Will the Dreamliner Revolutionize Airlines? - TheStreet



) -- The "worst is likely" over for the global airline industry's streak of losses -- or at least that's the assessment of the International Air Transport Association (IATA). Still, the sector isn't out of the red yet, with passenger yields and fuel costs "a continuing disaster," according to the association.

Indeed, the IATA estimates that fuel costs will average $75 a barrel next year, which would dwarf the $61.80 figure in 2009. That would amount to 26% of the airline industry's operating costs next year, a ginormous proportion compared to the 13% of operating costs attributable to oil between 2001 and 2002.

Passenger yields are "not expected to improve" either, says the IATA. They're currently at an "extraordinary low level," according to the association, which it says is being perpetuated by excess market capacity and humbled corporate travel budgets. Passenger yields tanked by 12% this year.

All told, the association's revised financial outlook for next year is $5.6 billion in global net loss, which is even steeper than its prior prediction of $3.8 billion in losses.

Published on Tuesday, this announcement was quite a downer on airline market sentiment. Still, on the same day, a beautiful thing happened for the airline industry: After more than two years of delays, the much anticipated Boeing 787 Dreamliner Aircraft took its first test-flight on Tuesday.

The plane that had stayed parked through the worst U.S. recession in generations on Tuesday was dubbed "the future of commercial aviation" after its spectacular maiden flight. Despite fears about rain and bad weather, the plane took off as scheduled from Paine Field in Everett, Wash., at 10:27 a.m. local time and landed at 1:33 p.m. on Seattle's Boeing Field. More than 12,000 employees and guests were there to witness the event.

The Dreamliner's first delivery has been planned for the fourth quarter of next year. With its cutting-edge technology, the plane will use 20% less fuel than today's planes of similar size, and provide airlines with up to 45% more cargo revenue capacity, according to Boeing.

In addition, it should provide a superior cabin ambience, through cleaner air, larger windows, wider storage spaces and better lighting.

Regardless, with the exception of the Dreamliner flight, a current of negative news was working against the airline industry this week. Airline stocks ended mostly in the red at the closing bell Friday:



stock fell 0.1% to $7.60, while


( AAI) added 0.6% at $5.20.


(CAL) - Get Report

stock fell 2.1% to $17.30, while


(DAL) - Get Report

advanced 0.5% to $11.70.


(JBLU) - Get Report

tumbled 2.2% to $5.50,

Southwest Airlines

(LUV) - Get Report

fell 0.4% to $11.20 and

US Airways


dipped 2% to $4.50.


( UAUA) stock gained 2.4% to $11.40. The Amex Airline Index ended Friday's trading session down 0.4% to $32.60.

For many within the sector, though, the ongoing developments about the Dreamliner will be a source of consolation.

So how about you: Do you think the birth of the Dreamliner indeed is the answer to the airline industry's woes?

-- Reported by Andrea Tse in New York

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