With the bulk of the quarter’s reporting done, in the main the numbers are encouraging but one swallow does not a summer make. The aviation industry will have to see a more sustained performance to support evidence of a recovery.
European and Asian airport operators have been releasing their financial results for 1Q2011. In the majority of cases EBITDA and/or operating profit is on the up, sustaining the confidence engendered from previous disclosures.
See the analysis: Airports' financial results sustain confident outlook
Of course, figures for April will be coming off a lower base due to the disruptions caused by the Eyjafjallajökull volcano eruption in Iceland and ash plume over Europe.
Dubai International Airport reported a 13.2% increase in passenger numbers in Apr-2011 to 4.23 million. But the Gulf is an exceptional case.
To cast a little more gloom on the horizon, the uptick in worldwide premium air travel slowed “significantly”, rising just 2.9% in Mar-2011. But it was a slowdown in economy travel over the past five months, that was causing IATA most concern.
Economy travel growth slowed to just 1.1% in Mar-2011, from 3.4% in Feb-2011 and 5.9% in 4Q2011. Over the past five months, jet fuel prices have surged USD40 per barrel and airlines have attempted to recoup these higher costs, which is having an adverse effect on price-sensitive economy travel, according to IATA.
Oil prices have started to turn a corner, but there is a long road ahead. West Texas finished the week up marginally on last week but at USD98.44 still about USD20 below April’s peak. As Middle East unrest continues to bubble, to say there is a continuing downward trend in oil prices would be mistaking sparrows for swallows.
US airfares are rising faster than fuel increases and while it is good for margins, there are concerns there is excess capacity across the Atlantic and Pacific.
Over the past year or so, airlines have been pouring capacity into the trans-Atlantic market to the point that as early as last summer some were questioning just how long that would last given the across-the-board capacity increases. Indeed, during the first quarter earnings calls all the airlines noted the predictable decline in yields across the Atlantic announcing they would be imposing capacity cuts in autumn.
The fluctuation across regions is exemplified in this week’s results from Tiger Airways.
The combination of record profits at its Singapore operation and “disappointing” financial results at its Australia operation is prompting Tiger Airways to accelerate expansion in Southeast Asia while halting all growth in Australia.
The Singapore-based low-cost carrier group turned a record SGD47 million (USD38 million) operating profit for its fiscal year ending 31 March-2011, an improvement of 82% over FY2010. In a tale of two Tigers, Tiger Australia incurred an operating loss of SGD9 million, compared with a roughly break-even result in FY2010.
Want more analysis like this? CAPA Membership gives you access to all news and analysis on the site, along with access to many areas of our comprehensive databases and toolsets.
Find out more and take a free trial.