Global aviation returns to profit
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Berlin – The International Air Transport Association (IATA) expects airlines to post a global profit of $2.5 billion in 2010. This is a major improvement compared with IATA’s previous forecast released in March of a $2.8 billion loss.
Industry revenues are forecast to be $545 billion in 2010. This is up from the $483 billion in 2009, but still below the $564 billion achieved in 2008. “The global economy is recovering from the depths of the financial crisis much more quickly than could have been anticipated. Airlines are benefiting from a strong traffic rebound that is pushing the industry into the black. We thought that it would take at least three years to recover the $81 billion (14.3%) drop in revenues in 2009. But the $62 billion top line improvement this year puts us about 75% on the way to pre-crisis levels,” said Giovanni Bisignani, IATA’s Director General and CEO.
“The $2.5 billion profit comes with some important health warnings. First, this represents a net margin of just 0.5%, which is a long way from sustainable profitability. Second, a major part of the global industry is still posting big losses. A stagnating economy, strikes, natural disasters, and a currency crisis have left European carriers struggling with an anticipated $2.8 billion loss,” said Bisignani.
Highlights of the revised forecast include:
Traffic: Passenger traffic is forecast to grow by 7.1% in 2010 while cargo traffic will expand by 18.5%. This is significantly better than the previous forecast growth of 5.6% and 12.0% respectively. Over the first quarter, the industry was growing at an annualized rate of 9% for passenger and 26% for cargo. Much of the cargo growth is associated with inventory re-stocking. As this cycle completes with normal inventory to sales ratios, we are expecting moderate growth driven by consumer spending.
Yields: Yields are now forecast to grow by 4.5% for both the cargo and passenger business. This is a significant improvement from the previously forecast yield growth of 2.0% in passenger markets and 3.1% for cargo. The 4.5% rate is just ahead of consumer price inflation. This is contributing strongly to the 13% rise in revenues forecast for 2010. Despite the increase, revenues remain 4% below their 2008 peak.
Load Factors: New capacity will be added to the global system as a result of the 1,340 aircraft that are scheduled to join the fleet in 2010. Of these, approximately 500 are replacement aircraft while the rest will be new capacity. Latent capacity is also present as a result of reduced long-haul fleet utilization which remains several percentage points below pre-crisis levels. Over the year, we expect an average demand improvement of 10.2% (passenger and cargo) to be met with a 5.4% increase in capacity. This will support load factors which remained near record levels for most of the first quarter.
Ash: Air space closures following the eruption of an Icelandic volcano dented the recovery in April as a result of over 100,000 flight cancellations associated with European markets over six days. While uncertainty remains with the potential for future eruptions, it appears that this was a short-lived shock. Early May figures show a rebound in traffic for European carriers.
Premium Travel: Despite earlier fears that the financial crisis would result in a structural change to the premium market, it now appears to be recovering cyclically in many regions
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