IATA Revisions Reflect Brighter Outlook for Airlines

 - March 26, 2010, 11:08 AM
IATA’s improved financial forecast shows a two-track recovery with airlines in Latin America, such as Brazil’s TAM Linhas Aereas, and the Asia Pacific region showing stronger traffic growth than airlines in North America and Europe.

A better-than-expected start to 2010 has prompted the International Air Transport Association (IATA) to significantly improve its forecast for anticipated airline losses this year. On March 11, it halved the forecast loss for its member carriers from the $5.6 billion it predicted in December 2009 to $2.8 billion. IATA attributes the rosier (though still negative) prognosis largely to economic recovery in the key emerging markets of the Asia-Pacific region and Latin America, where carriers reported passenger traffic growth of 6.5 percent and 11 percent, respectively, in January.

By comparison, IATA forecasters now talk in terms of a “two speed” global airline market, as Europe and North America see much weaker growth in the first month of 2010–just 3.1 percent and 2.1 percent, respectively. IATA now predicts improved traffic growth over the whole of 2010 of 5.6 percent in the passenger sector, versus the 4.5 percent it forecast in December, and 12 percent for freight, compared with the earlier estimate of 7 percent.

But more important, tighter discipline over fleet capacity is reaping dividends for IATA carriers. The association now predicts yields to grow by 2 percent for passenger flights and 3.1 percent for freight, compared with the steep 14-percent fall both sectors suffered last year. IATA’s revised forecast sees 2010 revenues reaching $522 billion–a $44 billion improvement on its earlier forecast and $43 billion more than the 2009 total. “Important fundamentals are moving 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,” concluded IATA director general and CEO Giovanni Bisignani. “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, throughout the value chain and with labor.”