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Airline Industry

IATA: Airline finances rebounded strongly in Q1

Jun 03, 2010

GENEVA - Airline finances rebounded strongly in the first quarter of this year, as a strong increase in cargo and passenger demand far outweighed extra capacity from new planes, the industry association IATA said on Thursday.

The recovery in airline performance seems to have resumed in May after disruption to flights from the volcanic ash cloud emanating from Iceland and economic concerns hit share prices, particularly for European carriers, the International Air Transport Association said in its airlines financial monitor.

A sample of 50 of IATA's 230 member airlines saw net post-tax losses halve to $2.0 billion in the first quarter of this year from $4.1 billion a year earlier, while operating losses shrank to $447 million from $2.9 billion.

Strong improvements were recorded in all regions except Europe, where net losses deepened, with airlines in the sample from Latin America and the Asia-Pacific moving back into net profit reflecting stronger economic recovery in those areas.

IATA noted that first-quarter financial results are always weak for seasonal reasons, and airlines typically make 80 percent of their earnings in the second and third quarters.

"This year there were signs of a significant improvement in all regions at the operating level, though Europe stands out as the weakest performer -- even before the impact of the ash plume," IATA said.

It said there was little reason for jet kerosene prices to break out of the $80-100 per barrel range they have held for the past six months, as ample inventories were likely to outweigh the impact of any resurgence in economic optimism.

Prices fell back during May as the Greek sovereign debt crisis raised uncertainties about the strength of the recovery.

The pace of improvement in passenger load factors -- a measure of capacity usage -- slowed in March and April but it remains near records when seasonally adjusted. However further capacity utilisation gains will be hard over the rest of the year as a further 1,340 aircraft are delivered, it said.

But higher load factors for both passengers and freight are allowing fares to rise, with premium fares now rising by about 10 percent a year and economy fares at half that, indicating stronger market conditions.

IATA forecast in March that the industry would lose $2.8 billion this year after $9.4 billion in 2009, with the crisis taking accumulated losses over the past 10 years to $50 billion.

IATA, whose members include British Airways, Lufthansa and Singapore Airlines, will unveil a revised forecast on June 6 at an air transport conference in Berlin.

IATA: Airline finances rebounded strongly in Q1
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