Airline profits take off and head for $12b

Profits for the global aviation industry are expected to reach US$8.9 billion ($12.2 billion) this year, according to the International Air Transport Association.

The association last night increased its outlook for profit in 2010 from US$2.5 billion forecast in June to US$8.9 billion.

Association director general Giovanni Bisignani said industry recovery had been stronger and faster than anyone predicted.

"The US$8.9 billion profit that we are projecting will start to recoup the nearly US$50 billion lost over the previous decade," Bisignani said.

"But a reality check is in order," he added. "There are lingering doubts about how long this upturn will last."

The improved outlook for 2010 was being driven by a combination of factors, with increasing demand and disciplined capacity management leading to stronger yields pushing revenues higher, and costs remaining relatively stable.

Improving demand had pushed traffic 3 to 4 per cent higher than the pre-crisis levels of early 2008, the association said.

Demand was expected to grow by 11 per cent in 2010 while capacity would only expand by 7 per cent.

The outlook for the average full-year crude oil price remained US$79 a barrel, although excess refinery capacity was resulting in lower prices for jet fuel, now predicted to be US$3 billion lower than forecast in June at US$137 billion. Fuel represented about 25 per cent of industry costs.

However, the industry outlook grew weaker in 2011, with profitability estimated to fall to US$5.3 billion.

"This year is as good as it gets for this cycle," Bisignani said.

"Governments are running out of cash for pump priming. Unemployment remains high and business confidence is weakening," he said.

The association expected a 3.2 per cent gross domestic product growth in 2010 to drop to 2.6 per cent in 2011.

"As a result, 2011 is looking more austere," Bisignani said.

Travel and freight markets would remain stronger in regions such as Asia, the Middle East and South America but the association did not expect these areas to be able to sustain global growth in 2011.

Industry growth next year was expected to fall back to 5 per cent, which was in line with historical trends.

However, a surge of aircraft deliveries would fuel capacity expansion of 6 per cent.

Boeing last week said the global airline industry would need 30,900 new aircraft through to 2029, valued at US$3.6 trillion.

Airlines in New Zealand, Australia and the South Pacific would need 920 planes worth US$120 billion.

Yesterday Air New Zealand said passenger numbers rose nearly 6 per cent last month, as the number of overseas visitors to New Zealand hit a record high.

Air NZ carried 978,000 passengers during August, the airline said in a monthly update. Capacity increased by 5 per cent, and revenue passenger kilometres were up 7 per cent.

Short-haul passenger numbers rose 6 per cent, with domestic demand up 5.8 per cent and Tasman/Pacific demand up 9.5 per cent following an increase in capacity.

Long-haul passenger numbers were up 5.7 per cent on a year ago, with demand up 14 per cent on Asia/Japan/UK routes, and up 1.1 per cent on North America/UK routes.