World airlines rebound on Asian and Latin American demand, halve 2010 losses forecast to $2.8B
Global airlines are undergoing a surprisingly strong recovery with Asian and Latin American carriers leading the way, the leading industry group said Thursday as it halved its loss forecast for 2010 to $2.8 billion.
The International Air Transport Association said carriers began bouncing back late last year, and have continued to see stronger demand after posting record losses during the global economic crisis. The group also lowered its 2009 loss estimate to $9.4 billion from $11 billion because of the year-end rally.
“We are starting to see some blue skies ahead of us,” said IATA chief executive Giovanni Bisignani.
The group, which represents 240 airline companies worldwide, had predicted in December that 2010 losses would total $5.6 billion because of the “extraordinarily low” yields airlines are generating — the average price someone pays to fly one mile.
Yields are now expected to improve 2 percent for passenger planes, and 3.1 percent for cargo traffic this year, despite a glut of planes on the market and lower corporate travel budgets. Both key statistics dived 14 percent in 2009.
Passenger demand should grow 5.6 percent for the year, while cargo demand could jump 12 percent, IATA added. It said strong growth in Asia and Latin America was offsetting lagging demand in Europe and the United States.
“We are seeing a definite two-speed industry,” Bisignani told reporters. He noted that American and European travelers may take a longer time to return to higher-priced business class seats for short-haul flights, and said markets in their regions continued to contract.
European carriers are expected to post a $2.2 billion loss, the largest in the world, while North American airlines could lose $1.8 billion because of a jobless recovery and poor consumer confidence, the group said. By contrast, Asian-Pacific companies could make $2.7 billion and Latin American carriers another $800 million.
Bisignani said 2010 represents the halfway point in a recovery effort that could take three years — even if that still doesn’t mean profits. Airlines should generate $44 billion in revenues more than last year, but that is still be $43 billion below the industry’s 2008 peak, he said.
IATA warned, however, that higher fuel costs would hamper any industrywide rebound. It is now gauging an average oil price of $79 a barrel for the year, meaning $132 billion in costs for carriers. That’s over a quarter of all operating costs.
“Oil is a wild card,” Bisignani conceded.
Speaking on industry developments, he noted over 30 airlines were knocked out of business since the crisis began and that carriers have lost nearly $50 billion in the last decade. They now hold over $200 billion in debts.
“This is not the time for increases in salaries or prices for services,” Bisignani said, without mentioning specifically Lufthansa’s strike last month or similar action threatened at British Airways.
“It’s certainly not the time for strikes,” he said. “All the partners need to work together to get out of these red numbers.”