Optimism takes wing in airline industry

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The International Air Transport Association (IATA) has halved its forecast loss for the global airline industry to US$2.8 billion due to a strong recovery in demand in the first few months of this year. This is a revision from the more pessimistic cumulative loss of US$5.6 billion expected just three months ago in December.

“Improvements are driven by economic recovery in the emerging markets of Asia-Pacific and Latin America whose carriers posted international passenger demand gains of 6,5% and 11% respectively in January,” IATA said in a statement last week.

While demand in Africa is expected to improve by 7.4%, this will not be sufficient for profitability as carriers continue to face strong competition for market share. African carriers are likely to post a US$100 million loss this year, halving last year’s losses, IATA forecasts.

The global airline lobby group adds it expects passenger demand to grow by 5.6% this year while tighter supply and demand conditions were expected to see yields improved by 2% for passengers and 3.1% for cargo.
“Premium travel, while slower to recover than economy travel, now appears to be following a cyclical recovery in volume terms. But it is still 17% below the early 2008 peak,” IATA avers.



Despite this, Business Day newspaper reports SA’s major airlines remained profitable last year. The broadsheet says all reported tough economic conditions with passenger volumes falling sharply towards the end of the year. It adds improved economic conditions in the first few months of the year have now eased some of that pressure, with most carriers reporting improved trading .
“South African Airways (SAA) has experienced moderate recovery in demand with continued pressure particularly in premium traffic,” SAA spokeswoman Vimla Maistry told the paper. Both 1Time and kulula have also seen some improvement in the past few months. However, the two low- cost airlines are expecting substantial volume growth as they add further capacity this year.
“We expect our volumes to grow along with the increased capacity of 13%-15%. However, we expect yield or average airfares to remain flat this year,” said Glenn Orsmond, CEO of 1Time Holdings. Gidon Novick, joint-CEO of Comair , operators of kulula , said the airline would be adding about 37% more capacity as the group added new routes. Internationally, Lufthansa said yesterday that it too would be adding new capacity despite a smaller fleet than last year.