Airline sector improves in 2010

Airlines set for rosier times in 2010 as passengers, freight and pricing power inch back

Slowly fading off are the days that had kept the airline industry on tenterhooks. With the economic crisis showing signs of a withdrawal in early 2010, passengers, freight and pricing power is making a slow come back to rosier days.

The ‘better days are here again’ formula seems to be working considering the fact that the forecast for loss during 2010 has been halved too. Industry body IATA officials have been quoted by news agencies that the airline companies are seeing recovery. The reason being attributed is that both passengers as well as cargo have posted record levels during the end of 2009. This also means that the pointers are clear, and the industry sees itself aback on track in the near term. Though the airline industry is still in the red, the recovery story is true. The positive feelers could amount to some inspiration to the industry and the global economy as exports too are showing an uptrend. It is more likely that 30 per cent of world trade by value is moved by air freight.

So where does the whole recovery talk place the airline industry in the economics of things? The losses would continue but in a very subdued level.

According to IATA, airlines would lose $2.8 billion this year which in effect would be half the $5.6 billion loss it forecast in December. That itself are numbers that inspire. Going by statistics, IATA, which groups about 230 airlines, including Air China, Lufthansa, Singapore Airlines and Skywest, has snipped its estimate of the 2009 loss to $9.4 billion from December’s $11.0 billion.

Talking of passengers on a recovery platform, it is being pointed out that passenger demand would go up by 5.6 per cent in 2010. This comes after a dip of 2.9 per cent last year. Cargo demand, in the meantime, shows signs of a growth of 12 per cent this year, post the 11.1 per cent fall last year. This is not all. There are many more pointers to the recovery story. While capacity usage recovered strongly at the end of last year, with airlines passenger load factor hitting 75.9 per cent in January and cargo utilization placed at 49.6 per cent.

One aspect of concern, however, is the fear of premium travel getting back on track at a slower pace. It is expected that the number of passengers paying for first and business class tickets would be adding up only at a slower rate owing to preference for economy travel.