IATA reverses global airlines forecast to $2.5-billion profit this year

MANILA, Philippines - The International Air Transport Association (IATA) expects airlines to post a global profit of $2.5 billion in 2010, a reversal of an earlier forecast in March of a $2.8-billion loss.

The group said industry revenues are likely to reach $545 billion in 2010, up from $483 billion in 2009 but still below the $564 billion achieved in 2008.

IATA represents some 230 airlines, including those from the Philippines, comprising 93 percent of scheduled international air traffic.

“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 percent) drop in revenues in 2009. But the $62 billion top line improvement this year puts us about 75 percent on the way to pre-crisis levels,” IATA director general and CEO Giovanni Bisignani said.

But Bisignani emphasized that the $2.5 billion profit comes with some important health warnings. “First, this represents a net margin of just 0.5 percent, 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,” he pointed out.

Passenger traffic is forecast to grow 7.1 percent in 2010 while cargo traffic will expand by 18.5 percent. This is significantly better than the previous forecast growth of 5.6 percent and 12 percent, respectively.

IATA noted that over the first quarter, the industry was growing at an annualized rate of nine percent for passenger and 26 percent 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 are now forecast to grow 4.5 percent for both the cargo and passenger business, as against the previously forecast yield growth of two percent in passenger markets and 3.1 percent for cargo. The 4.5 percent rate is just ahead of consumer price inflation. This is contributing strongly to the 13 percent rise in revenues forecast for 2010. Despite the increase, revenues remain four percent below their 2008 peak.

“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 percent (passenger and cargo) to be met with a 5.4 percent increase in capacity. This will support load factors which remained near record levels for most of the first quarter,” IATA said.