IATA updates forecasts for global aviation

IATA updates forecasts for global aviation

The International Air Transport Association (IATA) has revised its expectations for global aviation in 2010.

The industry trade body now expects the sector to generate a profit of $15.1 billion over the course of the year.

As late as June this year the IATA was predicting global profits of $2.5 billion, while in September the group had expected profits of $8.9 billion.

Similarly the association revised upwards its projections for 2011 to a net industry profit of $9.1 billion (up from the $5.3 billion forecast in September).

Net margins, however, are set to remain weak at 2.7 per cent for 2010 and falling to 1.5 per cent in 2011.

“Our profit projections increased for both 2010 and 2011 based on an exceptionally strong third quarter performance,” said outgoing IATA director general Giovanni Bisignani.

“But despite higher profit projections, we still see the recovery pausing next year after a strong post-recession rebound.”

IATA director general Giovanni Bisignani predicts a slowdown in 2011

Profit Margin

Bisignani also characterised the improvements in terms of profit margins, which continue to disappoint.

“Margins remain pathetic,” he said, “with a 2.7 per cent net margin in 2010 shrinking to 1.5 per cent in 2011; we are nowhere near covering our cost of capital.”

“The industry is fragile and balancing on a knife edge.

“Any shock could stunt the recovery, as we are seeing with the results of new or increased taxation on airlines and travellers in Europe,” said Bisignani.

Margin for Error

Despite the apparent volatility in the IATA forecasts, the trade body was quick to point out the importance of relating absolute figures to the size of the industry.

The $6.2 billion increase in IATA’s projection for the 2010 net profit (compared to the September forecast) is equal to just 1.1 per cent of the industry’s projected $565 billion in revenues.

2011 Forecast

Looking toward next year, the IATA remains less confident.

“The recovery cycle will pause in 2011.

“Although the $9.1 billion profit projection for 2011 is better than we had previously forecast, next year the industry will face tougher conditions than what we are experiencing today,” said Bisignani.

Rising fuel costs and increasing taxation are both likely to take a toll on profits, added Bisignani.