Sorin Georgescu, executive vice-president of marketing & sales at TAROM, believes that traffic on the leisure travel segment will witness declines because of the credit crunch, which will lead to a drop in consumer appetite.
"When a crisis occurs, people begin to save. It is quite difficult to give a firm estimate as to what will happen this year. The margin of error is quite high, ranging from 1.8-1.9 and even 3.3 million people in some cases," he said.
Last year was one of TAROM's best so far, after the airline registered an almost 40% surge in traffic, to around 1.8 million passengers, and reached a record occupancy rate of 69%-70%. This year, however, airline operators will be confronted with a global economic crisis, as well as an increase in the price of oil, which means they face a choice between smaller profit margins and price hikes.
"Profit will be affected because of higher oil prices. It is very hard for us to think about price increases, and, so far, we have made no decisions to this effect. In terms of business travel, where quality is more of a concern, prices will either stagnate or climb. In terms of the migration of workers, competition depends on the location of the airport, as well as prices," said Georgescu, who admits that, on some segments, tickets could become more expensive.
"It all depends on how our competitors fare. We could even accept a lower profit margin in the short term. Profit is not something you derive from one day to the next. It is also important to gain a market share," said the TAROM official.
TAROM's profit level is not very high, company representatives having budgeted gross profit worth 5.4 million euros last year, amid turnover worth 230 million euros. Charter flights are another important source of revenue for the airline, and fetch significant gains over short periods of time (i.e. 5% to 10% of the company's total revenues).
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