4-Nov-2009 11:00 AM

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.