The airline and aviation industry is evolving — and rapidly.
Far are we from the days of the 8-10 year repetitive cycle that caused sector-wide devastation. If we look back at the last 30 years, the industry down-cycles have been brought forth by events such as regional and global recessions, oil price spikes, terrorism, disease epidemic and of course airline labor issues.
Today, I sat through an aviation investment panel with six industry experts and my takeaway was that no-single or series of events would take the industry into a down-cycle like in decades past. A couple of examples are the downfall of Malaysia Airlines and TransAsia. Two major events in the same region, yet, not a ripple was felt in the Asian sector. Another is the bankruptcy filing of Alitalia, soon followed by Air Berlin’s bankruptcy filing. Has the market succumbed to the reality that these are idiosyncratic events that are non-symptomatic of the region or the industry as a whole? Can it be that the days of an aviation cycle are gone? It is hard to say since the last cycle ended about 4-5 years ago and historically the cycles come about every 8-10 years. However, there have been many events over the past few years — globally, that might have caused the industry to move towards an accelerated cycle. One thing is for sure, the industry has become resilient; or is it something else?
The big question is, what is causing this new phenomenon? Is it globalization of the airline and aviation industry? Is it the vast amounts of capital that have been attracted into aviation? Or is it the sheer size of a market that has become so large that anomalous events have little impact? Whatever it is, we technically have to wait 4-5 years to see what the market will do, but I for one am not going to wait around for a doomsday that will potentially never come. Onwards and upwards we go.