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| 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. |
| In this issue we examine how the further surge in fuel prices, since earlier this year, will affect airline profitability. Many of the conditions in place during early 2008, when the previous fuel price spike sent the industry from profit to loss, are recognizable today. Fuel prices are spiking and expected to average the same as in 2008, demand has slowed and asset utilization declined. However, the economy this time appears more robust (notwithstanding the European debt situation). We expect this to make the crucial difference, allowing the industry to continue in profit, albeit at a significantly reduced post-tax level of $4 billion. |
| Airline CFOs appear to agree with this outlook. Our July survey showed slightly improved confidence from the slump in April, when future expectations were consistent with a move into losses. Airlines remain confident about further expansion in markets, but pricing power is not as strong and the expectation is for little further improvement in margins. Meanwhile airlines face further cost threats from government, who are looking for revenues to fill budget deficits, despite the evidence that air transport plays a major role in sustaining the economic recovery. The UK’s APD is one of the least popular of these taxes but the UK Treasury has proposed restructuring that at least looks sensible. We report on research showing that there would be benefits from the proposed changes. This all makes for a challenging environment in which to set strategy. Chris Tarry, in his quarterly piece, looks at to what extent airline CEOs can rely on the lessons from history to inform current decision making. |
| I hope you find it to be an interesting and informative read. |
| Brian Pearce |
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INDUSTRY PERFORMANCE AND OUTLOOK | |
| Forecast profits revised down |
| We have reduced our forecast for airline net post-tax profits this year to US$4 billion, less than half the $8.6 billion we expected for 2011 in our March forecast. Since our previous forecast, air transport markets suffered… [more] |
Airline expectations show signs of improvement | |
| Results from IATA’s quarterly survey conducted in July point to an improvement in sentiment on the outlook for industry profitability compared to the sharp dip seen in April. The lower confidence seen in the April survey was driven by... [more] |
ANALYST VIEWPOINT by Chris Tarry, CTAIRA | |
| New rules of engagement – or more of the same? |
| The need for airlines to keep revenues ahead of costs is ever more pressing, and challenging, during periods punctuated with ‘event related disturbances’. Recent ash cloud, earthquake, fuel price and economic growth step-change events have turned attention once again to... [more] |
RESEARCH TOPICS | |
| Economic impact of proposed changes to UK APD |
| IATA analysis of proposed changes to the UK Air Passenger Duty indicates they would be positive for the broader economy and address inequities of the current system. IATA estimates that the changes could boost UK GDP by £66-123 million, increase employment by up to… [more] |
DATA UPDATE | |
| WATS 2011 |
| Have a complete statistical picture of the airline industry in 2010 with the 55th edition of the World Air Transport Statistics (WATS). This digest draws from over half a century of experience to assemble the key figures of more than 240 airlines, including low cost carriers. WATS is the air transport industry's most comprehensive and up-to-date reference digest and offers extensive coverage of a wide range of critical industry issues. [more] |
| If you wish to have more insight on key market trends, or require assistance with strategy development and implementation, IATA can help. For more info, contact us at +1.514.390.6745 or bis@iata.org |
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