Global aviation to post $2.5bn profit in 2010

7 Jun 2010 by BusinessTraveller

The International Air Transport Association (IATA) says it expects airlines to post a global profit of $2.5 billion in 2010, but in contrast European airlines are in line to lose $2.8 billion this year.

IATA had previously predicted in March that global aviation would lose $2.8 billion, and described the new forecast as a “major improvement”. But it warns that the profit forecast represents a net margin of just 0.5 per cent on industry revenues of $545 billion this year, “a long way from sustainable profitability”.

The association adds that a stagnating economy, strikes, natural disasters, and a currency crisis means European carriers continue to struggle, with an anticipated loss of $2.8 billion. In particular it says that 70 per cent of the $1.8 billion loss in revenue as a result of the volcanic ash crisis was borne by European carriers.

Europe is now forecast as the only region to post a loss this year, with Asia Pacific set to record profits of $2.2 billion, North America not far behind at $1.9 billion, Latin American carriers making $900 million, and the Middle East and Africa both posting profits of $100 million.

Commenting on the new forecasts Giovanni Bisignani, IATA’s director general and CEO said:

“Seeing black on the bottom line is a great achievement. The resilience of the industry has been strengthened by a decade of cost cutting, restructuring and re-engineering processes. IATA’s programmes have contributed to this with $47 billion in cost savings since 2004 with efficiencies in safety auditing, fuel management, infrastructure costs, and Simplifying the Business.

“But even with all of our hard work, the result is just a 0.5 per cent margin that does not even cover our cost of capital. The industry is fragile. The challenge to build a healthy industry requires even greater alignment of governments, labour, and industry partners. They must all understand that this industry needs to continue to reduce costs, gain efficiencies and be able to re-structure itself if it is to be sustainably profitable. We must all be prepared for a greater change.”

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