Home » Aviation » IATA cuts 2011 profit forecast by half

The International Air Transport Association (IATA) downgraded its 2011 airline industry profit forecast to $4 billion, 54% less than its $8.6-billion profit forecast in March.

At the IATA Annual General Meeting and World Air Transport Summit in Singapore this week, IATA director general Giovanni Bisignani said the revised profit forecast also reflects a 78% drop in the $18-billion net profit (revised from $16 billion) recorded in 2010.

“Natural disasters in Japan, unrest in the Middle East and North Africa, plus the sharp rise in oil prices have slashed industry profit expectations to $4 billion this year. That we are making any money at all in a year with this combination of unprecedented shocks is a result of a very fragile balance,” Bisignani said.

“The efficiency gains of the last decade and the strengthening global economic environment are balancing the high price of fuel. But with a dismal 0.7% margin, there is little buffer left against further shocks.”

April figures

Ironically, IATA earlier reported a rebound in cargo and passenger traffic in April despite high fuel prices and demand shocks.

IATA said all figures posted in April as well as the first four months of the year are above pre-recession levels recorded in 2008.

April traffic in the international market grew 16.5% from the same month last year. IATA noted the strong growth is exaggerated since it is being compared to April 2010 when the European airspace was closed due to the volcanic ash crisis.

In the international market, freight grew 5.4% against a capacity increase of 12.3%, pushing the freight load factor down from 55.3% last year to 51.9% in April of 2011.

International passenger load factors, on the other hand, fell slightly from 76.8% in April last year to 76.7%.

In the domestic market, freight traffic fell 9.3% against a capacity decrease of 1%, resulting in an average load factor for April of 26.8%.

Freight markets

Overall, freight markets grew 3.3% against a capacity increase of 9.2%, dropping the system-wide freight load factor to 46.5% compared to 49.1% for the same month last year while passenger traffic grew 11.9%, slightly ahead of an 11.5% capacity expansion pushing the system-wide load factor to 77.4%.

“Demand improved significantly in April. Eliminating all distortions, we are growing at 3-4%. International traffic is now 7% above the early 2008 pre-recession levels, load factors are hovering around 77% and business confidence is high,” Bisignani said.

“Despite the enormous restructuring over the last decade, the industry is not shock-proof. Profits are being squeezed by the succession of crises and shocks that have marked the first four months of this year.”

But the impact on demand will continue to ease moving into the second half. But maintaining the high load factors needed to support profitable growth will be difficult given the ongoing challenge of matching capacity to volatile demand, IATA said.

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