October 2011:

ä Industry profits
ä Business confidence
ä More than hope for airlines
ä Benefits Study (Denmark)
ä Aviation policy in China
ä Forecast 2011-2015

Welcome to the latest edition of IATA's quarterly eAnalyst.

The eAnalyst is designed to provide a concise and insightful guide to the current key issues in the global airline industry.

The industry is faced with an unusually uncertain outlook. IATA downgraded its forecast back in June which, at the time, looked gloomier than most analysts' prognoses. Our latest forecast looks into 2012 and finds a difficult environment for airline profitability with slowing passenger demand and squeezed margins. Whenever, global GDP growth has slipped below 2% the industry has lost money. Most forecasts see growth just above that – so we expect lower but still positive net profits at $4.9 billion. However, it would not take much of an adverse demand shock to push global growth below that threshold. Our latest survey of airline CFOs in October found business confidence significantly lower than in July. In fact expectations of profitability in the year ahead fell to levels consistent with not much better than breakeven.

Peter Negline is not so pessimistic. In his guest article he sets out a number of reasons why airlines may be better placed to manage today's risks, but offers an interesting view of the challenges for the industry to finance the planned one third rise of aircraft production rates. A further challenge will be the threat of taxation. Unfortunately many governments seem to have forgotten that aviation is an important growth catalyst. We report on a new set of studies by Oxford Economics quantifying the wider economic benefits of air transport, using Denmark as an example. China is one market where the growth potential is tremendous. In our "Key Policy Issue" section academics Zheng Lei and John O'Connell offer their analysis on aviation policy in this key market.

I hope you find it to be an interesting and informative read.

Brian Pearce
IATA Chief Economist

INDUSTRY PERFORMANCE AND OUTLOOK

ä Airline performance will depend on exposure to growth markets

The economic outlook deteriorated which means that weak airline market growth and weak airline profits will extend into 2012. However, air travel has held up better than expected to date and airlines managed to restore asset utilization... [more]

ä Confidence down to 2009 levels

The economic outlook has deteriorated since the previous survey in July but airlines expect this to have uneven impacts on their markets. The major deterioration has been in cargo markets, where airline report a sharp decline in the third quarter... [more]

ANALYST VIEWPOINT by Peter Negline, BOC Aviation

ä Airlines have more than hope on their side

The world economy stands amidst a great uncertainty caused by the broad lack of confidence and trust in governments of developed countries. Where does this leave the airline industry? Growing appetite for fuel efficient aircraft, expectations of US$ weakness along with some other issues... [more]

RESEARCH TOPIC

ä Economic benefits from air transport in Denmark

Air transport to, from and within Denmark creates three distinct types of economic benefit. Typically, studies such as this focus on the "economic footprint" of the industry, measured by its contribution to GDP, jobs and... [more]

KEY POLICY ISSUE by Dr. Zheng Lei and Dr. John F. O'Connell, Cranfield University

ä Aviation policy in China: an analysis of recent developments

China, only 37th in the world (by RPKs) in 1978, has witnessed an impressive 17% of annual traffic growth to become the second largest aviation market by 2005. By 2010, the profitability of Chinese carriers had soared... [more]

DATA UPDATE

ä Airline industry forecast 2011-2015

Airline Industry Forecast 2011-2015 is the most comprehensive forecast tool to analyze the future passenger and freight traffic demand and the evolution of global air travel market. Available now.  [more]