International Monetary Fund raised (21-Sep-2010) its 2010 growth forecast for South Africa to 3.2% and encouraged the government to consider tax breaks for companies hit by an “overvalued” rand. IMF stated the economy would likely expand 3.6% in 2011 and 3.9% in 2012, up from forecasts of 2.6% growth in 2010. The South African economy has rebounded from its first recession in 17 years after interest rates were reduced to a 30-year low and global demand for exports increased.
IMF raises GDP forecast for South Africa
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South African Airways seeks regional growth and new partnerships, but outlook remains bleak. UPDATE
South African Airways (SAA) is again looking at opportunities for new partnerships and network expansion. SAA is now re-engaging with Etihad following an unsuccessful initial partnership and is keen to launch new routes after the delivery of its first two A330-300s in 4Q2016.
Any growth, however, is unlikely to be profitable until SAA addresses its longstanding challenges. The airline has still not fully implemented its previous turnaround plan and urgently needs yet another capital injection.
A full and deep restructuring is required but seems impossible in the current political environment. Repeated government meddling has put SAA in an extremely challenging situation. The airline is in dire straits, and its outlook remains bleak.
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.