International Air Transport Association (IATA).(AIR TRANSPORT BRIEFING)

* The International Air Transport Association (IATA) has released a new industry financial forecast estimatinq a global industry profit of US$5.6 Billion in 2007 falling to US$5.0 billion in 2008. The outlook is unchanged for 2007 at US$5.6 billion. Higher oil prices (full-year average forecast of US$73 per barrel) were offset by strong traffic growth (5.9% for passenger traffic) and even stronger revenue growth of 8.4%. "For the first time since 2000, we are profitable. That is good news, representing a lot of hard work by airlines. Since 2001 non-fuel unit costs dropped 16%, labour productivity is up 64% and sales and marketing unit costs decreased 25%. But with a 1.1% margin, the bottom line is still peanuts, said Giovanni Bisignani, IATA's Director General and CEO. IATA sharply revised downward its outlook tar 2008 to US$5.0 billion from the previously forecast US$7.8 billion. The spike in fuel prices is expected to add US$14 billion to the industry fuel bill driving it up to US$149 billion (based" on an average price of US$78 per barrel). %e broadening impact of the credit crunch is expected to slow revenue .growth to 4.7% and traffic growth to 4.0%. Simultaneously, capacity expansion is expected to accelerate in 2008 with an increase in aircraft deliveries to 1,281 (up from 1,041 in 2007)." The peak of the business cycle is over and we are still US$190 billion in debt. So we could be heading for a downturn with little cash in the bank to cushion the fall" said Bisignani. While leading in absolute profitability in both 2007 and 2008, North American carriers will see the largest fall in profitability from US$2.7 billion in 2007 to US$2.2 billion in 2008. With 35% of the fleet over 25 years old, the impact of high fuel prices is greater than in other regions. Moreover, the region is at the centre of the credit crunch. According to the IATA forecast. European and Asian carriers will see minor drops in profitability of US$100 million each to US$2.0 billion and US$600 million respectively. Robust traffic growth to and within Asia is expected to partially insulate carriers from the impact of the crunch.

Print Get the Mag Weekly Updates