A majority (70 per cent) of airline CFOs and heads of cargo expect profits and air transport volumes to improve over the coming 12 months while input costs and yields remain stable, a report said.

With respect to recent past performance, respondents reported seeing better profitability in the fourth quarter (Q4) of 2013 compared to the year ago period, added the quarterly survey of the International Air Transport Association.

More than 55 per cent of respondents indicated an improvement, but the proportion of respondents experiencing a fall in Q4 profits rose to 25 per cent, compared to 20 per cent in the October survey when asked about Q3 results.

Nonetheless, performance for 2013 overall was an improvement on 2012, with airlines in some regions seeing the benefits of consolidation and efficiency gains. These improvements appear to be supporting the optimistic outlook for airline financial performance for the year ahead.

Demand growth

Passenger traffic increased during Q4 2013, according to survey responses about the past three months. The rate of improvement in January slowed compared to the October survey - the proportion of respondents reporting increased growth in air travel fell from 77 per cent in October to 65 per cent in January.

These developments are broadly consistent with air travel data, which shows continued strength in passenger demand, but at a slightly slower pace over recent months.

Looking forward, demand drivers remain broadly positive and suggest growth in passenger volumes in the months ahead will be at least at the current rate. The proportion of survey respondents expecting a rise in traffic volumes is a significant 72 per cent, a strong result but slightly down on October (83 per cent).

The survey results for cargo were positive and reflect important developments in the demand environment.

Respondents reported seeing growth in air freight volumes over recent months, which is consistent with freight data. The outlook for cargo volumes continues to improve, with more than 66 per cent of respondents expecting an increase in demand over the next 12 months. This is the biggest expected rate of increase since mid-2010, a very strong year for cargo.

Input costs

Survey respondents indicated a decline in input costs during Q4. Although jet fuel prices remained high during the last 3 months of 2013, they did ease slightly compared to the previous quarter.

But probably more notable than developments in jet fuel prices, survey respondents pointed to cost cutting initiatives as reasons for the fall in input costs in Q4. The outlook with respect to input costs over the next 12 months is broadly stable.

Employment

Recent past and future expectations for employment in the airline industry were positive according to the January survey results, sustaining the improvement on 2012 when CFOs and cargo heads were indicating declines in employment.

The increase in airline employment activity during the past three months is consistent with the improvement in financial performance that airlines are experiencing. The trend is expected to continue in the year ahead. – TradeArabia News Service