Global airlines are raising their forecasts to hit $8.9 billion in net profits by the end of 2010, which is three times higher than the previous forecast of $2.5 billion just a few months ago.
The revised revenue projections from the International Air Transport Association (IATA) are a boon for the industry. The main factors of the increased forecast are the Asian-Pacific airlines that have performed well throughout the crisis—raising their forecasts to $5.2 billion net profits—and North American airlines, which are forecast to make $3.5 billion in profits.
European airlines aren’t performing up to standard, dragging the overall forecast down by a predicted 1.9 billion in net losses. Latin American airlines are performing well, forecasting $1 billion net profit in 2010 mainly due to very strong economic growth and a minimum impact by the crisis. Middle East sees a stable $400 million net profit due to strong regional economies and an expanded share of long haul markets.
Demand is expected to be higher than the number of available seats, the IATA said. Airfare prices have been high this year—IATA said that the demand was expected to rise 11 percent this year while the capacity would expand by only 7 percent.
“This year is as good as it gets in the cycle,” Giovanni Bisignani, the CEO IATA, said in a statement. “Governments are running out of cash, unemployment remains high, and business confidence is weak. The real question is how long we see the recovery lasting.”
European airlines have struggled quite a bit this year, due to massive austerity programs implemented by many EU countries and Iceland’s eruption of Eyjafjallajökull volcano that froze most air traffic for about 2 months early this year. The weaker euro is the only positive factor keeping European airlines’ revenues where they are today, as more business and leisure travel to Europe is encouraged.
“The economic environment is still extremely risky and uncertain going forward,” said Brian Pearce, IATA’s chief economist, in a statement. “In Europe, we’ve seen that the markets are getting very worried about government debt in some countries. And we don’t really know what impact the austerity budgets will have,” he added.
IATA, the Montreal-based trade group representing 230 carriers, says that ticket prices will be 8 percent lower next year compared to 2008 prices. This is partly due to the increase in capacity by 6 percent in 2011, as 1,400 new air vessels will be delivered.
For 2011, IATA has presented a conservative forecast of $5.3 billion net profits citing to economic uncertainties, low consumer confidence, and a slowdown in European and North American airspace.
“We expect the 3.2 percent GDP growth of 2010 to drop to 2.6 percent in 2011. As a result, 2011 is looking more austere. We see profitability falling to $5.3 billion with a margin of 0.9 percent,” said Bisignani.
“The impact of the post-recession bounce from restocked inventories will dissipate. Consumer spending is not expected to pick up the slack as joblessness remains high and consumer confidence falls in Europe and North America,” he added.
In 2009, the airlines had a $9.9 billion net loss in total, and in 2008 the net loss was $16 billion. In 2007, before the crisis, the airlines posted a $12.9 billion net profit that the experts say may not be matched in years.
The revised revenue projections from the International Air Transport Association (IATA) are a boon for the industry. The main factors of the increased forecast are the Asian-Pacific airlines that have performed well throughout the crisis—raising their forecasts to $5.2 billion net profits—and North American airlines, which are forecast to make $3.5 billion in profits.
European airlines aren’t performing up to standard, dragging the overall forecast down by a predicted 1.9 billion in net losses. Latin American airlines are performing well, forecasting $1 billion net profit in 2010 mainly due to very strong economic growth and a minimum impact by the crisis. Middle East sees a stable $400 million net profit due to strong regional economies and an expanded share of long haul markets.
Demand is expected to be higher than the number of available seats, the IATA said. Airfare prices have been high this year—IATA said that the demand was expected to rise 11 percent this year while the capacity would expand by only 7 percent.
“This year is as good as it gets in the cycle,” Giovanni Bisignani, the CEO IATA, said in a statement. “Governments are running out of cash, unemployment remains high, and business confidence is weak. The real question is how long we see the recovery lasting.”
European airlines have struggled quite a bit this year, due to massive austerity programs implemented by many EU countries and Iceland’s eruption of Eyjafjallajökull volcano that froze most air traffic for about 2 months early this year. The weaker euro is the only positive factor keeping European airlines’ revenues where they are today, as more business and leisure travel to Europe is encouraged.
“The economic environment is still extremely risky and uncertain going forward,” said Brian Pearce, IATA’s chief economist, in a statement. “In Europe, we’ve seen that the markets are getting very worried about government debt in some countries. And we don’t really know what impact the austerity budgets will have,” he added.
IATA, the Montreal-based trade group representing 230 carriers, says that ticket prices will be 8 percent lower next year compared to 2008 prices. This is partly due to the increase in capacity by 6 percent in 2011, as 1,400 new air vessels will be delivered.
For 2011, IATA has presented a conservative forecast of $5.3 billion net profits citing to economic uncertainties, low consumer confidence, and a slowdown in European and North American airspace.
“We expect the 3.2 percent GDP growth of 2010 to drop to 2.6 percent in 2011. As a result, 2011 is looking more austere. We see profitability falling to $5.3 billion with a margin of 0.9 percent,” said Bisignani.
“The impact of the post-recession bounce from restocked inventories will dissipate. Consumer spending is not expected to pick up the slack as joblessness remains high and consumer confidence falls in Europe and North America,” he added.
In 2009, the airlines had a $9.9 billion net loss in total, and in 2008 the net loss was $16 billion. In 2007, before the crisis, the airlines posted a $12.9 billion net profit that the experts say may not be matched in years.
