IATA: Airlines will return to profitability

AIRLINES will return to profitability this year, according to the commercial aviation industry’s leading body.

The International Air Transport Association (IATA) expects airlines to post a collective $2.5bn (£1.7bn) profit for 2010, marking a vast improvement on its previous forecast published in March, which forecast the industry would report $2.8bn in losses.

“The global economy is recovering from the depths of the financial crisis much more quickly than could have been anticipated. Airlines are benefiting from a strong traffic rebound that is pushing the industry into the black,” said Giovanni Bisignani, IATA’s director general and chief executive officer.

IATA had anticipated that it would take at least three years to recover from the significant losses experienced by the airline industry, but recently back-tracked on that figure when it found that revenues had improved by $62bn.

The group expects European airlines to post $2.8bn in losses, downgrading past forecasts, after the region’s carriers faced increasing difficulties this year because of strikes and the Iceland volcano.

“This is a headline that looks good as it was unexpected to see the airlines in the black. However, the profit margins are so tight that they could easily fall back into the red. A rise in oil and a slowdown of the economy could do that,” said Matt Brown, an analyst at ETX Capital.

However, credit rating agency Moody’s raised its 12 to 18 month outlook for the industry from negative to stable on the back of modest growth in passenger numbers and yields in 2010 and 2011.

In a note Moody’s said: “We expect profitability in the global airline sector to improve as we gain distance from the trough of the recession and expect the airlines to expand capacity prudently.”