IATA Cuts 2010 Loss Forecast in Half

IATA halved its loss forecast for 2010 to US$2.8 billion.

* Latin American carriers will post an US$800 million profit for the second consecutive year. The region’s economies are less debt-burdened than the US or Europe. Economic ties to Asia helped isolate the region from the worst of the financial crisis. Carriers in parts of the region have benefitted from liberalized markets which have facilitated some cross-border consolidation, giving greater flexibility to deal with changing economic conditions. Demand is expected to grow by 12.2% in 2010.

* European carriers will post a US$2.2 billion loss—the largest among the regions. This reflects the slow pace of economic recovery and faltering consumer confidence. Demand is expected to grow by 4.2% in 2010. Intra-European premium travel is expected to recover more slowly. In December it remained 9.7% below previous year levels.

* North American carriers will post the second largest losses at US$1.8 billion. The jobless economic recovery continues to burden consumer confidence. Demand is expected to improve by 6.2% in 2010. But with intra-North America premium travel still down 13.3% as of December, the region remains in the red.

* Middle East carriers are expected to experience demand growth of 15.2% in 2010, but will see losses of US$400 million. Low yields in long-haul markets connected over Middle East hubs is a burden on profitability.

* African carriers are likely to post a US$100 million loss for 2010, halving 2009 losses. Demand is expected to improve by 7.4%. But this will not be sufficient for profitability as they continue to face strong competition for market share.

Structural Adjustments

“The stark contrast between profitability among Asian and Latin American carriers while losses continue to plague the rest of the industry clearly demonstrates the fact that airlines have not been able to develop into global businesses. The restrictions of the bilateral system prevent the kind of cross border consolidation that we have seen in industries such as pharmaceuticals or telecoms. Airlines are battling the challenges of the financial crisis without the benefit of this important tool. It’s time for change,” said Bisignani.

In November 2009, IATA’s Agenda for Freedom initiative facilitated the signing of a multi-lateral statement of policy principles focused on liberalizing market access, pricing and ownership. Seven governments (Chile, Malaysia, Panama, Singapore, Switzerland, the United Arab Emirates and the United States) and the European Commission signed the document. Kuwait joined the group by endorsing the principles in March.

“The second stage talks between the US and Europe are the big opportunity for 2010. The slow recovery in both regions should be an invitation for change. Liberalizing ownership would boost both markets. Even more importantly, as these markets combined represent about 60% of global aviation it would send a strong signal for global change. Brands, not flags, must guide the industry to sustainable profitability. That cannot happen until governments throw away the outdated restrictions of the bilateral system,” said Bisignani.

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