sacramento Business Journal.
That’s not U.S. airlines; that’s global airlines. (The IATA does predict that airlines in North America should do better than foreign airlines, though.)
Yahoo! Finance also reported that global airline revenue would also drop – off $80 billion, or 15% from a year ago.
The U.S. looks to lose $1.billion. “Asia-Pacific and European carriers are likely to take the biggest hits, losing $3.3 billion and $1.8 billion, respectively,” reported the Sacramento Business Journal. Air cargo will also shed 17%.
Sizing up the situation, Giovanni Bisignani, chief executive officer of IATA, said, “The ground has shifted. Our industry has been shaken. This is the most difficult situation that the industry has faced.”
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Bisignani called for a cooperative effort from companies, governments and industry. “Our future depends on a drastic reshaping by partners, governments and industry,” he said. “We cannot bear the cost of government micro-regulation, crazy taxation and partners abusing their monopoly power.”
Bisignani suggested that mergers could help strengthen the airline industry, and he encouraged nations to curb the obstacles to international mergers.
Another factor hurting the industry is that airline stocks have been unpredictable. This week airline stocks fell on Monday on news of the industry’s estimated losses… only to attempt a comeback on Tuesday. One analyst told Reuters that “airline shares in general tend to be volatile.”
Though the airline industry may be struggling and its stocks erratic, there is somewhat of a silver lining here… and that is oil.
Oil is going up, and there is every reason to believe that it will continue. Though this may not be good news for the airlines, editor Christian DeHaemer of Crisis Trader shows that could be good news for investors.
He recently wrote that many countries are buying up oil, especially China and Russia. He said, “If the U.S. were smart, instead of paying $700 billion for wars to protect our oil supply and another $3 trillion in bailout money and green energy, we’d be doing what the Chinese are doing and buy up oil assets.”
Christian went on to point out that investors should add oil investments to their portfolio, and he recommended some promising opportunities. If you’d like to learn more about Chris’ latest strategy in the energy sector – and how you could profit from today’s energy – download his free exclusive report.
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