How the Market may Shape Up
The major carriers have been securing their positions in overseas markets by way of alliances and joint ventures. United Continental Holdings Inc (NYSE:UAL) participates in the Star Alliance, in addition to JVs; one with Air Canada and Lufthansa, and one with All Nippon Airways. Delta Air Lines, Inc. (NYSE:DAL) is a member of the SkyTeam Alliance. Notably, it has also just acquired a 49% stake in Virgin-Atlantic, providing it an enhanced foothold at London Heathrow. This is in addition to its existing venture with Air France, KLM, and Alitalia.
Accordingly, carriers ought to sustain their market share, as they are able to offer seamless transportation across the globe.
Undoubtedly, though, over the long term, emerging economic markets will become more important as destinations. Indeed, the IATA states that trade trends are a driver of international flight demand more so than GDP. We are already seeing the heightened importance of China as far as serving passengers. Others, such as India, could well be the next markets carriers will need to serve directly.
The IATA has projected that by 2016, China will rank 6th in total international passengers, with over 100 million enplaned. Hong Kong, according to the report, would rank 9th. These markets are currently served primarily through alliances and codeshare arrangements by the majority of carriers.
United Continental Holdings Inc (NYSE:UAL), that carrier best-situated in Asia-Pacific markets, will play an even larger part on the international stage over the next several years. Certainly, European markets should continue to be vital to the world economy as well, as the U.K., Germany, Spain, and France should still rank ahead of China in enplanements. This means Delta ought to be in decent shape, too, while those that are planning to break ground internationally ought to fare well. Expect Southwest to become a force to contend with internationally over the next decade.
The article Your Guide to International Airline Expansion originally appeared on Fool.com and is written by Damon Churchwell.
Damon Churchwell has no position in any stocks mentioned. The Motley Fool recommends Southwest Airlines. Damon is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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