Oil prices are going to be less of a problem for all transport companies this year, but the economic slump could seriously affect train companies as the crucial London commuter market hits the buffers.
Stagecoach, Go-Ahead and First Group are all exposed to the London market and benefited last year from the high oil price, as public transport became a more cost-effective mode of transport compared with the car. However, the recession will hit all the train operating companies with cutbacks in the important financial services sector, which employed many long-suffering commuters, set to hit passenger revenues by up to 10 per cent according to some analysts' estimates. Some rail companies have already countered this with above inflation ticket price rises to protect revenues, but there is a limit to their ability to continue doing this.
Companies with large bus divisions like such as Arriva should do better than most as previous recessions have seen bus use rise. Industry watchers will be looking at the non-regulated bus routes outside London for evidence that passenger revenue is holding up.
In the near-term, the aviation industry will benefit far less from the low oil price as a result of previous hedging fuel at high prices. The sector though could see a wave of large-scale consolidation if BA gets its deal with Iberia off the ground. A successful conclusion is by no means certain after the recent failure to secure a tie-up with Qantas. BA's huge pension liabilities will also provide food for thought for potential partners, and it is most likely that Lufthansa and Air France will dominate deal-making in Europe this year. Life is no easier at EasyJet, and investors will be keeping a close eye on events to see if the stand-off between founder Sir Stelios Haji-Ioannou and the company board descends into a debilitating feud. The under pressure private jet market will provide a test for BBA Aviation, as the services company tries to manage its debt burden and shore up its troubled North American Signature business.
The year will also be tough for Forth Ports mainly because of slowing economic activity through its terminals, but also because of uncertainty over the future of its Leith development in Edinburgh, which has been hit by the falling property market. Overall, industrial transport, with the exception of aviation, should continue to produce solid revenues for the year, but this is unlikely to translate into major gains in share prices.
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