Things in the Sky

Today, IATA released an updated financial forecast for 2010, and the trade group now predicts that the industry will now lose only $2.8 billion dollars. Yes, we should be happy about that, considering the previous forecast was for double that amount – $5.6 billion. In addition, IATA is forecasting that the total losses for 2009 will amount to $9.4 billion, $1.6 billion less than previously forecast.

So why the optimism? “The improvement is largely driven by a much stronger recovery in demand seen by year-end gains that continued into the first months of 2010. Relatively flat capacity translated into some yield improvement and stronger revenues,” the group reports.

IATA also released some interesting slides, so here are some of the ones I found interesting:

Those of us in North America will experience losses of $1.8 billion, second only to Europe with a $2.2 billion loss. It appears that the emerging economies will be leading the recovery, especially Latin America. IATA says that region wll perform well because “economic ties to Asia helped isolate the region from the worst of the financial crisis. Carriers in parts of the region have benefitted from liberalized markets which have facilitated some cross-border consolidation, giving greater flexibility to deal with changing economic conditions.”

I’ve written here before about the amounts of capacity that have been taken out of airline schedules, and that’s really been helping load factors, and by definition, RASM performance. IATA also predicts that restricted reply will help boost yields very slightly in 2010 – a 2.0% increase for passenger traffic.

Finally, here’s a graph of revenues. Basically, there’s an improvement, but there’s a lot of lost ground to recover here, especially when it comes to the high-yield premium passengers.

Basically, there’s a long road ahead, especially in the North American and European regions. But at least the recovery seems a bit stronger than originally forecasted.

You can see IATA’s industry outlook here.

IATA recently released its monthly data on international traffic with results for October. There was a very small increase, 0.2% in passenger traffic on international routes. Economy traffic was up 1.3% (compared to 0.9% last month) and premium traffic was down 9.3% in October compared to the 13.9% decline in September. So, the change in direction for premium traffic was only temporary.

While an improvement in traffic is good, one must also look at revenues. Year-over-year comparisons on premium revenue improved with 20% decline in October, 7 percentage points better than September, though IATA notes that “since revenues fell a similar amount between September and October last year there was little underlying premium revenue improvement during this October.” Here’s a graph of revenues (blue line) and volumes (purple bars):

This report has shown the same thing for the past few months – there’s improvement, but there’s still a ways to go. But a total increase in passengers is a good sign.

IATA just released its latest update on premium traffic with data from September, and the results aren’t the best. Premium traffic was down 13.9%, which is worse than last year. As the report notes, “The question is whether this setback is just the usual volatility – upturns are never smooth – or a change in the previously improving trend.”

I guess one bit of decent news was that revenues were relatively flat – down an estimated 27%, which compares favorably to the estimated 30% decline in the report for August. IATA notes that “Load factors are now back to pre-recession levels which is slowly improving fares and yields.” Take a look at the graph for volume (purple columns) and revenues (blue line):

Let’s just hope this drop in passengers isn’t a reversal in trend.

You can see the whole report here.