M&A: mergers and airlines

M&A: mergers and airlines

The state of the airlines industry in the coming months depends a lot on what will fall faster: costs or revenues?

The steep drop in global fuel prices will take a lot of pressure off airlines. The International Air Transport Association (Iata) had said earlier this month that total industry losses in 2009 would be around $2.5 billion (Rs12,125 crore)—half the estimate for 2008.

But now it seems that revenues, too, are dropping fast. Airlines have already started cutting fares. And Iata says in a new study that airlines saw a 13.5% drop in cargo and a 4.6% drop in passengers in November. Though the loss estimate has not been changed as yet, Iata director general Giovanni Bisignani says the industry is now shrinking.

There is one interesting nugget of information in the new Iata data. Carriers in America and Europe saw a drop in passengers because of the collapse of the investment banking industry. Deal makers were an important source of business for airlines. They are being missed at airports and business-class areas of planes.