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Capacity, capacity, capacity

01 August 2013

Bobby Janagan, General Manager, Rolls-Royce & Partners Finance, discusses capacity management.

Read more: Bobby Jannagan Rolls Royce

In the economic downturn that came after the September 11 2001 terrorist attacks, airlines worldwide posted large losses because of the significant drop in demand.

The economic downturn that followed the 2008 financial crisis was much more severe, but airlines did not incur losses to the same magnitude. How did the airlines perform better second time around?

The answer is capacity management.

Since 2008 airlines have managed their capacity in a more disciplined way and focused on yield instead of load factors.

They have managed that capacity either by parking or returning aircraft to the lessors. In the past 25 years two major drivers have propelled growth in the aviation industry. First, significant passenger and freight demand has been achieved on the back of general economic growth, particularly from the emerging markets.

Second, governments worldwide have liberalized the airline industry by privatizing state-owned airlines, as well as relaxing ownership and...

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