The growth in international business is helping soften the blow brought on by rising fuel costs and a tanking U.S. economy, says the just-released 2008 Outlook by Air Transport Association Vice President and Chief Economist John Heimlich.

"Passenger and cargo demand is surging globally, making the airline business increasingly global," the report says. "The reality is that the world economy, led by China, India and other developing economies, is growing at twice the rate of the U.S. economy."

U.S. airlines will show profits again in 2007, the report says, making 2006-07 the first back-to-back years of net profit for the U.S. airlines since 1999-2000. Final figures will not be available from the Bureau of Transportation Statistics until May 2008.

"While the ultimate margin will undoubtedly be sub par by typical corporate America standards, the two consecutive years of profitability come as welcome relief after an unprecedented five-year loss of $35 billion," the report said.

In 2008, ongoing passenger and cargo revenue strength - particularly in the international arena - will help offset a sizeable increase in fuel expenses and "modest" increases in other expense, the report predicted.

The report predicts a $3.5-to-$4.5 billion net profit this year, which would make 2006-2008 the airlines' first profitability "three-peat" since 1998-2000.

Michael Fabey
Traffic World