IATA cuts 2010 loss forecast in half

Geneva-The International Air Transport Association (IATA) halved its loss forecast for 2010 to US$2.8 billion (compared to the US$5.6 billion loss forecast in December 2009).

The improvement is largely driven by a much stronger recovery in demand seen by year-end gains that continued into the first months of 2010.

Relatively flat capacity translated into some yield improvement and stronger revenues.

IATA also lowered its 2009 loss estimate to US$9.4 billion from the previously forecast US$11 billion loss.

Improvements are driven by economic recovery in the emerging markets of Asia-Pacific and Latin America whose carriers posted international passenger demand gains of 6.5 percent and 11.0 percent respectively in January.

North America and Europe are lagging with international passenger demand gains of 2.1 percent and 3.1 percent respectively for the same month.

"We are seeing a definite two-speed industry. Asia and Latin America are driving the recovery.

The weakest international markets are North Atlantic and intra-Europe which have continuously contracted since mid-2008," IATA's Director General and CEO Giovanni Bisignani said.

Forecast highlights include:

Improving Demand: Passenger demand (which fell by 2.9 percent in 2009) is expected to grow by 5.6 percent in 2010.

This is an improvement on the previous forecast in December by 4.5 percent growth.

Cargo demand (which fell by 11.1 percent in 2009) is expected to grow by 12.0 percent in 2010. This is significantly better than the previously forecast 7.0% growth.

Load Factors: Airlines kept capacity relatively in line with demand throughout 2009.

A strong year-end recovery pushed load factors to record levels when adjusted for seasonality. By January the international passenger load factor was 75.9 percent while cargo utilization was at 49.6 percent.

Tighter supply and demand conditions are expected to see yields improve - 2.0 percent for passenger and 3.1 percent for cargo.

This is a considerable improvement from the precipitous 14 percent fall experienced by both in 2009.

Premium Travel: Premium travel, while slower to recover than economy travel, now appears to be following a cyclical recovery in volume terms.

But it is still 17 percent below the early 2008 peak. Premium yields, which are 20 percent below peak, may be suffering a structural shift.

Fuel: With improved economic conditions, the price of fuel is rising. IATA raised its expected average oil price to US$79 per barrel from the previously forecast US$75.

That is an increase of US$17 per barrel on the US$62 average price for 2009.

The combined impact of increased capacity and a higher fuel price will add US$19 billion to the industry fuel bill bringing it to an expected US$132 billion in 2010.

As a percentage of operating costs, this represents 26 percent, up from 24 percent in 2009.