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Airlines Market Report Plus 2009
Key Note Publications Ltd, July 2009, Pages: 134
The operating revenue generated by UK airlines is estimated to have increased by 6% in 2008 to £18.25bn. Falls were recorded, however, in: the number of passengers uplifted by UK airlines in 2008 — down to 131.1 million; the number of seat kilometers (km) used — down to 314.3 billion; and in the volume of freight kilometers used — down to 8.32 billion.
Air-passenger transport is undertaken on both scheduled and non-scheduled services. The scheduled sector, which includes the low-cost carriers, is the larger of the two and the one which continues to show growth. Passenger numbers on non-scheduled flights, which are mostly operated by the holiday charter airlines, have been falling for a number of years due to air travelers preferring to travel independently rather than on package or inclusive tours. The fastest-growing and largest segment of the market overall is scheduled, international flights.
The airline sector is currently experiencing its worst ever trading environment. Following the impact of high oil prices in the first half of 2008, which had a serious effect on airlines' operating costs and caused some operators to cease trading, the global recession is now having a significant impact on passenger numbers. The airlines have responded to the situation by cutting capacity, abandoning unprofitable routes and imposing a pay freeze on employees. The downturn means that the profitability of UK airlines is likely to come under severe pressure in 2009 as the combination of falling passenger numbers, higher costs and a fall in the value of sterling takes its toll.
The Government has confirmed that Air Passenger Duty (APD, which is a passenger-based tax charged to the aircraft operator and based on the number of passengers, destination and class of travel) will rise significantly in 2010. The tax paid on departing flights will now fall into four bands, with passengers being charged according to how far they fly. The increases, planned for November 2009 and November 2010, will hit medium-haul and long-haul travelers the hardest. The restructuring of the APD means that British holidaymakers will now be taxed more than any other travelers, with taxes and charges on some flights costing much more than the fare itself.
UK airlines face a difficult 2009 with the global recession expected to depress demand. The authors forecast that the numbers of passengers uplifted on UK airlines will fall in 2009 with the numbers traveling on both scheduled and non-scheduled flights falling. The numbers of passengers traveling on scheduled services may recover a little in 2010, although the non-scheduled flight sector may remain a little weak.
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