A gradual rise in demand for business class and other more lucrative category seats is helping push airline yields up ever so slightly, according to a senior executive of a major European carrier.
The return to "normal" or pre-recession capacities and yields, however, is still well over a year away, according to Albert Henschel, General Manager (UAE) of SAS Scandinavian Airlines.
Speaking exclusively to Emirates Business before announcing his airline's fourth winter season on the Dubai – Copenhagen sector, Henschel said conditions were improving for the battered industry. "We can see some signs of yield going up slowly. They are getting a little better. The demand of business class seats and 'economy extra' seats is going up slowly. With this prices go up a little bit. I sincerely hope this continues. I cannot see a significant rise in yield for some time because this recession has been really strong. It hit all kinds of industry," he said.
His views echo a statement on Tuesday from the International Air Transport Authority (Iata), which said airlines were climbing out of recession with strong increases for passenger travel and freight in February.
Global passenger demand in February was 9.5 per cent higher than February 2009, with passenger load factor measured at 75.5 per cent.
To mitigate the crisis SAS grounded 20 per cent of its seat capacity last year, and Henschel said prevailing trends indicate it would take much over a year for all the grounded aircraft to return to service. "We will slowly put back the capacity we took out in the same pace as demand starts to grow. It [removing capacity] was one of the ways to maintain a reasonable economy this year. I expect it will take more than a year to return to capacity." said Henschel.
Market conditions in the Middle East and Dubai in particular looked far more promising for SAS.
The company beat all expectations for its third winter schedule between Dubai and Copenhagen, reporting fully booked flights since February. Passenger numbers had grown 30 per cent for the period October 29, 2009 to April 4, 2010, he said. The airline, which operated a thrice-weekly Dubai–Copenhagen return schedule for the last three winters, will commence its fourth winter schedule on November 4.
European interest in Dubai is only growing and it continues to be a top winter destination for the airline's fliers from Denmark, Norway and Sweden, said Henschel.
"Load factor of this route is significantly higher than last season. From the beginning of February to April all our flights are fully booked. It is a single-digit higher than our first season [2007-08] but double digit higher than our last season [2008-09]," said Henschel.
"We had 30 per cent more passengers on board this season. Since prices are also 30 per cent lower, profitability has been a very low single digit, almost negated. Yield has been under tremendous pressure. But we hope to recover a bit this year," he said.
Increasing demand to and from Dubai has caused the airline to enter into a code-sharing agreement with Lufthansa, which will come into effect next week.
"The number of flights and number of seats for our fourth winter schedule later this year will be the same as this concluding season. But instead of leaving the market we are entering a code share with Lufthansa, who operate double daily from here. When we return in November we will have our thrice-a-week schedule and the code share with Lufthansa on the other days.
"Since the GGC is growing a bit more than the rest of the world it is important to have a presence here. We would like to increase ours a little bit but we are a small player on the international routes. This arrangement shows just how important this market is to our global network," said Henschel.