IATA releases results of airline business confidence survey

Results from IATA’s quarterly survey conducted in July show a further improvement in airline business confidence, with almost 70% or respondents reporting improved profitability during the last quarter and a similar number expecting further improvement over the year ahead.

While there is regional variation – largely in line with the strength of economic recovery being experienced – the majority of respondents in all regions report improvements during the last quarter and expect either stability or further improvement over the year ahead

In June IATA revised up its own forecast for 2010 industry financial performance from a loss of $2.8 billion to profit of $2.5 billion.

The sharp improvement in cargo demand seen in early-2010 continued during the second quarter of this year, with around 80% of respondents indicating rises air cargo demand, although just over a quarter of respondents now indicate that cargo traffic growth may moderate over the next twelve months – possibly a function of the restocking phase of the inventory cycle coming to a close.

The picture for yields has improved substantially with now the balance of respondents reporting yield increases in cargo markets. The outlook for further yield improvement remains strong, but cargo rates may be starting to stabilise. While there have been no dramatic shifts in the cost base over the last quarter, concern over rising fuel prices remains – and consequently higher costs – later this year could be expected.

Airlines remain confident about prospects for profitability, although recovery in profits for European airlines appears to lag behind other regions – 30% of respondents from Europe still report declining profitability. However, 60% of respondents from this region reported improved profits in the last quarter, possibly indicating a turning point in prospects

Confidence about further improvements in profitability over the twelve months remains high. Some regional variation remains, with Europe being the only region still registering possible profitability decreases – although that the overwhelming majority (80%) of European respondents are actually positive on prospects. In the Middle East two thirds of respondents expect ‘no-change‘ in profitability indicating a fairly stable outlook. In the Americas and Asia Pacific, two-thirds expect further increases in profits.

Competition is increasing on key routes as capacity is reintroduced. In most regions, a majority of respondents are seeing yields rise, although in the Middle East & Africa the bulk of responses indicate yield stability with two-thirds indicating ‘no-change‘ during the previous quarter.

A solid majority of respondents reported that cargo yields increased during the last three months. In fact, this has returned to levels last seen in mid-2008 before the precipitous fall in cargo traffic later that year.