Airline Group Halves Forecast for Losses in 2010

PARIS — A leading airline trade group slashed its forecast for industry losses this year in half Thursday, due to what it said was a stronger-than-expected economic recovery in emerging markets, especially Asia and Latin America.
The International Air Transport Association had been predicting 2010 losses of $5.6 billion as recently as December, amid concerns that unsold seats and empty cargo holds would keep a lid on revenues. The new forecast was for a loss of $2.8 billion.
“Passengers are returning to flying,” Giovanni Bisignani, the I.A.T.A secretary general, said in a briefing with journalists. “While it is still too early to celebrate, this is a good signal for the economy.”
The I.A.T.A. raised its forecast for 2010 passenger traffic growth to 5.6 percent from 4.5 percent, compared with a 2.9 percent decline in 2009. Cargo traffic — which dropped by 11 percent in 2009 — was now expected to jump by 12 percent this year, up from a December forecast of 7 percent growth.
However, the global growth picture remains uneven, the I.A.T.A. said.
Markets in North America and Europe were lagging, reporting gains in international passenger demand of just 2.1 percent and 2.3 percent, respectively, in January.
In emerging markets, the picture is strikingly different, Mr. Bisignani said. International passenger demand in the Asia-Pacific region climbed by 6.5 percent in January from a year earlier. The I.A.T.A. predicted that airlines in the region would swing to a combined $900 million profit this year, from a loss of $2.7 billion in 2009.
“This is a very dramatic shift,” Mr. Bisignani said, noting that airlines in that region were now facing a shortage of capacity, particularly for air freight.
The situation in Latin America was also encouraging, with international passenger demand up 11 percent in January from a year earlier. The association forecast that carriers in the region would record profits of around $800 million this year, in line with 2009.
Much of the strength in the region was due to growing economic ties to the fast-growing economies of Asia, the I.A.T.A. said, as well as a recent wave of cross-border airline mergers that have given carriers greater flexibility and economies of scale.
Globally, airline revenues are expected to recover sharply this year, to $522 billion from $479 billion in 2009.
“Revenues are half-way to recovery — $42 billion below the 2008 peak and $43 billion above the 2009 trough,” Mr. Bisignani said.
Airlines in North America and Europe, where consumer confidence and job growth remain low, were expected to record another year of losses in 2010.
North American carriers are likely to lose around $1.8 billion this year, compared with $2.9 billion in losses in 2009. Air travel demand is expected to grow by 6.2 percent, although first- and business-class travel remains sluggish.
European carriers were expected to lose around $2.2 billion in 2010, slightly less than the $2.5 billion the I.A.T.A. forecast in December, amid an expected 4.2 percent increase in demand.
Airlines in the Middle East were expected to see one of the sharpest recoveries in demand this year, up 15.2 percent from 2009, although they are likely to remain in the red to the tune of $400 million. Excess capacity in the region is weighing heavily on ticket prices.
After slashing capacity last year by cutting flights and using smaller aircraft, airfares and cargo rates are beginning to rise. The I.A.T.A. forecast that average revenue per distance traveled, known as yield, would improve by around 2 percent in 2010 for passenger travel and 3 percent for cargo, compared with a precipitous 14 percent drop experienced by both sectors in 2009.
Its interesting how the airline companies thing that the economy is getting better, i don't mean to say its not but we also have to take into consideration the cost of gas. For the past year, gas has been really expensive and many people decide to fly because it less costly. Also the places where these airlines expect to make a profit is surprising because North American region is expecting to have losses and i think this might be true because their is still to much unemployment. How those this affect the people? Are their goals reasonable?