Airlines are confident that their industry will boost revenue over the next year and consider joint ventures a more viable growth driver than mergers, a PricewaterhouseCoopers survey of nearly 40 chief executive officers at carriers worldwide finds.
The report said airline CEOs are more upbeat about the prospects for their industry than all CEOs as a group. Eighty-two percent of airline CEOs are confident that their industry's revenue will rise over the next year, compared with 68 percent of all CEOs that took part in PwC's annual global survey.
Expanding middle classes in Asia and emerging markets such as Latin America have boosted travel demand and helped airlines bounce back from losses since the 2008-2009 downturn. The global industry is expected to earn a net profit of $18 billion this year, up from an estimated $10.6 billion for 2013, according to a June forecast by the International Air Transport Association (IATA) trade group.
Global airlines will generate revenue of $746 billion in 2014, up from $710 billion last year, IATA projects.
Jonathan Kletzel, U.S. transportation and logistics leader at PwC, said the challenge for airline chiefs was in deciding how to invest their earnings.
"Do you re-invest in the airline itself, into employees, technology, into products and services or do you save it for a rainy day or give it back to investors?" Kletzel said. "I think there’s a lot of opportunity for the airlines to drive more innovation with some of those profits."
The survey found agreement among CEOs that technological changes, from increased consumer use of mobile devices to improved systems for managing airline tasks, would likely bring opportunities to drive more efficient operations and deepen customer ties. Seventy-one percent of the airline CEOs polled said they were planning or moving ahead with changes to their company's data management.
Kletzel said better use of data tools could help airlines identify new revenue opportunities from segmenting customers.
The airline CEOs largely are not banking on consolidation, with just 3 percent in the survey planning to use mergers as a major means to grow over the next year. But 18 percent identified joint ventures and alliances - business arrangements such as the partnership between U.S. carrier Delta Air Lines and Britain's Virgin Atlantic Airways [VA.UL] - as their main growth driver.
Additionally, 63 percent of airline CEOs are developing or planning changes to their merger-and-acquisition or venture strategies, the survey found.
PricewaterhouseCoopers said in the report that while mergers were crucial for enhancing profit margins, regulatory hurdles were an obstacle to cross-border deals.
The airline report is based on an online survey of 39 CEOs of carriers that are IATA members. Big and small airlines from all regions were represented in the study, a PwC spokeswoman said.
(Reporting by Karen Jacobs in Atlanta; Editing by Mohammad Zargham)