Airline finances starting to look up, IATA says
Airlines are faring better financially this year, with share prices and fares up, despite the volcanic ash that caused hardship in April, global airlines body IATA said.
In its latest financial snapshot, the International Air Transport Association said on Monday strong operating profits reported by major U.S. airlines in the first quarter augured well for the rest of the industry.
"Positive Q1 operating profits in the U.S. is a good sign for the expected improvement in airline financial performance during 2010," the Geneva-based group said.
IATA, whose 230 airline members include British Airways, Deutsche Lufthansa and Singapore Airlines, estimated the six-day shutdown of much of European airspace last month cost carriers $1.7 billion in lost revenues.
But, it said on Monday, markets were now keen on the sector, whose performance tends to be cyclically tied with the broad economy which is rebounding from financial crisis.
"Even after Iceland's volcanic ash plume airline share prices stood 15 per cent up so far this year, compared to a 6 percent rise in the FTSE Global All Cap Index. Financial markets remain bullish over future airline financial performance," IATA's report said.
Last month, IATA said demand for international air freight and passenger travel accelerated in March, but would dip in April because of the volcanic disruption.
Its latest Financial Health Monitor said passenger travel was up at an annualised rate of 9 per cent in the first quarter, with air freight volumes expanding at a 26 per cent rate.
Air fares, a key driver of airline income, have also risen significantly on a seasonally adjusted basis, IATA said.
"Tighter supply-demand conditions, as load factors rise, have pulled average fares (and cargo rates) up," it said.
"Average economy fares are now 10 per cent above their lows, while premium fares have risen 15 per cent. However, both are only half-way to regaining the levels achieved in early 2008."
Oil prices have averaged $78 per barrel in 2010, just below the $79 per barrel IATA is forecasting for this year.