IATA upgrades 2010 forecast for airline industry, predicts profit of $2.5 billion

IATA: Airlines are flying back to profits in 2010

BERLIN — The global airline industry is showing a turnaround and will swing back to profit in 2010 after several difficult years, as growth in Asia and the U.S. offsets weaker demand in Europe, the major international air transport group said Monday.

Profits are expected to reach $2.5 billion, the International Air Transport Association said, a vast improvement from the $2.8 billion total loss it predicted three months ago.

“The global economy is recovering from the depths of the financial crisis much more quickly than could have been anticipated,” IATA chief executive Giovanni Bisignani told journalists in Berlin, though the group warned the industry is still far from “sustainable profitability.”

The industry saw revenues drop by $80 billion or 15 percent in 2009 amid the crisis, and IATA initially believed three years or more would be needed to recover.

Bisignani now expects a “a strong rebound of air traffic,” he said. Passenger traffic is forecast to grow by 7 percent to a total of 2.4 billion passengers in 2010. The forecast for cargo growth was revised sharply upward, from 12 percent in March to 18.5 percent.

Europe, however, remained a striking weak spot with IATA anticipating a $2.8 billion loss for airlines on the continent — worse than the $2.2 billion previously predicted. Europe’s feeble growth, strikes at some airlines, the eurozone debt crisis and the volcanic ash cloud that caused major disruption this spring are hampering the recovery, according to the IATA.

“Europe is lagging behind,” Bisignani said.

North American carriers, which sharply cut capacity amid the crisis, are expected to earn $1.9 billion in 2010 — a turnaround from the previously predicted loss of $1.8 billion, and the $2.7 billion that carriers lost last year. Asian airlines are expected to earn $2.2 billion this year, powered by strong growth across the region.

The level of first and business class travelers is back to pre-recession levels, giving the airline’s profits a boon, the IATA said.

The industry group predicted a total revenue of $545 billion. The forecast profit of $2.5 billion therefore represents a net margin of 0.5 percent, which the IATA calls “a long way from sustainable profitability.”

Bisignani lashed out at government regulation, which he sees as hampering the industry’s growth and profitability prospects, singling out Europe’s persistent failure to create a single airspace. “Ministers do not have the leadership to address such an issue,” he said.

Lufthansa’s chief executive Wolfgang Mayrhuber, speaking alongside Bisignani, stressed that the conclusion of an agreement on the Single European Sky concept would also be a boon for the environment as airlines would have to fly fewer detours and could reduce C02-emissions by some 12 percent. “If they want us to be greener, the biggest project is the single sky,” he said.

Despite numerous efforts to integrate air traffic management systems, Europe’s airspace with some 28,000 flights daily is still broken up into small slices of airspace controlled by national governments, making air travel significantly less cost efficient than in the United States.

The Single European Sky concept is meant to ensure greater aviation efficiency and improved environmental performance by eliminating the need for airliners to zigzag through 27 different national air spaces. Instead, the goal is to enable direct point-to-point travel with the help of a single, integrated air traffic control system.

For the European airlines, the latest source of discord with regulators was the volcanic ash cloud that spewed from an Icelandic volcano this spring — forcing a controversial shutdown of much of Europe’s airspace for several days in April and causing sporadic disruption last month.

IATA has estimated the total impact on airlines’ revenue of the ash cloud at $1.8 billion.

“We are not asking for any subsidies,” Mayrhuber said. Instead the Association of European Airlines wants the European Union to postpone an emission trading scheme that would impose new costs for the airlines and disadvantage them on a global scale, he said.

Meanwhile, Germany’s government unveiled plans for a new fee affecting all passengers starting from German airports to include the cost of air traffic’s CO2 emissions. The surcharge is set to bring the state coffers €1 billion ($1.20 billion) annually.

“If this really goes through, this is a black day for Germany as an aviation hub,” Lufthansa spokesman Peter Schneckenleitner told The Associated Press.