Deeply discounted airfares may be on the way out

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Airline executives have been saying for the past few weeks that revenues appear to be stabilising after falling sharply during the first five months of 2009. They are also saying, however, that there are no clear indications of an upturn.

The airline industry world-wide is expected to lose as much as $9 billion this year, which could lead to the collapse of some carriers, while low fares are at the same time stimulating demand among business travellers.

Airfares are lower in most markets, and for business travelers, this is the best time to return to the skies. Spot airfare sales have been on offer since the beginning of the year – and continue, even as the costs of fuel and operations in general are rising.

There are signs that the industry is about to change its approach, however. Giovanni Bisignani, director of the International Air Transport Association (IATA), said to airline bosses at a conference this past week: “Cash is king,” putting a voice to the growing consensus that selling seats below actual cost to maintain market share is not a sustainable practice.

The association has also indicated that in order to survive, the industry will have to downsize through consolidations and further capacity cuts.

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