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Airlines show sign of recovery, IATA

Kenneth Ehigiator
Airlines are recovering strongly from economic crisis, as passengers, freight and pricing power return, the airline industry association, IATA, has said, halving its forecast for a 2010 loss.

With capacity for both passengers and cargo hitting record levels at the end of last year, all indicators are moving in the right direction, and the recovery is much better than expected, IATA Director-General, Giovanni Bisignani, said.

According to him, the recovery, still leaving the industry deeply in the red, is good news for both the industry and the global economy as a whole, indicating that exports are reviving.

IATA estimates that 30 percent of world trade by value is moved by air freight.“We are moving in the right direction. The recovery is strong. But we are still at pre-crisis levels,” Bisignani told a news conference.

IATA said airlines would lose USD$2.8 billion this year, half the USD$5.6 billion loss it forecast in December.
IATA, which groups about 230 airlines, cut its estimate of the 2009 loss to USD$9.4 billion from December’s USD$11.0 billion.
Passenger demand would rise by 5.6 percent in 2010, after falling 2.9 percent last year, while cargo demand would jump 12.0 percent, after an 11.1 percent fall, IATA said in its updated financial forecast.

According to IATA, capacity usage recovered strongly at the end of last year, with passenger load factor hitting 75.9 percent in January, while cargo utilisation stood at 49.6 percent.

It said tighter supply and demand were bringing a return of pricing power, with yields on passenger business now forecast to rise 2 percent and on cargo by 3.1 percent, after both fell 14 percent in 2009.

But it also said airlines might be suffering a structural shift in premium travel, with the number of passengers paying for first and business class tickets recovering at a slower rate than economy travel.

The global airline body said performance varied strongly across regions, with Asia and Latin America driving the recovery, but North Atlantic and European markets remaining weak.

IATA said airlines werenow halfway to recovery, with revenues forecast at USD$522 billion this year — USD$42 billion below their 2008 peak and USD$43 billion above the 2009 trough.

But it will take airlines 2-3 years to make up the losses from the crisis, Bisignani said.
Bisignani said airlines had absorbed losses of USD$50 billion over the past 10 years, and still faced a series of risks, ranging from economic developments to environmental pressures.

“With airlines taking delivery of another 1,400 aircraft this year, there are risks to capacity usage,” he noted.
Another uncertainty is the price of fuel. IATA forecasts the price of oil will average USD$79 a barrel this year, an increase of USD$17 over 2009, driving fuel as a proportion of operating costs to 26 percent from 24 percent.


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