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Welcome to the latest edition of IATA’s quarterly eAnalyst.

The eAnalyst is designed to provide a concise and insightful guide to the current key issues in the global airline industry.

Developments in the economic and air transport market environment during the first quarter highlight the fragile state of the current expansion, with high jet fuel prices temporarily replacing Eurozone debt as the most pressing risk facing the industry. In March, we revised down our central case forecast for airline net profits in 2012, from $3.5 billion to $3 billion. Revenues are not expected to slow as much, with capacity being added at a slower pace than expected, supporting yields, and improvements to business and consumer confidence helping the demand side. However, we expect Brent oil prices to average $115 a barrel, up from our previous forecast. This added cost pressure has resulted in profits being cut.  The next financial forecast released in June will provide an updated view of the industry outlook.  Recent developments have swung from positive revenue growth to negative impacts from heightened risks in the euro-zone.    

Our latest survey of airline CFOs in April has also provided some insight into the industry outlook, showing business confidence expectations improving slightly. Respondents reported weakness in Q1 profits, but to a lesser degree than in Q4 2011. The view for the next 12 months is now also less pessimistic, with an expectation for further growth in traffic in the year ahead. 

In our ‘Analyst’s Viewpoint’ Chris Tarry worries about the impact of aircraft deliveries and the resulting excess capacity in Europe.  Elsewhere life is being made difficult for airlines, their passengers and the wider economy by an extraordinary rise in Delhi’s airport charges.  We assess the impact.
I hope you find it to be an interesting and informative read.

Brian Pearce
IATA Chief Economist

INDUSTRY PERFORMANCE AND OUTLOOK

High Oil Prices Threaten Airline Performance

We downgraded our central case forecast for airline net profits in 2012, from $3.5 billion to $3 billion, in our March update. There are several key factors that support this forecast... [more]

Airline Sentiment Shows Some Improvement

Airline industry confidence has improved slightly in IATA’s April survey of CFOs and heads of cargo. Respondents reported weakness in Q1 profits, but to a lesser degree than in Q4 2011… [more]

ANALYST VIEWPOINT

Who will have to “pay the price”?

by Chris Tarry, CTAIRA

The rules of economics apply to all aspects of aviation just as they do to any other business. At the present time (May 2012) there is (yet again) a considerable debate regarding which elements of the system are in a state of equilibrium and which are out of balance... [more]

QUARTERLY RESEARCH

Delhi Airport aeronautical tariff - Impact

The Airports Economic Regulatory Authority (AERA) adopted a shared till inflation – X price cap model for the determination of aeronautical tariffs effective May 15th, 2012. The new tariffs determined by AERA based on the shared till inflation – X price cap model would impose… [more]

QUARTERLY DATA TOPIC

The dynamic capacity management conundrum

IATA Consulting

Since deregulation was implemented, airlines have made a quantum-leap in terms of revenue management development. This has enabled airlines to influence the booking pattern… [more]