Global airline bosses say worse is behind them
Aviation CEOS are forecasting a rebound in the second half with rising profits and a surge in passenger and cargo demand, a poll by global aviation body IATA found. Some 47 percent of airline CEOs surveyed in latest edition of IATA’s quarterly confidence index expect a rise in profits going forward, compared with only a fifth in the April survey.
A massive 70 percent of respondents forecast a rise in passenger traffic this year, as the ‘demand shocks’ of the Arab Spring turmoil and Japanese tsunami tail off.
“Results from the survey conducted in July show that while profit margins have continued to be squeezed in the second quarter, there has been some recovery in the outlook of profitability in the 12 months ahead,” said the report. “While fuel prices remain high, expectations of further sharp increases have dissipated and traffic demand remains strong, helping to drive the pick-up in sentiment on future profitability.”
The aviation industry was hit hard by the effects of political unrest in the Middle East in the first half, which sent fuel prices soaring to over $130 a barrel and curbed tourism demand. Airlines including Air France, British Airways and Lufthansa were forced to scrap or scale down flights to top tourism destinations such as Egypt.
According to IATA figures, fuel costs represent 29 percent of airline overheads and are the primary driver behind the rising industry costs squeezing carriers. The IATA report said that expectations for further rises in input costs over the next 12 months had fallen, despite expectations that profits will remain depressed, earnings estimated to amount to $4bn this year, down from $18bn last year.
The industry is also positive on the prospect of employment, with only 9 percent of airlines expecting to make staff cuts, and almost half anticipating no change. In Q2, as many as 47 percent of firms increased their headcounts, and in the future, the biggest increases are expected in markets such as Asia and Americas.
IATA said in May that Middle East and North African airlines would see $100m in profit this year, down from $900m in 2010, as high oil and political unrest squeezed the industry.