IATA slashes 2011 global profit projection

The International Air Transport Association (IATA) has slashed its 2011 airline industry profit forecast to US$4 billion – a 54 percent cut from the previous projection and less than a quarter of the 2010 figure. In March, the organisation predicted a US$8.6 billion industry-wide profit, while last year airlines reported net income of US$18 billion. IATA, which represents 230 member airlines – or about 93 percent of the world’s scheduled international air traffic – attributed the reduced forecast to soaring oil prices, the consequences of March’s catastrophic earthquake in Japan and political unrest in the Middle East and North Africa. Acco

20th Jul 2011


General News


 

IATA slashes 2011 global profit projection


The International Air Transport Association (IATA) has slashed its 2011 airline industry profit forecast to US$4 billion – a 54 percent cut from the previous projection and less than a quarter of the 2010 figure.
In March, the organisation predicted a US$8.6 billion industry-wide profit, while last year airlines reported net income of US$18 billion. IATA, which represents 230 member airlines – or about 93 percent of the world’s scheduled international air traffic – attributed the reduced forecast to soaring oil prices, the consequences of March’s catastrophic earthquake in Japan and political unrest in the Middle East and North Africa.
According to IATA’s outgoing Director General and Chief Executive Officer Giovanni Bisignani – since succeeded by former Cathay Pacific Airways head Tony Tyler (see story opposite) – airline efficiency gains over the past decade and the strengthening of the global economy are a counterweight to the resurgent price of fuel. “But with a dismal US$4 billion profit projection on expected revenues of US$598 billion, there is little buffer left against further shocks,” Bisignani said at the 67th IATA Annual General Meeting in Singapore.
IATA notes that the current fuel-price surge is different from 2008’s peak.
“First, while oil inventories are low, there is substantial spare Organisation of Petroleum Exporting Countries (OPEC) and refinery capacity, which was not the case three years ago,” the group says. “Second, the monetary expansion that fuelled a surge in financial investments in commodities is ending, which will remove a major upward pressure on fuel prices. Nonetheless, volatility in the fuel price remains one of the industry’s major challenges.”
However, strong growth in demand in the Asia Pacific will help the region weather the storm.
“The Japanese earthquake and tsunami are expected to dent the region’s prospects for the remainder of the year,” IATA says. “However, this will be more than offset by robust growth in both China and India.”
The Asia-Pacific is the only region where IATA expects demand growth (of about 6.4 percent) to outpace capacity (which will increase by about 5.9 percent).
The average oil price for 2011 is estimated to be about US$110 per barrel. With jet kerosene priced just below US$140 per barrel, IATA estimates that the industry’s fuel bill will increase by US$10 billion to US$176 billion, which is about 30 percent of airline’s cost – more than double last year’s 13 percent figure.
According to Bisignani, travel demand will continue to be stimulated by 3.2 percent growth in global trade and increasing corporate earnings. However, growth rate forecasts for both the cargo and passenger markets have been reduced because of higher fuel costs. Passenger demand is now expected to increase 4.4 percent this year, 1.2 percentage points below the March forecast.
Similarly, cargo demand is expected to increase 5.5 percent, slower than the 6.1 percent growth rate predicted earlier.
[Byline:] – William Dennis
[Headline:] Boeing, ANA begin 787 service-readiness validation
[Pic: 787ANA. Caption: Deliveries of the 787 to ANA will begin in the August-September timeframe. (Credit: Boeing)]
Boeing and its Japanese 787 launch customer All Nippon Airways (ANA) announced on 4 July that they were beginning a series of trials aimed at validating the twinjet’s readiness to enter service.
In the following days, Boeing said ANA pilots would fly a 787 on actual airline routes in Japan, using airline dispatch and flight rules. The carrier's mechanics and ground crews would also acquire experience working on the aircraft in a simulated operational environment.
“The Dreamliner is an integral part of our plans to become Asia's number one airline and will allow us to bring new standards of comfort and service to our passengers,” says Shinichiro Ito, ANA’s president and chief executive officer. “Validating all of our training and preparations for the Dreamliner is critical to help ensure a smoother entry into service for our passengers and crews later this year.”
The 787 made its debut in Asia on 3 July, landing at Tokyo’s Haneda Airport early in the morning to be greeted by more than a thousand media representatives, ANA employees and aviation enthusiasts. Flight test airplane ZA002 had flown non-stop to Tokyo from Seattle, sporting ANA’s livery.
Throughout the week-long validation, the 787 will experience simulated day-to-day airline operations. Maintenance, servicing and flight crew operations will be conducted at five airports in Tokyo, Osaka (both at Itami and Kansai), Okayama and Hiroshima. ANA's first scheduled service with the aircraft will either be Haneda-Okayama or Haneda-Hiroshima.
ANA has 55 of the jetliners on order and plans to deploy them across its route network. Boeing says it plans to deliver the first 787 to ANA in the August to September timeframe.
On 26 June, Boeing started Function & Reliability (F&R) testing and extended-range twin-engine operations (ETOPS) demonstrations on the aircraft as it moved into the final phase of flight testing prior to certification.
“We are ready for this final phase of flight testing,” says Scott Fancher, vice-president and general manager of the 787 programme. “The team has created a solid plan for accomplishing the hours and test points required for F&R and ETOPS testing.”
[Byline:] – Andrzej Jeziorski
[ENDS]


 

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