Global aviation returns to profitability but Europe still in the red

The International Air Transport Association (IATA) expects airlines to post a global profit of $2.5 billion in 2010. This is a major improvement compared with IATA’s previous forecast released in March of a $2.8 billion loss.

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. “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. We thought that it would take at least three years to recover the $81 billion (14.3%) drop in revenues in 2009. But the $62 billion top line improvement this year puts us about 75% on the way to pre-crisis levels,” said Giovanni Bisignani, IATA’s Director General and CEO.

“The $2.5 billion profit comes with some important health warnings. First, this represents a net margin of just 0.5%, which is a long way from sustainable profitability. Second, a major part of the global industry is still posting big losses. A stagnating economy, strikes, natural disasters, and a currency crisis have left European carriers struggling with an anticipated $2.8 billion loss,” said Bisignani.

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. Over the first quarter, the industry was growing at an annualized rate of 9% for passenger and 26% for cargo. Much of the cargo growth is associated with inventory re-stocking. As this cycle completes with normal inventory to sales ratios, we are expecting moderate growth driven by consumer spending.<Korea Shipping Gazette>