Companies brace for tough year when any profits will be prized - Airlines

PUBLISHED : Friday, 01 January, 2010, 12:00am
UPDATED : Friday, 01 January, 2010, 12:00am

The worst of the global financial crisis appears to have receded, but the airline industry still faces rising fuel costs and weaker ticket prices in 2010.

Government stimulus programmes to shore up the global economy will have to be repaid, says Giovanni Bisignani, director general of the International Air Transport Association (Iata). 'Taxes will have to be raised to pay for the massive intervention.'

As a result, consumers and corporate travellers will continue to watch their spending over the next year. In the United States, the percentage of debt to household income still stands at above 120 per cent.

'Developing countries such as China may see a V-shaped recovery but the recovery prospects for developed economies are less certain and a W-shaped recovery is very likely,' says Bisignani.

Although airlines are expected to carry similar passenger and cargo tonnage in 2010 compared to 2007, total revenue will be lower than three years ago.

'The number of travellers will be back to the peak levels of 2007, but with US$30 billion less in revenue,' he says.

Fuel costs, the largest single operating cost for carriers, however will be on the rise this year. Iata expects Brent oil prices will average US$75 per barrel this year from US$61.8 in 2009.

The improvement in ticket prices seen is faltering due to a drop in consumer confidence in the US and Japanese economy. Iata estimates that ticket sales for business and first class decreased 20 per cent year on year in October, after a 27 per cent decline in September.

'If we have to do the work of 2007, with US$30 billion less cash, change is needed,' says Bisignani.