Analyst: Airlines are too slow to cut capacity

Airline analyst Chris Tarry: “This is a time for caution, not valor”

Airlines are wrong to expand their fleets, an air transport analyst says. Airlines are adding or reinstating stored aircraft at the fastest rate since the recession. European carriers are ambitiously adding capacity at twice the rate in Asia and three times that in North America. With airlines reporting lower targets this year and the IMF confirming a slowdown in GDP growth, independent airline analyst Chris Tarry warns that Air France-KLM and Lufthansa are among the airlines most exposed.
Airlines don’t want to reduce capacity again too early, as they may lose market share. However, Tarry says: “When airlines make capacity decisions, they focus on how good it might be, when the real question is how bad. This business is about revenue and once that starts to slow you come under immediate pressure. This is a time for caution, not valor.”
Bloomberg Business Week
[pictured: Lufthansa A380 in hangar, Frankfurt]