Airline Market Trends
After all the hardship, it appears the main impetus for ending the federal government shutdown in January was its impact on air travel. On January 25, the FAA began restricting flights into and out of New York’s LaGuardia Airport due to a shortage of air traffic controllers. Prior to this, there had been reports of TSA employees calling in sick, which caused longer lines getting through security at airports throughout the U.S.1
Those cancellations and postponed flights created the final trigger event that just goes to show how vital the airline industry is both domestically and throughout the world. In 2018, more than 4.3 billion passengers and 58 million tons of freight were transported by air via 38 million flights. The airline industry is not just a conveyor of economic activity, it is also a provider. Some 65 million people are employed by the airline industry worldwide, contributing more than $2.7 trillion to the global GDP.2
Air travel provides two benefits for the average consumer: Exploration of locations far and wide and investment opportunity. Boeing, the world’s number one plane maker (by revenue), reports it expects sales to increase by as much as 10 percent in the coming year thanks to worldwide growing demand for airplanes. Furthermore, the company is currently competing with Northrop Grumman Corp. to win a lucrative Pentagon contract for replacing the land-based U.S. intercontinental missile fleet.3
There is continued demand for commercial jets, as evidenced by recent near-record profits in the airline industry. One country stepping up its game is China, which is working on current infrastructure to support an increase in air traffic. It is reported that by 2035, China will have doubled its current number of airports to 450. If this happens, China will surpass the US as the world’s largest aviation market and become an even larger power player in international trade.4
Not surprisingly – given China’s extensive plans – the aviation industry expects worldwide demand for air travel to double over the next 15 years. In the U.S. alone, it is projected that more than 7.8 billion travelers a year will be flying in and out of domestic airports. Hence the need for rampant investment in airport infrastructure, which currently lacks the structure and technology to efficiently process that level of volume.
Individual airport expansion and renovation projects are estimated to cost upwards of $10 billion, but that’s just the construction expense.5 Consideration must also be given to how ramping up physical sites will impact traffic and congestion in their respective cities and adjacent neighborhoods, as well as environmental impacts and the increase in greenhouse gas emissions.6
While it is smart to keep an eye out for growth and/or undervalued industries for potential investment, it is perhaps even more important to evaluate those opportunities within the context of your financial portfolio. That’s where we can help. A financial portfolio is only one component of a complete financial picture that should include insurance products and longer-term income strategies designed to provide financial confidence for both spouses – even if one outlives the other. We’re happy to help you determine if you are currently on the right path and explore avenues that may be of interest.
1 Chelsea Toczauer. Air Cargo Airports. Jan. 25, 2019. “LaGuardia Airport suffers delays on day 35 of U.S. government shutdown” https://aircargoairports.com/laguardia-airport-suffers-delays-on-day-35-of-u-s-government-shutdown/. Accessed Jan. 30, 2019.
2 International Airport Review. Jan. 30, 2019. “ICAO underscores need for aviation investment, financially and socially.” https://www.internationalairportreview.com/news/80590/icao-aviation-investment/. Accessed Jan. 30, 2019.
3 Andrew Tangel and Doug Cameron. Morningstar. Jan. 30, 2019. “Boeing’s Sales Climb on Air Travel Demand—Update.” https://www.morningstar.com/news/dow-jones/TDJNDN_201901308605/boeings-sales-climb-on-air-travel-demandupdate.html. Accessed Jan. 30, 2019.
4 Nina Chamlou. Air Cargo World. Dec. 11, 2018. “China to double its number of airports by 2035.” https://aircargoworld.com/allposts/china-to-double-its-number-of-airports-by-2035/. Accessed Jan. 30, 2019.
5 VTB Global Perspectives. Jan. 5, 2019. “Overdue for an upgrade?” https://www.vtbglobalperspectives.com/overdue-for-an-upgrade. Accessed Jan. 30, 2019.
6 Christoph Wolff. Forbes. Jan. 16, 2019. “How Davos Talk Brings Action to Mobility and Transportation Issues.” https://www.forbes.com/sites/worldeconomicforum/2019/01/16/how-davos-talk-brings-action-to-mobility-and-transportation-issues/#3dbd0fc24e29. Accessed Jan. 30, 2019.