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Airline profits to soar this year

22 September 2010 07:59 (UTC +04:00)

Baku - APA-Economics. It seems we can all stop feeling sorry for the forlorn aviation industry. Despite bearing the brunt of the worst recession in decades (along with the embattled financial services sector) it seems things are finally on the up. Industry body the International Air Transport Association (IATA) has raised its profit forecast for the worldâ€™s airlines to $8.9bn this year â€“ thatâ€™s more than triple the original figure, Management Today reported.

For one thing, it looks like passenger demand is recovering: IATA reports that the number of passengers climbed by 9.2% in July, compared with a year ago. Whatâ€™s more, cargo volume has increased by almost 23%.

Admittedly, 2009 may have been a shockingly bad year to compare it to (the industry lost a collective $9.9bn), but these are healthy numbers, especially when you consider that in June IATA forecast a 2010 global profit of just $2.5bn. The worldâ€™s airlines havenâ€™t been profitable since 2007, when they reported combined earnings of $12.9bn.

The downside, at least for European airlines, is that the majority of the growth seems to be coming from the booming Asia Pacific region. Carriers there are expected to boast profits of $5.2bn this year â€“ more than double IATAâ€™s original estimates. This is partly thanks to strengthened demand for business travel within the region, as well as strong growth in freight traffic, which has accounted for as much as 40% of revenues at some airlines.

In fact, airlines in Europe will be the only ones to lose money this year, as they continue to struggle in the turbulent economic conditions. And no small amount either, at Â£1.3bn. Still, itâ€™s less than the $2.8bn previously forecastâ€¦

The other bad news is that the growth isnâ€™t likely to last. IATA reckons it will slow, particularly in North America and Europe, as the effect of government stimulus measures begin to expire. Oh dear. Although of course, these are only forecasts and come with all the usual caveats about â€˜forward-looking statementsâ€™.

But one UK airline is defying the doom and gloom. Exeter-based airline Flybe clearly isnâ€™t spying any trouble on the horizon as it continues with acquisition plans.

Flybeâ€™s chief exec Jim French claims the company is currently working on two acquisitions of â€˜small regional airlinesâ€™ in Europe, but would not specify which. He could be forgiven for feeling a bit flush at the moment: Flybe is one of only three major European airlines to have reported profits throughout the recession.