IATA expecs US$5.6 billion loss in 2010

The International Air Transport Association (IATA) revised its financial outlook for 2010 to an expected US$5.6 billion global net loss, larger than the previously forecast loss of US$3.8 billion. For 2009, IATA maintained its forecast of a US$11 billion net loss.

The world airlines will lose US$11.0 billion in 2009. We are ending an Annus Horribilis that brings to a close the 10 challenging years of an aviation Decennis Horribilis. Between 2000 and 2009, airlines lost US$49.1 billion, which is an average of US$5.0 billion per year,?said Giovanni Bisignani, IATA? Director General and CEO.

The worst is likely behind us. For 2010, some key statistics are moving in the right direction. Demand will likely continue to improve and airlines are expected to drive down non-fuel unit costs by 1.3%. But fuel costs are rising and yields are a continuing disaster. Airlines will remain firmly in the red in 2010 with US$5.6 billion in losses, said Bisignani.

The forecast highlights include:
Revenues: Industry revenues are expected to rise by US$22 billion (4.9%) to US$478 billion in 2010, compared to 2009. However, revenues remain US$57 billion (-11%) below the peak of US$535 billion in 2008 and US$30 billion below 2007 when passenger traffic was at similar levels to what is expected in 2010.

Passenger Demand: Following a decline of 4.1% in 2009, passenger traffic is expected to grow by 4.5% in 2010 (stronger than the previously forecast 3.2% in September). A total of 2.28 billion people are expected to fly in 2010, bringing total passenger numbers back in line with the peak recorded in 2007.

Cargo Demand: Cargo demand is expected to grow by 7% to 37.7 million tonnes in 2010 (stronger than the previously forecast 5% in September), following a 13% decline in 2009. Total freight volumes will remain 10% below the 41.8 million tonne peak recorded in 2007. Cargo demand is rising faster than world trade as depleted inventories are rebuilt. Once the inventory cycle completes, growth is expected to fall back in line with world trade.

Yields: In 2009, passenger and cargo yields plummeted by 12% and 15% respectively. Cargo yields are expected to improve by 0.9% in 2010. But passenger yields are not expected to improve from their extraordinary low level.

This is being driven by two factors: excess capacity in the market and reduced corporate travel budgets. Capacity adjustments in 2009 were made at the expense of lower aircraft utilization (down 6%). An additional 1300 aircraft due for delivery in 2010 will contribute to 2.8% global capacity growth, putting continuing pressure on yields. On top of this, corporate travel buyers have adjusted their budgets to reflect lower premium fare levels.

Fuel: An average oil price of US$75.0 per barrel (Brent) is expected in 2010, up considerably from the US$61.8 average expected for 2009. As a percentage of operating costs, fuel will be 26% in 2010. This is considerably lower than the 32% of operating costs that fuel comprised in 2008, but twice the 13% of operating costs that fuel represented in 2001-2002.

Cash: Over 2009, the industry raised at least US$38 billion in cash (US$25 billion from capital markets and US$13 billion from aircraft sale and leasebacks). The ratio of cash to revenues improved for European and North American airlines, but was flat for Asia- Pacific carriers. This will provide a cash cushion for the approaching first quarter seasonally weak traffic lows.

The number of travelers will be back to the peak levels of 2007, but with US$30 billion less in revenues. The US$38 billion cash cushion built up throughout this year will help airlines survive through the low season, but there is no recovery in sight for 2010. Tough times continue, said Bisignani.<Korea Shipping Gazette>