IATA: World’s Airlines Returning to Profitability

 - June 7, 2010, 9:13 AM

The International Air Transportation Association (IATA) issued a rather stunning projection today that the world’s airlines will actually turn a profit this year of $2.5 billion. The forecast comes not three months after IATA projected a loss of $2.8 billion.

The group predicts that industry revenues will total $545 billion in 2010, compared with $483 billion last year, 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,” said Giovanni Bisignani, IATA director general and CEO. “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.”

Although clearly encouraged by the seemingly sudden turnaround, Bisignani issued some “important health warnings” along with the profit projection. “First, [$2.5 billion] represents a net margin of just 0.5 percent, which is a long way from sustainable profitability,” he said. “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.”

The revised figures include a forecast growth of 7.1 percent in passenger traffic and an 18.5-percent increase in cargo traffic. IATA now projects yields to grow by 4.5 percent for both the cargo and passenger business, compared with the previously forecast yield growth of 2 percent in passenger markets and 3.1 percent for cargo. The 4.5 percent yield growth just beats the rate of consumer price inflation, contributing strongly to the 13-percent rise in revenues forecast for 2010. Despite the increase, revenues remain 4 percent below their 2008 peak.