IATA revises forecast, predicts industry will earn $2.5 billion in 2010

IATA yesterday forecast that the international airline industry will post a profit of $2.5 billion in 2010, a significant upgrade compared with its March prediction of a $2.8 billion loss.

Addressing IATA's 66th AGM in Berlin yesterday, DG and CEO Giovanni Bisignani projected that industry revenue will rise 12.8% this year to $545 billion from $483 billion in 2009. The organization previously had forecast revenue of $522 billion in 2010 (ATWOnline, March 12).

The higher earnings and revenue forecasts came as IATA projected 7.1% and 18.5% full-year growth in passenger and cargo traffic respectively, up from 5.6% and 12% foreseen in March. It also bumped up its forecast for growth in passenger yield from 2% to 4.5% and for cargo yield from 3.1% to 4.5%.

"The global economy is recovering from the depths of the financial crisis much more quickly than could have been anticipated," Bisignani said. "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%) drop in revenues in 2009. But the $62 billion top line improvement this year puts us about 75% on the way to pre-crisis levels."

Asia/Pacific is powering the upturn, IATA said, forecasting a $2.5 billion 2010 profit for airlines in that region. It predicts North American carriers will earn a $1.9 billion profit but warns that European airlines will post a collective $2.8 billion loss.

While expressing the organization's new optimism about the current year, Bisignani raised notes of caution. "The $2.5 billion profit comes with some important health warnings," he said. "First, this represents a net margin of just 0.5%, which is a long way from sustainable profitability. Second, a major part of the global industry is still posting big losses. And a 0.5% margin does not even cover our cost of capital. The industry is fragile."

He said recovering airlines should be careful about chasing market share ahead of profitability. "New capacity will be added to the global system as a result of the 1,340 aircraft that are scheduled to join the fleet in 2010," he explained. "Of these, approximately 500 are replacement aircraft while the rest will be new capacity."

He credited the industry's expected return to profitability to a decade of "cost cutting, restructuring and reengineering processes," adding, "IATA's programs have contributed to this with $47 billion in cost savings since 2004 with efficiencies in safety auditing, fuel management, infrastructure costs and Simplifying the Business."