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Airline business confidence improves in April

Montreal, April 24, 2013

Seventy-three per cent of airline CFOs and cargo heads surveyed in April said they expect an increase in profits over the next 12 months as against a proportion of 56 per cent in January, a report said.

Respondents were also more upbeat about recent-past performance, with 62 per cent of the survey group indicating profits over the past 3 months were up on the year ago period, said April  survey of the Airline Business Confidence Index released by the International Air Transport Association (Iata).

Consolidation and efficiency gains have helped airlines in some regions increase profits in 2012, and that is likely driving the expectation for further financial improvements in 2013, the report noted.

Demand growth

Traffic volumes in the passenger business improved during the first quarter (Q1) of 2013 compared to the year ago period, according to survey responses about the past three months, and growth in demand is also expected for the year ahead. There was little change in these results from the January survey.

Survey respondents indicating an increase in passenger traffic over the past three months compared to a year ago is consistent with air travel data. The first two months of 2013 have seen strong expansion in the growth trend, supported by improvements in the business environment and solid economic growth in emerging regions.

A majority of survey respondents reported seeing a rise in cargo volumes over the past three months compared to the year ago period. Although global FTKs (freight tonne kilometers) have not made much progress in 2013, they have maintained the rise in levels during Q4 2012. On a seasonally adjusted basis cargo volumes were up in February compared to a year ago, the Iata report said.

For the 12-month outlook, respondents expect to see an increase in cargo traffic, but there has been a small decline since the January survey. Current levels of business confidence still point to improvement in the demand environment in the months ahead, but a recent intensification of Eurozone debt problems had raised doubts about the strength of the global economic recovery.

Input costs

There was no change in response to recent input costs since the January survey, and in fact that has been the trend since October. With respect to jet fuel prices, there actually has been some decline during Q1 2013 as a result of increasing non-Opec supply, but price levels are still high and above $120 per barrel. Looking ahead, expectations for the next 12 months are for some increase in the current input cost levels.

Yield environment

The April survey suggests that yields increased in Q1 2013, which is a further improvement on January when 40 per cent of respondents said they experienced a pick-up in yields. In April, more than half of respondents indicated that yields had increased on the year ago period. Cargo yields also showed further improvement in January, with a majority of respondents saying that yield levels are unchanged or up on year ago levels.

The outlook for the year ahead is also quite optimistic, for both passenger and cargo businesses. Passenger yields are expected to improve, with no respondents indicating that they anticipate a decline over the next 12 months. The outlook for cargo yields is also more positive, with an upturn in expectations after some weakness in January.

Employment

On balance there was no change in employment during Q1 2013, but that is an improvement on the January survey when a decline in employment was reported for Q4 2012. Looking ahead, the more optimistic profits outlook is supporting an expected increase in employment over the next 12 months. – TradeArabia News Service




Tags: Iata | Survey | cargo | Demand growth | Profitability |

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