Asia Pacific airline CEOs confident of higher profits, but cargo outlook moderating
Around two thirds of Asia Pacific airline CEOs are expecting further improvements in profitability over the next 12 months, according to an IATA survey. It reflects a global trend of rising confidence about profitability, underpinned by the view that “economic growth will continue to recover across the regions and that relatively tight capacity will keep load factors high”.
Half of all respondents worldwide reported passenger yield increases during the last quarter, up from a third in the previous IATA survey. Airlines are seeing strong demand and higher load factors. The industry body noted: “An improving share of business class traffic is also supporting higher average yields.
View the full report: IATA releases Airlines Business Confidence Index for Jul-2010
Passenger yield outlook strong, cargo moderates
The global outlook for passenger yields for the year ahead remains positive, with over 70% of respondents indicating that yields should increase. Expectations for cargo yield improvement over the 12 months ahead also “remain high”, according to IATA, which noted that tight capacity on some directional markets and record high load factors has resulted in a further strengthening in cargo yields over the past three months.
However the cargo outlook has moderated slightly from the levels seen in recent surveys. The proportion of respondents indicating that ‘no-change’ in cargo yields is likely over the year ahead has grown from just over a third last survey to more than half in July. IATA noted: “In addition to reflecting the effects of increasing cargo capacity, it is possible that pick up concerns over whether the impetus given to yields from restocking activity early in the recovery will continue as this phase of the inventory cycle comes to a close.”
Morgan Stanley yesterday recommended investors switch from airlines with high cargo exposure to those with a focus on premium passengers, noting, “as the global economy recovers and premium travel returns, we believe the well-capitalised airlines will be competitively positioned to participate in the recovery phase of the airline industry cycle.”
Skywest soared 11.1% ahead of today’s confirmation it has struck an in-principle agreement with Virgin Blue for a reciprocal codeshare in Western Australia. Virgin Blue Airlines CEO, John Borghetti, said the agreement would “allow the airlines to develop a closer, more strategic commercial relationship”, adding both sides would “also seek to explore opportunities to coordinate schedules, develop joint marketing programs and submit joint tenders for new business opportunities, subject to obtaining any necessary regulatory approval”.
Virgin Blue was steady yesterday.
Asia Pacific selected airlines daily share price movements (% change): 20-Jul-2010