Here is from Aviationweek today:
The global airline industry is likely to see a far smaller loss next year than it predicted just three months ago, mainly due to a remarkable turnaround in the fortunes of U.S. airlines that will be only partly offset by a worsening outlook for European and Asia-Pacific carriers.
The International Air Transport Association (IATA) forecasts the industry will lose $2.5 billion in 2009, compared to the $4.1 billion loss predicted in early September. Where IATA earlier saw North American carriers losing $4 billion in 2009, the group now predicts a $300 million profit. The reverse is true for European and Asia-Pacific carriers; in September IATA forecast essentially flat growth in 2009, and now it sees losses of around $1 billion for each region. Latin American carriers are expected to record losses of $200 million, the same as Middle East airlines.
IATA bases its new outlook on oil prices averaging US$60 per barrel in 2009, producing a total industry bill of $142 billion. As for 2008, IATA also adjusted its forecast slightly. It now sees an industry loss of $5 billion, compared to the $5.2 billion loss predicted earlier. However, the picture varies so much from region to region that it is “increasingly difficult to talk about what’s happening in the industry overall,” said IATA Chief Economist Brian Pearce.
The big swings in the latest forecast, of course, are due to the rapidly changing fuel price and demand outlooks. As fuel dipped, U.S. carriers have found that their drastic capacity cuts have set them up very well for the demand drop. The others have yet to make such severe capacity cuts. Most non-U.S. regions have a major wave of reductions ahead of them, Pearce believes. Both Europe and Asia-Pacific carriers have slowed growth plans, but have yet to see a decrease, he said.
Another factor is that airlines in other regions generally have stronger fuel hedge positions. While this put the U.S. carriers at a disadvantage when fuel soared to record levels earlier this year, it also means they will reap the rewards of lower fuel prices more quickly than European and Asia-Pacific airlines.
These other regions will not reap the full benefit of lower fuel prices until 2010, said Pearce. This lag explains why while jet fuel spot prices will be down about 40% next year, the effective price after hedging will be more like 10%-15% lower.
The prediction of a slight profit for North American airlines aligns with recent commentary from U.S. airline executives and analysts. North American airlines were in many regards fortunate, Pearce point out, because they didn’t choose to hedge less than their European counterparts, and the capacity cuts were made for a reason that no longer applies. Given the deteriorating demand environment, these moves “were fantastic strategy in hindsight,” Pearce said.
While the situation is looking better on the cost front, the revenue outlook has worsened dramatically with the realization the global recession will be more extensive than previously realized. In fact, Pearce said this recession will be worse than those in both 1991 and 2001. Airlines, like other sectors, “are not looking at a quick turnaround,” and any “robust recovery” is now expected to be in 2011 at the earliest.
The airline revenue outlook for a two-year period appears to be the worst in the post-World War II period, IATA says. A 6.5% decline in revenue for 2009 would be equivalent to the drop following the 9/11 terrorist attacks, and worse in percentage terms than in the previous two economic recessions.
The revenue loss for 2009 is expected to be $35 billion, which would outweigh the $32 billion drop in fuel costs forecast next year. For 2010, IATA sees revenue down $3 billion compared to a fuel cost drop of $17 billion. Revenues are expected to rise by $48 billion in 2011, and fuel costs will increase by $29 billion. Yields will also be down this year, by about 3%. The cost of travel from a consumer perspective will be about 5% lower, Pearce believes.
Passenger traffic is likely to be down 3% in 2009, following a 2% drop in 2008. All regions will be affected, including Latin America, which has so far resisted the traffic weakness seen in North America. Traffic within this region – as distinct from intra-region travel – has stayed fairly strong, as it has in other areas like the Middle East and China.
Sources :
- Aviationweek: IATA Predicts Smaller Global Loss, Profits, December 9, 2008
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