03-Mar-2011 3:53 PM
IATA cuts North American profit outlook; US airline shares down
Analysis
IATA cut its global industry profit outlook due to rising fuel prices. The forecast for the airline industry was cut back from USD9.1 billion to USD8.6 billion. Oil prices are forecast to increase from 26% to 29% of overall costs. North American airlines are forecast to make USD3.2 billion in 2011, down 32% from 2010. Shares in US carriers dropped in trading on Wednesday, with Delta Air Lines falling 4.3%.
Summary
- IATA has revised its global industry profit outlook for airlines due to rising fuel prices, cutting the forecast from USD9.1 billion to USD8.6 billion.
- Oil prices are expected to account for 26% to 29% of overall costs, leading to a decrease in profitability for airlines.
- North American airlines are forecasted to make USD3.2 billion in 2011, down 32% from the previous year.
- Shares in US carriers, such as Delta Air Lines, experienced a decline in trading following the announcement, with Delta falling 4.3%.
- Passenger numbers are projected to increase by 5.4%, while cargo volume is expected to grow by 6.0%.
- Alaska Airlines reported positive traffic highlights in February 2011, with an increase in passenger numbers and load factors, although on-time performance declined.
Details of IATA's revised profit forecast for 2011 are as follows:
- Revenue: USD594 million, +7.6% year-on-year;
- Costs: USD575 million, +9.7%;
- Fuel: USD166 million, +19.4%;
- Operating profit: 18.4 million, -32.8%;
- Net profit: USD8.6 million, -46.3%;
- North America: USD3.2 billion, -31.9%;
- Europe: USD0.5 billion, -64.3%;
- Asia Pacific: USD3.7 billion, -51.3%;
- Middle East: USD0.7 million, -36.4%;
- Latin America: USD0.3 billion, -70%;
- Africa: Breakeven, compared with a profit of USD0.1 billion in p-c-p;
- Passenger numbers: 2570 million, +5.4%;
- Passenger yield: +1.5%;
- Cargo volume: 46.2 million tonnes, +6.0%;
- Cargo yield: +1.9%.
AirTran reported the following traffic highlights in Feb-2011:
- Passenger numbers: 1.7 million, +2.4% year-on-year;
- Passenger load factor: 76.9%, +1.8 ppts.
Alaska Airlines reported the following traffic highlights in Feb-2011:
- Passenger numbers:
- Alaska Airlines: 1.3 million, +13.1% year-on-year;
- Horizon Air: 512,000, +3.3%;
- Passenger load factor:
- Alaska Airlines: 81.5%, +1.7 ppts
- Horizon Air: 76.7%, +4.5 ppts;
- On-time performance:
- Alaska Airlines: 82.1%, -4.1 ppts;
- Horizon Air: 73.5%, -15.5 ppts.
Selected AAD daily share price movements (% change): 3-Mar-2011
