The revenue generated by UK airlines is estimated to have reached £17.32bn in 2007, a 4.1% increase on 2006. The number of passengers carried by UK airlines increased by 3%, to 131.2 million in 2007, and the number of seat kilometres (km) used rose by 4.7%, to 315.87 billion km.
Air-passenger transport is undertaken on both scheduled and non-scheduled services. The scheduled sector, which includes low-cost carrier services, is the market's largest and fastest-growing sector. Non-scheduled flights, which include holiday charter flight operator services, have generally been contracting for a number of years — a result of the growing trend towards independent travel, as opposed to package or inclusive tours.
The rising price of oil is presenting the airline sector with a major challenge. Between 2007 and 2008, the cost of jet fuel increased by around 80%. Oil accounts for a third or more of most airlines' operating costs, therefore oil price increases are impacting significantly on their profitability. Between January and April 2008, up to 12 airlines around the world — including the US-owned Eos Airlines, which operated flights between London Stansted and JFK in New York, and Oasis Hong Kong Airlines, which operated scheduled services to Gatwick from its Hong Kong base — ceased trading. The Isle of Man-based airline EuroManx also ceased trading in May 2008, and further airline closures during the rest of the year are expected. Early in June 2008, Ryanair announced that, if oil prices remained at their current rate, the company would only break even in the upcoming financial year.
The EU-US Open Skies Agreement, which marks the start of a new era in transatlantic aviation, came into effect on 30th March 2008. The agreement allows any airline of the EU and any airline of the US to fly between any two points in the regions. US airlines are also allowed to fly between points in the EU. The agreement removes restrictions on routes, prices or the number of weekly flights and also establishes closer co-operation between the EU and the US in areas such as security and the environment.
Although, Key Note forecasts long-term growth in demand for air transport, the rate of increase in the immediate term (2008 and 2009) could be affected by the general slowdown in the economy. The growth that will be achieved between 2008 and 2012 will, once again, come from the expansion of the low-cost scheduled services sector, while passenger numbers on non-scheduled flights are projected to slide further, as consumers continue to favour independently arranged travel. The problems the industry will continue to encounter up to 2012 include increasing oil prices, government taxation on air travel and rising airport charges.
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