IATA latest forecast suggest that "losses from commercial airline operations worldwide in 2009 are expected to reach $11 billion. Our first look into 2010 suggests that losses will begin to shrink to a lower level of $3.8 billion".
The outlook for 2010 is for more widespread, but still relatively weak, economic growth. This is not expected to be strong enough to eliminate excess capacity nor to bring about much recovery in demand for premium seats; so yields will remain weak. Losses will diminish but a recovery to net profit looks unlikely until 2011.
The first impact of stabilizing economies was seen in air freight volumes which were flat during the first quarter and then started to rise in the second. Passenger markets were slower to reach a bottom as rising unemployment and weak income growth discouraged travel. But unless major economies go into a further down-leg of recession it looks as though that floor was reached in the second quarter.
However airlines are still facing exceptionally weak yields on both passenger and freight markets. Rising load factors have helped to stabilze yields but this has been partly achieved by cutting aircraft utilization. Spreading fixed aircraft costs over fewer hours in the air means that, even if higher load factors enable a firming in fares, unit costs will have risen.
The futures market and consensus forecasts now project average oil prices of $61/b this year (was $56/b) and $72/b in 2010. As a result the fuel bill will be higher than previously expected this year and will rise into 2010, further squeezing airline operating cash flows.
Major airlines raised over $15 billion of cash on capital markets so far this year, boosting security against continued weak yields and rising fuel prices. However, with banks still not lending freely and ownership restrictions limiting equity finance, many of the smaller and medium-sized airlines remain in a much more fragile financial condition.
Source: IATA
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