IATA released (19-Oct-2010) its Airline Business Confidence Oct-2010, which showed that while confidence going forward remains generally high, there is evidence of some concerns regarding 2011. More than 77% of respondents reported improved profitability in 3Q2010 on the back of strong revenues and cost control. In Sep-2010, IATA upwardly revised its FY2010 profit forecast to USD8.9 billion and a more subdued outlook for FY2011 of USD5.3 billion. Expectations for further improvements in demand over the 12 months ahead are still high but look to be moderating rather than accelerating given the economic outlook and that the restocking activity which stimulated freight traffic has drawn to a close. The outlook for further yield improvement has dipped back, although still remains positive. [more]
Business confidence remains high, concerns for 2011: IATA
You may also be interested in the following articles...
Flybe: back in profit, but still one of Europe's least profitable listed airlines
Flybe returned to profit in FY2016 – according to its latest definition of adjusted pre-tax profit, this was its first positive result since before its stock market flotation in 2010. Quibbles over profit definitions aside, it is apparent that Flybe's restructuring under CEO Saad Hammad since 2013 is continuing to make progress. Nevertheless, with an operating profit margin of just 1.4%, Flybe was one of the least profitable listed European airlines in 2015 (or nearest financial year).
Flybe is now into what Mr Hammad calls the 'Profitable Growth' phase of its turnaround. In FY2016 it returned to capacity and revenue growth after declines in the previous year. In FY2017 it is accelerating its capacity growth at a time when market conditions are producing very soft yields, but Flybe is determined to maintain cost discipline.
Of course, the achievement of profitability is only the first step in profitable growth. FY2016 will benefit from fuel cost tailwinds and this should help it to take the next step – even if it faces unit revenue headwinds.
CAPA global airline financial outlook
Operating margin to reach new high in 2016, but this may signal a subsequent downturn. CAPA’s global airline operating margin model indicates that the industry was more profitable in 2015 than it has been for almost five decades. Moreover, the model predicts that world airline operating margins will rise further above previous historic peak levels in 2016. These new levels of profitability are mainly thanks to the low oil price environment, coupled with strong demand growth in spite of global economic growth rates that are far from exceptional.
Much of the industry is also benefiting from a period of relative capacity discipline. New revenue sources may also be helping, although their role in airline profitability is still emerging.
The macroeconomic and geopolitical backdrops provide the main risks to this forecast. Beyond that, the biggest challenge for the industry will then be to try to sustain margin levels, rather than to allow a peak to be followed by a rapid downturn, as has always happened in the past. But downturns can play a positive role in industry development, possibly even stimulating consolidation.