IATA maintains $11 billion loss forecast despite profitable third quarter

Posted 04/11/2009

IATA yesterday said airlines that already have reported their third-quarter results earned a net profit of $400 million, reversed from a net loss of $1.5 billion in the year-ago period, but maintained its forecast for an $11 billion full-year loss owing a $6 billion first-half deficit and the fact that "Q4 is usually loss-making."

In its Airlines Financial Monitor, the organization said, "travel volume growth turned positive in September for the first time in a year with international RPKs up 0.3%," and noted that "seasonally adjusted levels of RPKs are now 5% up on their Q1 low."

But it warned that RPKs are still 6% below early 2008 levels and that "the pace of improvement [in fare levels] is slow and levels remain well down on last year, unlike travel volumes. . .The revenue environment remains extremely challenging." Fares and yield show signs of "stabilizing," but "at very low levels."

While capacity cuts were unable to keep pace with the drop in demand in the 2009 first half, capacity has been flat throughout the year and "as a result supply-demand conditions are now improving as demand picks up," IATA said. "The key question is whether capacity constraint will continue. Many airlines have announced further cuts for the winter season, but so far published schedules suggest some increase."

With the overall economic downturn easing, the organization noted that "stronger capital markets allowed airlines to raise a further $8 billion of new cash in the past two months. . .The industry has now raised $4.5 billion in equity and over $20 billion of new debt so far this year." It added that "the larger airlines now have a good cash cushion and the ability to finance much-needed restructuring if regulators allow."

New aircraft delivered exceeded 100 in September, according to IATA, a quantity that "substantially overwhelmed the number of aircraft being retired or put into storage." Through the first three quarters, 911 new aircraft were added to the global fleet while only 213 were retired and 156 put into storage. Despite the reduction in capacity, the commercial aircraft fleet expanded more than 2% in the first nine months, it said. "The result has been lower aircraft utilization and upward pressure on unit costs or reduced benefits from cost savings measures," it stated.

by Aaron Karp

Originally published 5 Nov 2009 at: http://feeds.atwonline.com/~r/AtwDailyNews/~3/eicpXWNOI8w/story.html