Pursuing profitable growth pays off...

Friday, 09 February 2007

Airline losses down, optimism up as IATA reports ‘06 figures

AIRLINE losses last year were down to US$500 million from US$3.2 billion in 2005.

And according to the latest annual round-up by IATA, the organisation this year expects the first overall profit for the aviation industry in six years.

In 2006, the cargo growth rate increased to 4.6 per cent compared with 3.2 per cent the previous year.

But IATA says it still remains below the historical growth trend of 5.6 per cent.

Global air passenger traffic grew at a slower pace last year than in 2005, but airlines around the world filled a record number of seats, as well as carrying more commercial goods. Average passenger load factors in 2006 jumped to an all-time high of 76 per cent — up from 75.1 per cent in 2005.

“The lesson for 2006 is that pursuing profitable growth pays off,” said Giovanni Bisignani, IATA’s director general and chief executive officer. “While passenger growth slowed, the bottom line improved. The industry showed an estimated operating profit of US$10.2 billion for 2006, while net losses were reduced to a projected US$500 million. Cost reduction, improved efficiencies and careful capacity management have positioned the industry to achieve a projected net profit of US$2.5 billion in 2007.”

The Middle East was the fastest growing region for both cargo and passengers — recording full-year growth of 16.1 per cent and 15.4 per cent respectively.

Although the cargo growth rate improved marginally to 4.6 per cent, the key markets of Europe and Asia were relatively subdued at 1.7 per cent and 4.7 per cent respectively. High fuel costs and competition from other transport modes (particularly in Europe) constrained growth in 2006.

North America was the most improved market as freight growth increased from 0.4 per cent to six per cent as airlines switched capacity towards cargo.

All regions — except the Middle East — saw a decline in passenger traffic growth rates compared with 2005.
“Load factors — at a record high of 76 per cent — were the good news for 2006,” said Bisignani.

“The focus for 2007 is efficiency. Slower traffic growth rates and a less buoyant global economy will impact revenue growth. Industry-wide, we expect revenue growth to slow from eight per cent in 2006 to 4.5 per cent in 2007. While lower oil prices are a welcome relief, they remain around US$60/barrel c- more than double the price in 2000. Bottom-line improvement depends on achieving further efficiencies across the board.

“Airlines have reduced non-fuel unit costs by an average of 3.5 per cent per year over the last five years. It is time for our industry partners across the value chain — including airports and air navigation service providers — to deliver similar results.”