Financial trends in the aviation industry: growth, privatization, and valuation
Air transportation plays a vital role in promoting economic prosperity and growth, and its expansion has been remarkable considering the various ﬁnancial melees that the industry has endured over the years. The increase in the need for air travel services has been fueled by a number of factors, such as air transport liberalization, airport and airline privatization, the growth of tourism, and not least economic boom in emerging markets. In fact, according to Airbus, the number of passengers is expected to grow by an average of more than 4.7 percent per year, requiring more than 29,220 new passenger aircraft and freighters at a value of nearly US$4.4 trillion over the next 20 years, leading to an increasing demand for airport infrastructure across the world (Airbus, 2013). Along with the substantial growth, there has also been change in the ownership structure and ﬁnancial relationships that have characterized the industry since its inception. Originally, many airports and airlines were controlled directly by governments or government corporations, although in the United States, airlines have always been privately owned. British Airways was the ﬁrst European airline to be privatized, in February 1987 as part of a wider privatization plan by the British government; in 1999, the French government approved Air France’s partial privatization. So, in recent years, the earlier situation has changed, as many governments have sought to pursue a policy of privatization. Today most European airlines are wholly or mostly in private hands, and this is increasingly true elsewhere in the world as well.