Resurgent airlines could deliver a payoff

What's Up: Airlines are enjoying strong demand for North Atlantic travel between the US and Europe in the first few months of the year.

Powered by automated translation

Strong demand for air travel over the North Atlantic could present attractive opportunities to invest in US and European airlines.

In the first five months of the year, carriers experienced double-digit gains in passenger numbers on the passage between Europe and the US, one of the world's most popular routes.

Investors would be wise to take a look at major players such as American Airlines, United Airlines, British Airways and Virgin Atlantic after the latest report by the International Air Transport Association (IATA).

Passenger numbers in the North Atlantic market, which represents about 19 per cent of global traffic and 30 per cent of revenue, grew by 12.4 per cent from January to May, according to IATA. The gains were helped by international trade activities, it said.

One caveat is that some decline in business confidence for the US signals slower rates of expansion, the airline lobbying group said.

US carriers fared better than counterparts elsewhere during the global downturn because they acted quickly to cut capacity, which helped to stave off a fall in ticket prices.

This discipline has been carried into the post-downturn economy, with many expected to reap profits this year.

In Europe, Virgin Atlantic this week will celebrate its success in avoiding a pilots' strike with a new pay offer, while British Airways and Iberia jointly announced a 25 per cent rise in business-class travel in May.

The positive developments could persuade sceptical investors to take a closer look at airlines, which must endure highly cyclical conditions and economic shocks caused by earthquakes and health scares, leading many to reap only meagre profits.

Worldwide, hardest hit from January to May were airlines in Central America, where demand for air travel plummeted 57 per cent.

Airlines in the south Pacific experienced a 19 per cent fall in passenger traffic, IATA reported.