IATA halves forecast 2010 loss to $2.8 billion from $5.6 billion

IATA slashed its projected 2010 loss for the global airline industry by half, stating in a new forecast issued yesterday that a stronger-than-expected recovery in demand, particularly in Asia and Latin America, will result in a full-year loss of $2.8 billion instead of the $5.6 billion predicted in December.

It also revised its estimate of collective 2009 losses to $9.4 billion from $11 billion previously. DG and CEO Giovanni Bisignani cautioned that the pace of the recovery is uneven geographically, describing a "two-speed industry" in which carriers in Asia and Latin America are "driving the recovery" while "lagging" North American and European airlines continue to struggle. "The weakest international markets are North Atlantic and intra-Europe, which have continuously contracted since mid-2008," he said.

In the forecast released yesterday, IATA pointed out that "although there has been further development of alliance cooperation, joint ventures and some mergers and acquisitions, it is the case that airlines are still highly dependent on the traffic generated by their local economies and trade lanes." Consequently, in Asia and Latin America, "where economic growth has revived the most," there is strong demand for air travel. But it warned that the recovery "has faltered [in more developed nations] under pressure from consumer debt and still weak bank balance sheets."

Asia/Pacific carriers are projected to post a $900 million profit this year and Latin American airlines will earn $800 million, IATA said. But it forecast that North American carriers will lose $1.8 billion while European airlines post a $2.2 billion deficit.

The organization said passenger demand, which fell 2.9% year-over-year in 2009, will grow 5.6% in 2010, up from 4.5% projected in the December forecast. Cargo demand, which dropped 11.1% year-over-year in 2009, will grow 12% in 2010, up from 7% predicted in the previous forecast.

"Tighter supply and demand conditions" will lead to a 2% improvement in yield on passenger traffic and a 3.1% increase on cargo, it said, noting that this would be turned around considerably "from the precipitous 14% fall experienced by both in 2009." But premium yields are still 20% below early 2008 peaks despite the fact that premium travel "now appears to be following a cyclical recovery in volume terms," it said, warning that premium yields "may be suffering a structural shift."

Full-year revenue is forecast to rise 9% year-over-year to $522 billion, which still would be 7.5% below 2008 revenue of $564 billion. "Revenues are halfway to recovery, $42 billion below the 2008 peak and $43 billion above the 2009 trough," Bisignani said. "Important fundamentals are moving in the right direction. . .We can be optimistic but with due caution."