US$6 billion loss projected for 2005
The international Air Transport Association (IATA) announced traffic results to the end of November 2005. Freight traffic for November showed 2.8% growth over 2004, while passenger traffic grew at 6.1%. For the first 11 months of the year, freight recorded 2.8% growth while passenger traffic was up 7.7%. Passenger load factors for November were 73%. When adjusted for seasonality, November load factors improve to 77.1%, the highest level since December 2003.
‘Overall the industry is growing, which is good news. But the pace of growth has geared-down a notch as a result of weaker demand from some critical sectors such as IT,’ said Giovanni Bisignani, IATA’s Director General and CEO. ‘Next year we expect freight growth to return to more normal levels in the 6.0% range as the business sectors driving air freight recover’particularly the IT and semi-conductor industries.’
Regional variations in traffic are pronounced for the 11-month period to November. Middle Eastern Carriers recorded the highest growth rates for both passenger and freight’12.4% and 14.0% respectively. Asia-Pacific carriers saw passenger traffic grow at 6.6% while freight expanded at 3.9%. North American carriers saw their passenger traffic increase 9.1% with freight contracting by 0.3%. European carriers followed the same trend with passenger traffic up 6.4% while freight lagged behind at 1.1%.
‘Turning growth into profitability has never been more critical. Airlines will end 2005 with a US$6 billion loss’on top of US$36 billion in losses accumulated between 2001 and 2004. As we battle the high price of fuel, cost efficiency will continue to be a top priority’not only for airlines but for every partner in the value chain including airports and air navigation service providers,’ said Bisignani.
Airlines have reduced non-fuel unit costs by 14% since 2001. As a result the break-even price of oil has risen from US$22/barrel (Brent) in 2003 to US$48/barrel (Brent) in 2005. Based on continued cost reduction and an oil price of US$53/barrel (down from US$54.5 in 2005) airlines are expected to return a loss of US$4.3 billion in 2006. ‘We will only see profitability in 2007 when we expect a return of US$6.2 billion. This is a net profit margin of 1.5%, not even enough to cover the cost of capital and nowhere near recovering the billions lost since 2001. A long and difficult agenda for change involving all partners is still ahead of us,’ said Bisignani.