IATA reports strong 2010 but expresses fears for future

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IATA has expressed concerns that the steadily-rising price of oil will further dent the airline industry's already "pathetic" profit margins.

"We predicted that 2011 would see a second consecutive year of profitability but with industry profits falling by 40% to $9.1 billion," says IATA director general Giovanni Bisignani.

However, that prediction had been made on the basis of an oil price of $84 a barrel and prices are currently hovering around $100. "For every dollar increase in the average price of a barrel of oil over the year, airlines face the difficult task of recovering an additional $1.6 billion in costs," says Bisignani. Fuel accounts for 27% of airlines' operating costs.

Presenting its full-year 2010 statistics for international air traffic, IATA says that the past year showed the airline business generally bouncing back strongly from 2009's sharp dip. Scheduled passenger traffic was up 8.2% while cargo grew 20.6% as companies around the world re-stocked their inventories.

Passenger and cargo numbers for December 2010 showed they had outstripped 2008's pre-recession heights, with air travel volume up by 4% and cargo by 1% over 2008.

"The world is moving again," says Bisignani. "After the biggest demand decline in the history of aviation in 2009 people started to travel and do business again in 2010. Airlines ended the year slightly ahead of early 2008 volumes, but with a pathetic 2.7% profit margin. The challenge is to turn the demand for mobility into sustainable profits."

Middle East carriers led the way in passenger demand, recording 17.8% growth in 2010 despite a 13.2% rise in capacity as a steady stream of new aircraft was delivered to Gulf-based airlines.

All other regions also recorded year-on-year growth in 2010: Africa with 12.9%, Asia-Pacific 9%, Latin America 8.2% and North America 7.4%.

Europe brought up the rear, with a more modest rise of 5.1%. IATA notes that this was double the region's capacity increase of 2.6%, which helped passenger load factors rise to 79.4%. However, the continuing poor state of many European economies meant that yield improvements were constrained and a further blow came in December with the severe weather that disrupted air travel in several European countries.

Cargo demand was notably erratic throughout 2010, says IATA, with growth varying from 35.2% in May to a low of 5.8% in November. Overall, however, the freight industry is coming back on track to its historical annual growth pattern of 5-6%.

There were large variations in regional cargo patterns. Latin American carriers recorded the highest annual growth, at 29.1%, while Middle East airlines were close behind with 26.7%. Asia-Pacific followed with 24%, Africa with 23.8% and North America, 21.8%. Still-weak European economies were reflected in a 10.8% rise,