IATA: Airline CFOs confident demand, profitability will continue to improve

IATA said executives from airlines around the world reported "a sharp improvement in the business environment" for the air transport industry in the final months of 2009 and are optimistic that conditions will continue to improve throughout the current year.

The organization yesterday released the results of its latest "Airline Business Confidence Index" quarterly survey of global airline CFOs and cargo heads conducted last month, noting that "for the first time since January 2008 a majority said profitability had improved in the previous quarter (2009 Q4)" and "76% expect profitability to improve over the next 12 months." It cautioned that the improvement was "from a very weak base, so. . .it will still take many quarters before demand, yields and revenues recover to levels seen in early 2008, let alone catching up to the 2-3 years of growth lost due to the recession."

While passenger and cargo traffic are improving, with more than 82% of airlines projecting gains in passenger demand and 72% predicting improvement in cargo demand in coming months, yields are still sluggish, IATA said. "There was still a majority of airlines reporting lower yields in the [2009 fourth quarter]," it noted, though it stated that the number of carriers reporting declining yields "was significantly smaller" compared to the last survey conducted in October.

Not all regions are brimming with optimism, however. The organization noted that there is "significant regional variation," with three-quarters of European airlines and 60% of carriers in North and South America reporting a "further decline in profitability" in the fourth quarter. "European airlines in particular appear to still be facing extremely difficult conditions with 80% of respondents from the region still reporting yield falls," it said. Asian airlines, by contrast, are "the most positive," with economic recovery in the region relatively strong.

Despite the regional variations, IATA said that most survey respondents "indicate that the 'worst is over' and that continued recovery in traffic and yields will drive profitability in the right direction. However, [the downturn was so severe]. . .it could take some time for airlines to shift from losses to profits in absolute terms."