Iata estimates US$5.6 billion loss

International Air Transport Association revised its financial outlook for 2010 to an expected US$5.6 billion global net loss, larger than the previously forecast loss of US$3.8 billion.

Iata maintains its forecast of a US$11 billion net loss for this year.

Overall, Iata believes demand will continue to improve and airlines are expected to drive down non-fuel unit costs by 1.3%. But fuel costs are rising and yields are a continuing disaster. Airlines will remain firmly in the red in 2010 with US$5.6 billion in losses.

Industry revenues are expected to rise by US$22 billion or 4.9% to US$478 billion in 2010, compared to this year. However, revenues remain US$57 billion below the peak of US$535 billion in 2008 and US$30 billion below 2007 when passenger traffic was at similar levels to what is expected in 2010.

Following a decline of 4.1% this year, passenger traffic is expected to grow by 4.5% in 2010 (stronger than the previously forecast of 3.2% in September). In 2010, 2.28 billion passengers are expected in line with the peak recorded in 2007.

But yields plummeted by 12% and not expected to improve from their extraordinary low level in 2010 due to excess capacity in the market and reduced corporate travel budgets.

Capacity adjustments were made at the expense of lower aircraft use (down 6%). An additional 1,300 aircrafts due for delivery in 2010 will contribute to 2.8% global capacity growth, putting continuing pressure on yields. On top of this, corporate travel buyers have adjusted their budgets to reflect lower premium fare levels.

An average oil price of US$75 per barrel (Brent) is expected in 2010, up considerably from the US$61.8 average expected for this year. As a percentage of operating costs, fuel will be 26% in 2010.

All regions except Africa that will post the same amount of loss at US$100, will see an improvement in 2010 compared to this year. North American carriers will see losses reduced from US$2.9 billion to US$2 billion, largely due to pricing power and cost reductions gained through capacity adjustments.

European carriers will generate the largest losses of any region at US$2.5 billion. Still, this is an improvement over the US$3.5 billion loss that the region’s carriers are expected to post this year. Slow economic recovery in the region combined with limited ability to adjust capacity due to airport slot regulations is hindering the region’s airlines.

Asia Pacific carriers will post losses of US$700 million. Compared to losses of US$3.4 billion expected this year, this region is showing the most dramatic improvement, driven by a recovery in some of the region’s economies such as China.

Middle East carriers will see losses shrink from a US$1.2 billion loss to a US$300 million deficit. A strong long-haul connection business over Middle East hubs will provide some insulation against the impacts of Dubai’s financial difficulties.

Latin American carriers will be the only profitable regional grouping in this year and the next. The profit in each year is expected to be US$100 million, largely due to the benefit of relatively strong economies in South America and the efficiencies gained through regional airline structures.