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Business

Air transport authority triples forecast for 2010 airline industry profits

Video by Jade BARKER

Text by News Wires

Latest update : 2010-09-21

The International Air Transport Association more than tripled its expectations for airline industry profits for 2010, saying the sector would earn 8.9 billion dollars, a significant increase from its prediction in June of 2.5 billion dollars.

AFP - The International Air Transport Association on Tuesday more than tripled its forecast for airline industry profits this year as demand picked up but warned earnings would ease back next year.
   
IATA said the sector would earn 8.9 billion dollars in 2010, well up from its previous prediction of 2.5 billion dollars made in June.
   
"We are upgrading again our global profit forecast for the world's airlines," IATA director general and chief executive, Giovanni Bisignani, told a news conference in Singapore.
   
"The industry has been stronger and faster than anyone predicted," he said.
   
Besides increasing demand for air travel, better capacity management by the airlines also helped the industry to recover stronger than expected from the global slump, IATA said.
   
The Asia-Pacific, which has eclipsed North America as the world's largest air travel market, continues to outperform the rest of the world and will record the biggest profit, of 5.2 billion dollars this year, IATA said.
   
IATA had previously predicted the region would make a profit of 2.2 billion dollars.
   
"The strong improvement is based on strong market growth and yield gains," the airline trade body said.
   
"Renewed buoyancy in air freight markets has been particularly important for airlines in this region, where it can represent up to 40 percent of revenues," it added.
   
North America would make a higher profit of 3.5 billion dollars instead of the earlier estimate of 1.9 billion dollars.
   
Europe remains the only region in the red with a projected loss of 1.3 billion dollars, smaller than the earlier estimate of 2.8 billion dollars, the association said.
   
The Middle East will see a profit of 400 million dollars versus 100 million dollars previously estimated, while Latin America's carriers will earn about one billion dollars, higher than the earlier forecast of 900 million dollars.
   
But IATA said in its first estimate of results for the industry next year that profits for the sector, widely seen as an indicator of general economic activity, would drop to 5.3 billion dollars.
   
Despite this year's robust profit forecasts, "I would say it's not time for a big celebration", Bisignani said.
   
"The real question in this forecast is how long we see the recovery lasting. It is clear that there will be a slowdown in the fourth quarter," he said, adding air travel was already tapering off.
   
Bisignani said global gross domestic product (GDP) growth of 3.2 percent expected this year should ease to 2.6 percent in 2011 as government stimulus packages that helped economies rebound from the 2008-2009 recession run their course.
   
International Monetary Fund chief Dominique Strauss-Kahn said last week he was confident developed economies would not fall back into recession but warned that recovery might not be strong enough to create jobs.
   
Such high jobless rates and falling consumer confidence, especially in the United States and Europe, will affect travel demand, according to IATA.
   
While travel and freight markets will remain stronger in Asia, the Middle East and South America "we do not expect these hot spots to be able to sustain global growth in 2011", IATA added.
   
However, slower growth should keep costs in check and oil prices are expected to stay at an average 79 dollars a barrel, the association said, adding that fuel continues to account for about 25 percent of airline expenditure.
   
IATA represents some 230 carriers that account for more than 90 percent of scheduled air traffic globally, but does not include many of the budget airlines credited with a boom in short and medium-haul travel in recent years.

 

Date created : 2010-09-21

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