IATA sees threat to recovery in fares and yields; danger of renewed capacity increases

IATA released (03-Nov-2009) its airlines financial monitor for Sep-Oct-2009. Key points include:

• Financial indicators:
  • Stronger capital markets allowed airlines to raise USD8 billion in new funds in past two months;
  • Airlines equity prices moved in line with market in Oct-2009, Asian carriers outperformed, while US airlines underperformed;
  • Early results for 3Q2009 show an improvement in financial performance, but IATA maintained its 2009 industry loss forecast of USD11 billion.
• Fuel costs:
  • Oil hit USD85 per barrel in mid-Oct-2009, the year-on-year advantage of lower fuel prices is disappearing;
  • Further rises expected by futures markets;
• Demand:
  • Travel volume growth positive in Sep-2009 (+0.3%), first positive figure in a year;
  • Seasonally adjusted RPKS are 5% higher than 1Q2009 lows, but still down 6% on early 2008 levels;
  • FTKs up 12% over Dec-2008 low, but remain 17% below early 2008 levels.
• Capacity:
  • IATA questions whether capacity restraint will continue, as published schedules suggest some increase;
  • Load factors on international services returned to levels and pattern seen in 2007;
  • Aircraft utilisation down 3% for narrowbodies and 4% for widebodies;
  • Marked improvement in Sep-2009 freight load factors, moving back towards pre recession levels;
  • New aircraft deliveries again exceeded 100 in Sep-2009, 911 new aircraft delivered this year, with 213 retired and 156 in storage;
  • Commercial aircraft fleet expanded overall by 2%.
• Yields:
  • Still very weak, but more favourable than in 2Q2009;
  • Load factors returning to pre-recession levels, leading to a rise in average fares;
  • Pace of yield improvement is slow and levels remain well down on 2008;
  • Low levels of aircraft utilisation and planned deliveries suggest a threat to fares and yields.