Jetrader - Autumn 2016 - 56

There hasn't been as much rationalization
among the carriers as has occurred in the
U.S., although you can say that Geneva is
no longer really the hub that it once was.
Overall, I think the route rationalization in
the U.S. that eliminated unprofitable hubs
certainly occurred.
In 2008, I said that environmental regulations would increase costs, which would
lead to slower growth. In that respect, the
industry is only smaller relative to what
it would have been without some of the
environmental regulations. I think that is
true. Costs are higher all around. We have
environmental taxes in Europe and soon
more in the U.S.
The industry has also moderated the
increase in capacity by becoming more
efficient and better in scheduling and
revenue management. The manufacturers

are making aircraft with more seat sizes
so that the carriers can better match supply and demand on individual routes. In
addition, improvements in forecasting
technology has allowed the industry to
operate with seat factors at all-time highs.
We never used to see year-end seat factors
in the 80s and even the high 80s. The daily
volatility of demand would have prevented
that. Those sorts of improvements lead to
moderating capacity growth because we
are now using the airplanes to capacities
or using more than their capacities. In a
way, I think I was correct on this prediction, but the industry is only smaller as
it would've existed without some of the
environmental regulations.
In regard to it being a less competitive
industry, I think it is less competitive today
than it was eight years ago. Although the

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LCCs have continued to expand at record
rates, consolidation has also occurred.
There have been big acquisitions like Delta
and Northwest, United and Continental and
American and US Airways, and that's just in
the U.S. In Europe there's been the growth of
IAG with BA, Volaris and Iberia, Lufthansa
has acquired carriers Austrian and is deciding whether or not to increase its minority
stake in Brussels to full ownership.
Because of these combinations, we have
an industry that's less competitive than it
was eight years ago. However, this does
not mean that it's not competitive. Fares
and prices continue to be a bargain for
travelers. You might pay less today than you
would have 10 years ago for the same flight.
We still have a competitive industry, but
fewer carriers than we had a decade ago.
Fewer carriers mean fewer players which,
in turn, means less competition.
I think the prediction of the industry
pursuing carbon neutrality was spot-on.
It was an easy prediction to make due to
the efforts to reduce fuel consumption
being the same as the effort to go green;
thus lowering carbon emissions. We have
created an industry that is working very
hard to become a carbon neutral industry.
It doesn't matter that the driving motivator
is improving fuel efficiency, as the effect
is the same. Some of the expected regulations that force the industry to reduce
carbon have been modified and slowed in
terms of their introduction, but even so the
economic desire and incentive to reduce
fuel consumption has continued to make it
work very effectively for carbon neutrality.
JT: What do you see for the future in
the aviation industry and its efforts to
go green?
DT: There's no question that there's been
major advances in the industry to go green,
and the industry will continue on that path.
The airlines get rewarded by becoming more
fuel efficient if they go green. They get
rewarded with improved profitability. I
expect that we will continue to see the
industry go green. On top of that, we've got
ICAO pushing new rules for emissions standards for aircraft. For example, those new
standards are expected to be implemented
by 2017 for effectiveness by 2020. The EPA
rules in the U.S. will be developed. Europe
has carbon trading rules. All of these areas
will be impacted to create additional pressure on the industry to go greener.
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