Giovanni Bisignani: Recovery of Airline Industry Underway

By Lisa Schlein

March 15, 2010

The International Air Transport Association says the airline industry is on the road to recovery. Because of a strong year-end showing, IATA now forecasts smaller losses in 2010 of $2.8 billion, compared to its previous forecast of $5.6 billion. IATA has just issued its updated industry financial forecast in Geneva.

The International Air Transport Association, which represents 230 airlines around the world, says the industry is beginning to recover from the worst year in modern aviation history.

It says passengers are returning and traffic growth is expected to be much stronger in 2010. This will translate into a 5.6 percent rise in air travel volumes and a 12 percent rise in air freight.

While this is good news, IATA Director-General Giovanni Bisignani says it is too soon to celebrate. Despite recent gains, he notes demand is still 2.3 percent below pre-crisis level.

"So, we are moving in the right direction," Bisignani said. "The recovery is strong, but we are still in pre-crisis level. So, the impact of this crisis will be two or three years of losses."

IATA says the growth in airline traffic is tied to an improvement in the global economy. Bisignani calls this a two-edged sword. When the economy starts to grow, he says fuel prices go up.

"Unfortunately, there is a risk that the fuel goes up faster than the economy and so this creates a problem," Bisignani said. "We cannot, in this situation of the economy, still going out from the clouds. It will be difficult to apply fuel surcharge in this weak environment."

IATA expects fuel prices to rise to $79 a barrel, accounting for 26 percent of operating costs.

The report says revenues will rise to $522 billion in 2010. This is $44 billion more than previously forecast. But, it cautions the industry is moving at two different speeds, with some regions doing better than others.

Bisignani says airlines that are turning a profit are those in Asia and Latin America, where economic growth has revived the most. On the other hand, he says carriers in North America and Europe will record the greatest losses.

"One point eight billion for North America and $2.2 billion losses for Europe," Bisignani said. "What are the issues here? One is the GDP. It is moving slower than in other parts of the world. The other issue is the jobless recoveries and continuing economic concerns. All of those actions and those situations will limit traffic growth."

IATA says Middle East carriers are expected to experience demand growth of more than 15 percent this year, but will see losses of $400 million because of low yields.

It says African carriers are likely to lose $100 million in 2010. This is half of the losses experienced in 2009. And, although demand is expected to improve by 7.4 percent, it says this will not be sufficient for profitability. This is because African airlines face strong competition for market share from carriers outside the region.