Air industry revises forecast significantly

The international airline industry
will generate net profits of US$8.9 billion during 2010.

According to a new report from the
International Air Travel Association, an upturn in traffic and yield has been
far faster than originally forecast. The association had previously said that
it anticipated worldwide profits of $2.5 billion.

However, analysts also sounded a
warning note in that the durability of the upturn was in increasing doubt
throughout North America and Europe.

“Certainly the initial impetus from
business inventory building and fiscal stimulus has ended, if not gone into
reverse. Growth will slow in 2011. Unfortunately this is likely to coincide
with increasing capacity, as new aircraft deliveries rise and fleet utilization
recovers. Load factors and yields will come under downward pressure and we
expect profits to slip to US$5.3 billion,” read the report.



Markets are now above pre-recession
levels in terms of freight demand, and nearly back to the pre-recession trend.
Passenger markets, however, have lost a year’s growth. The transport
association said that this was down to a lack of consumer confidence as
compared to a rapid recovery in business confidence.

Aggregate growth in both passenger
and cargo are now expected to slow from 11 per cent in 2010 to 5 per cent
growth in 2011.

“The business inventory cycle was
behind the surge in cargo volumes this year and a sharp rebound in business
travel drove the upturn in air travel volumes. The inventory cycle is over and
governments and central banks in some parts of the world have switched from
substantial fiscal and monetary stimulus to tightening mode.

“Growth rates anyway will now slow
because of the comparison with the recovery period in the second half of 2009.
By the end of 2010 most markets and regions will see growth back to single
figures,” said the association, which noted that capacity had been cut sharply
in 2009 and remained low.