Global aviation given clean bill of health

Global aviation given clean bill of health

The global aviation industry is recovering at a considerably faster rate than previously expected due to a sharp recovery in passenger numbers and cargo. However European airlines are missing out on the recovery due to the impact of April’s volcanic eruption in Iceland and industrial disputes, IATA announced on the first day of its 2010 AGM in Berlin.

The aviation industry body said it now expects airlines around the world to post a $2.5 billion profit in 2010, compared with its previous forecast in March for a loss of $2.8 billion.

It said passenger traffic is now expected to grow 7.1% this year and cargo volumes will grow by 18.5%, compared with its previous forecasts for 5.6% and 12% growth, respectively. Industry revenue is forecast at $545 billion, up from $483 billion in 2009.

“The global economy is recovering from the depths of the financial crisis much more quickly than could have been anticipated. Airlines are benefiting from a strong traffic rebound that is pushing the industry into the black,” said Giovanni Bisignani, IATA’s Director General and CEO.

Industry revenues are forecast to be $545 billion in 2010. This is up from the $483 billion in 2009, but still below the $564 billion achieved in 2008. However he warned that this comes with some important health warnings.

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“A stagnating economy, strikes, natural disasters, and a currency crisis have left European carriers struggling with an anticipated $2.8 billion loss,” he added.
Passenger traffic is forecast to grow by 7.1% in 2010 while cargo traffic will expand by 18.5%. This is significantly better than the previous forecast growth of 5.6% and 12.0% respectively.

Yields are now forecast to grow by 4.5% for both the cargo and passenger business. This is a significant improvement from the previously forecast yield growth of 2.0% in passenger markets and 3.1% for cargo.

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. Of these, approximately 500 are replacement aircraft while the rest will be new capacity.

Air space closures following the eruption of an Icelandic volcano dented the recovery in April as a result of over 100,000 flight cancellations over six days. But it appears that this was a short-lived shock. Early May figures show a rebound in traffic for European carriers.

Premium travel was rebounding at an annualized growth rate of 20% over the first quarter and economy travel is now back to pre-recession levels.

Regional differences in airline performance sharpened with this forecast. “The recovery from this crisis is asymmetrical. Worsening conditions in Europe are in sharp contrast to improvements in all other regions,” said Bisignani.

Highlights include:

Asia-Pacific: Asia-Pacific carriers continue to benefit from strong regional growth. Against a global GDP growth expectation of 2.9%, the Asian economy (excluding Japan) is expected to grow by 7% this year. China will outpace that with an expected 9.9% GDP expansion. As a result, the region’s carriers are expected to deliver the largest profit at $2.2 billion. This is more than double the previously forecast $900 million in March and a major reversal from the $2.7 billion loss in 2009.

North America: North American carriers are expected to return a profit of $1.9 billion.  This is a major reversal from the previously forecast $1.8 billion loss, and the $2.7 billion that the region’s carriers lost in 2009.

Latin America: Latin American carriers will show a profit of $900 million, up slightly from the $800 million previously forecast. The region’s commodities are closely linked with Asian growth and supported by a 3.9% GDP expansion this year.

Middle East: Middle Eastern carriers are expected to post a profit of $100 million - their first since 2005. This is significantly better than the previously forecast $400 million loss and the $600 million that the region’s carriers lost in 2009.

Africa: African carriers are expected to post a $100 million profit, their first since 2002. This reverses the $100 million loss previously forecast in March and the $100 million that the region lost in 2009.

Europe: Europe will be the only region in the red with a $2.8 billion loss. This is a downgrading from the $2.2 billion loss previously forecast in March, although it is an improvement on the $4.3 billion that the region lost in 2009. European carrier bore 70% of the $1.8 billion loss in revenue as a result of the volcanic ash crisis. A series of labour strikes have also impacted the region’s performance.