Issues & Trends – Mar 2010
At last, better news from airlines as IATA halves 2010 loss forecast
IATA has halved its 2010 loss forecast for the world’s airlines to $US2.8 billion. As recently as December last year it was forecasting losses of $US6 billion.
“The improvement is largely driven by a much stronger recovery in demand seen by year-end gains that continued into the first months of 2010,” said an IATA statement issued earlier this month.
The airline body said relatively flat capacity translated into some yield improvement and stronger revenues.
IATA also lowered its 2009 loss estimate to $US9.4 billion from the previously forecast $US11.0 billion loss.
“Improvements are driven by economic recovery in the emerging markets of Asia-Pacific and Latin America whose carriers posted inter-national passenger demand gains of 6.5 per cent and 11.0 per cent respectively in January,” the statement reported.
North America and Europe also reported passenger growth in January but are lagging with gains of only 2.1 per cent and 3.1 per cent respectively.
“We are seeing a definite two-speed industry,” said IATA’s director general and chief executive Giovanni Bisignani. “Asia and Latin America are driving the recovery. The weakest international markets are North Atlantic and intra-Europe which have continuously contracted since mid-2008.”
Highlights of the revised IATA forecast include:
• Passenger numbers: Passenger demand (which fell by 2.9 per cent in 2009) is expected to grow by 5.6 per cent in 2010. This is an improvement on the December forecast of 4.5 per cent.
• Load factors: Airlines kept capacity relatively in line with demand throughout 2009. A strong year-end recovery pushed load factors to record levels when adjusted for seasonality. By January the international passenger load factor was 75.9 per cent.
• Yields: Tighter supply and demand conditions are expected to see passenger yields improve two per cent. This is a considerable improvement over the precipitous 14 per cent fall of 2009.
• Premium Travel: Premium travel now appears to be following a cyclical recovery in volume terms. But it is still 17 per cent below the early 2008 peak. Premium yields, which are 20 per cent below peak, may be suffering a structural shift.
• Fuel: IATA raised its expected average oil price to $US79 per barrel from the previously forecast $US75. This translates to 26 per cent of running costs, up two percentage points from 24 per cent in 2009.
• Revenues: Revenues will rise to $US522 billion. That is $US44 billion more than previously forecast and a $US43 billion improvement on 2009.
“Revenues are half-way to recovery – $US42 billion below the 2008 peak and $US43 billion above the 2009 trough,” said Bisignani. “Important fundamentals are mov-ing in the right direction. Demand is improving. The industry has been wise in managing capacity. Prices are beginning to align with the costs – premium travel aside.
“We can be optimistic but with due caution. Important risks remain. Oil is a wild-card, over-capacity is still a danger, and costs must be kept under control.”