IATA Profit Forecast
KUALA LUMPUR, Sept 21 (Bernama) -- The International Air Transport Association (IATA) has raised its profit forecast for this year to US$8.9 billion (US$1=RM3.07) from US$2.5 billion, bolstered by a significant global recovery in capacity and demand.IATA's director general/chief executive officer, Giovanni Bisignani, said since the last forecast in June, there were many global developments that strongly impacted the airline business.
"Over the full year, we expect global demand to expand by 11 per cent and capacity by seven per cent.
"The supply and demand condition that I have just mentioned is boosting the load factors," he said during a conference call from Singapore on Monday.
He said load factor from January to July stood at 78 per cent globally, giving an advantage for airline operators to gain some pricing power. "As a result of this, strong improvement is seen in yields, he said.
Bisignani said more business travellers on premium seats were also boosting average yields.
"Yields are now expected to grow by 7.3 per cent for passenger and 7.9 per cent for cargo," he said.
Beside demand, Bisignani said, disciplined capacity management has resulted in a sharply stronger yields pushing revenue higher, which was expected to grow to US$560 billion this year.
He said Asia-Pacific carriers would continue to drive significant growth globally and expected to post a profit of US$5.2 billion, better than US$3 billion recorded during the previous peak in 2007 and doubled the previously forecast $2.2 billion.
"Asia-Pacific is still the largest aviation market in the world that driven the recovery. The improvement is based on strong market growth and yield gains.
"Renewed buoyancy in air freight markets has been particularly important for airlines in the region, where it can represent up to 40 per cent of revenues.
"The 23.5 per cent improvement in high volume intra-Asia premium traffic due to a surge in business travel is another driving factor," he said.
On fuel, Bisignani said, IATA maintained an average full-year crude oil price of US$79 per barrel.
"Fuel continues to account for about 25 per cent of total operating cost," he said.
Bisignani said despite strong improvements, there were lingering doubts whether this cyclical upturn would last.
"Even if it is sustainable, the profit margins that we operate on are so razor thin that even increasing profits 3.5 times only generates a 1.6 per cent margin.
"This is below the 2.5 per cent margin of the previous cycle peak in 2007 and far below what it would take just to cover our cost of capital," he said.
Looking ahead, IATA forecast lower profitability for next year of US$5.3 billion with a margin of 0.9 per cent as the governments ran out of cash for pump priming, weakening business confidence and high unemployment rate.
"Consumer spending is not expected to pick up the slack as joblessness remains high and consumer confidence falls in Europe and North America.
"Travel and freight markets will remain stronger in regions such as Asia, the Middle East and South America but we do not expect these hot spots to be able to sustain global growth in 2011," he said.
He said the surge in aircraft deliveries in 2011 would boost fuel capacity expansion of six per cent -- in excess of expected demand improvements.
Bisignani said falling load factors would also remove the possibility of further yield improvement leading to a more challenging revenue environment.
Earlier, Bisignani signed a memorandum of understanding (MoU) with Singapore's Nanyang Technological University to collaborate on the development and upgrading of human capital for the global aviation industry.
Under the MoU, both parties will explore the possibility of launching a joint executive Master of Business Administration programme with specialisation in aviation management.
They will also collaborate on research topics of mutual interest and benefit, to develop new theories and practices on cultural intelligence and global talent management.
Source : BERNAMA
"Over the full year, we expect global demand to expand by 11 per cent and capacity by seven per cent.
"The supply and demand condition that I have just mentioned is boosting the load factors," he said during a conference call from Singapore on Monday.
He said load factor from January to July stood at 78 per cent globally, giving an advantage for airline operators to gain some pricing power. "As a result of this, strong improvement is seen in yields, he said.
Bisignani said more business travellers on premium seats were also boosting average yields.
"Yields are now expected to grow by 7.3 per cent for passenger and 7.9 per cent for cargo," he said.
Beside demand, Bisignani said, disciplined capacity management has resulted in a sharply stronger yields pushing revenue higher, which was expected to grow to US$560 billion this year.
He said Asia-Pacific carriers would continue to drive significant growth globally and expected to post a profit of US$5.2 billion, better than US$3 billion recorded during the previous peak in 2007 and doubled the previously forecast $2.2 billion.
"Asia-Pacific is still the largest aviation market in the world that driven the recovery. The improvement is based on strong market growth and yield gains.
"Renewed buoyancy in air freight markets has been particularly important for airlines in the region, where it can represent up to 40 per cent of revenues.
"The 23.5 per cent improvement in high volume intra-Asia premium traffic due to a surge in business travel is another driving factor," he said.
On fuel, Bisignani said, IATA maintained an average full-year crude oil price of US$79 per barrel.
"Fuel continues to account for about 25 per cent of total operating cost," he said.
Bisignani said despite strong improvements, there were lingering doubts whether this cyclical upturn would last.
"Even if it is sustainable, the profit margins that we operate on are so razor thin that even increasing profits 3.5 times only generates a 1.6 per cent margin.
"This is below the 2.5 per cent margin of the previous cycle peak in 2007 and far below what it would take just to cover our cost of capital," he said.
Looking ahead, IATA forecast lower profitability for next year of US$5.3 billion with a margin of 0.9 per cent as the governments ran out of cash for pump priming, weakening business confidence and high unemployment rate.
"Consumer spending is not expected to pick up the slack as joblessness remains high and consumer confidence falls in Europe and North America.
"Travel and freight markets will remain stronger in regions such as Asia, the Middle East and South America but we do not expect these hot spots to be able to sustain global growth in 2011," he said.
He said the surge in aircraft deliveries in 2011 would boost fuel capacity expansion of six per cent -- in excess of expected demand improvements.
Bisignani said falling load factors would also remove the possibility of further yield improvement leading to a more challenging revenue environment.
Earlier, Bisignani signed a memorandum of understanding (MoU) with Singapore's Nanyang Technological University to collaborate on the development and upgrading of human capital for the global aviation industry.
Under the MoU, both parties will explore the possibility of launching a joint executive Master of Business Administration programme with specialisation in aviation management.
They will also collaborate on research topics of mutual interest and benefit, to develop new theories and practices on cultural intelligence and global talent management.
Source : BERNAMA
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