IATA Cuts 2010 Loss Forecast in Half
-Strong Start to
Geneva - The International Air Transport
Association (IATA) halved its loss forecast for 2010 to US$2.8 billion (compared
to the US$5.6 billion loss forecast in December 2009). The improvement is
largely driven by a much stronger recovery in demand seen by year-end
gains that continued into the first months of 2010. Relatively flat
capacity translated into some yield improvement and stronger revenues.
IATA also lowered its 2009 loss estimate to US$9.4 billion
from the previously forecast US$11.0 billion loss.
Improvements are driven by economic recovery in the
emerging markets of Asia-Pacific and Latin America whose carriers posted
international passenger demand gains of 6.5% and 11.0% respectively in
January. North America and Europe are lagging with international
passenger demand gains of 2.1% and 3.1% respectively for the same month.
“We are seeing a definite two-speed industry. Asia and
Latin America are driving the recovery. The weakest international markets
are North Atlantic and intra-Europe which have continuously contracted
since mid-2008,” said Giovanni Bisignani, IATA’s Director General and
Forecast highlights include:
Passenger demand (which fell by 2.9% in 2009) is expected to grow by 5.6%
in 2010. This is an improvement on the previous forecast in December of
4.5% growth. Cargo demand (which fell by 11.1% in 2009) is expected
to grow by 12.0% in 2010. This is significantly better than the
previously forecast 7.0% growth.
Airlines kept capacity relatively in line with demand throughout 2009. A
strong year-end recovery pushed load factors to record levels when
adjusted for seasonality. By January the international passenger load
factor was 75.9% while cargo utilization was at 49.6%.
Tighter supply and demand conditions are expected to see yields
improve—2.0% for passenger and 3.1% for cargo. This is a considerable improvement
from the precipitous 14% fall experienced by both in 2009.
Premium travel, while slower to recover than economy travel, now appears
to be following a cyclical recovery in volume terms. But it is still 17%
below the early 2008 peak. Premium yields, which are 20% below peak, may
be suffering a structural shift.
With improved economic conditions, the price of fuel is rising. IATA
raised its expected average oil price to US$79 per barrel from the
previously forecast US$75. That is an increase of US$17 per barrel on the
US$62 average price for 2009. The combined impact of increased capacity
and a higher fuel price will add US$19 billion to the industry fuel bill
bringing it to an expected US$132 billion in 2010. As a percentage of
operating costs, this represents 26%, up from 24% in 2009.
Revenues will rise to US$522 billion. That is US$44 billion more than
previously forecast and a US$43 billion improvement on 2009.
“Revenues are half-way to recovery—US$42 billion below the
2008 peak and US$43 billion above the 2009 trough. 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. 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,” said Bisignani.
Regional differences in airlines prospects are sharp:
carriers will see the US$2.7 billion 2009 loss turn to
US$900 million in profits on the back of a rapid economic recovery
being driven by China. Cargo markets are particularly strong with
long-haul cargo capacity for shipments originating in Asia
experiencing a capacity shortage. Demand is expected to grow by 12%
American carriers will post an US$800 million profit
for the second consecutive year. The region’s economies are less
debt-burdened than the US or Europe. Economic ties to Asia helped
isolate the region from the worst of the financial crisis. Carriers
in parts of the region have benefitted from liberalized markets
which have facilitated some cross-border consolidation, giving
greater flexibility to deal with changing economic conditions.
Demand is expected to grow by 12.2% in 2010.
carriers will post a US$2.2 billion loss—the largest
among the regions. This reflects the slow pace of economic recovery
and faltering consumer confidence. Demand is expected to grow by
4.2% in 2010. Intra-European premium travel is expected to recover
more slowly. In December it remained 9.7% below previous year
American carriers will post the second largest
losses at US$1.8 billion. The jobless economic recovery continues to
burden consumer confidence. Demand is expected to improve by 6.2% in
2010. But with intra-North America premium travel still down 13.3%
as of December, the region remains in the red.
- Middle East
carriers are expected to experience demand growth of
15.2% in 2010, but will see losses of US$400 million. Low yields in
long-haul markets connected over Middle East hubs is a burden on
carriers are likely to post a US$100 million loss for
2010, halving 2009 losses. Demand is expected to improve by 7.4%.
But this will not be sufficient for profitability as they continue
to face strong competition for market share.
“The stark contrast between profitability among Asian and
Latin American carriers while losses continue to plague the rest of the
industry clearly demonstrates the fact that airlines have not been able
to develop into global businesses. The restrictions of the bilateral
system prevent the kind of cross border consolidation that we have seen
in industries such as pharmaceuticals or telecoms. Airlines are battling
the challenges of the financial crisis without the benefit of this
important tool. It’s time for change,” said Bisignani.
In November 2009, IATA’s Agenda for Freedom initiative
facilitated the signing of a multi-lateral statement of policy principles
focused on liberalizing market access, pricing and ownership. Seven
governments (Chile, Malaysia, Panama, Singapore, Switzerland, the United
Arab Emirates and the United States) and the European Commission signed
the document. Kuwait joined the group by endorsing the principles in
“The second stage talks between the US and Europe are the
big opportunity for 2010. The slow recovery in both regions should be an
invitation for change. Liberalizing ownership would boost both markets.
Even more importantly, as these markets combined represent about 60% of
global aviation it would send a strong signal for global change. Brands,
not flags, must guide the industry to sustainable profitability. That cannot
happen until governments throw away the outdated restrictions of the
bilateral system,” said Bisignani.
- IATA -
For more information, please contact:
Director Corporate Communications
Tel: +41 22 770 2967
Notes for Editors:
(International Air Transport Association) represents some 230
airlines comprising 93% of scheduled international air traffic