Airlines Report Strong Recovery in 2010 Despite Bad Weather

International scheduled air traffic showed an 8.2 percent increase in passenger business and a 20.6 percent increase in freight, the International Air Transport Association (IATA) reported in its full-year 2010 demand statistics.

Demand growth outstripped capacity increases of 4.4 percent for passenger and 8.9 percent for cargo. Average passenger load factor for the year was 78.4 percent which is a 2.7 percentage point improvement on 2009. The freight load factor saw a 5.2 percentage point improvement to 53.8 percent.

Compared to the pre-recession levels of early 2008, December air travel volumes grew by 4 percent. Air freight was 1 percent higher than pre-recession levels but volume has dropped by 5 percent since the peak of the post-recession inventory re-stocking boom in early 2010, according to the association.

"The world is moving again. After the biggest demand decline in the history of aviation in 2009, people started to travel and do business again in 2010,"  said Giovanni Bisignani, IATA’s director general and CEO. "Airlines ended the year slightly ahead of early 2008 volumes, but with a pathetic 2.7 percent profit margin. The challenge is to turn the demand for mobility into sustainable profits."

Severe weather Europe and North America in December put a dent in the industry’s recovery. It is estimated that inclement weather shaved 1 percent off of total traffic demand for the month. As a result passenger demand dipped to 4.9 percent growth on December 2009 levels, significantly lower than the 8.2 percent growth recorded in November. Hardest hit was Europe, which saw December growth slow to 3.3 percent,

North American carriers recorded year-on-year increases in passenger demand of 7.4 percent in 2010. A key feature in 2010 was the capacity discipline, where full-year capacity was up by just 3.9 percent (leading to a sharp recovery in profits). The passenger load factor at 82.2 percent for the full year (up from 79.6% in 2009) could be difficult to maintain if capacity additions accelerate over the period ahead. Passenger demand in December increased 6.7 percent.

"The story this month is the sharp rise in oil prices. We predicted that 2011 would see a consecutive second year of profitability but with industry profits falling by 40 percent to $9.1 billion," said Bisignani. "This was based on an oil price of $84 per barrel (Brent). Fuel accounts for 27 percent of operating costs and a sustained rise in the oil price could spoil the party. With uncertainties in the Middle East, oil prices are now hovering near the $100 per barrel mark. For every dollar increase in the average price of a barrel of oil over the year, airlines face the difficult task of recovering an additional $1.6 billion in costs."




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