IATA has revised its 2010 industry outlook and is now projecting that the world’s airlines will make a profit of $8.9 billion (up from the $2.5 billion forecast in June) this year.
In its first look into 2011, the association estimates that profitability will drop to $5.3 billion.
“The industry recovery has been stronger and faster than anyone predicted. The $8.9 billion profit that we are projecting will start to recoup the nearly $50 billion lost over the previous decade,” says Giovanni Bisignani, IATA’s director general and CEO.
“But a reality check is in order. There are lingering doubts about how long this cyclical upturn will last. Even if it is sustainable, the profit margins that we operate on are so razor thin that even increasing profits 3.5 times only generates a 1.6% margin. This is below the 2.5% margin of the previous cycle peak in 2007 and far below what it would take just to cover our cost of capital.”
The improved outlook for 2010 is being driven by a combination of factors. On the revenue side increasing demand and disciplined capacity management are leading to sharply stronger yields pushing revenues higher. At the same time, costs remain relatively stable.