Iata reports rising optimism and ‘some relief’ to airline finances

Iata reported “some relief” to airlines’ finances following a survey of business confidence among carriers in July.

Airline association Iata also reported increased optimism about carriers’ future profitability.

An Iata survey of airline chief financial officers (CFOs) and heads of cargo found passenger yields remained low in the three months to June. But three-quarters of respondents (73%) forecast profitability would improve as passenger traffic recovers.

One in four (25%) expected no change or deteriorating losses due to new waves of Covid-19. Some respondents feared the end of government aid programmes might also offset revenues from rising traffic.

More than half the respondents (55%) reported reductions in workforces in the quarter as airlines continue to restructure, but only 15% expected further falls in employment in the next 12 months compared with 24% in April.

One in three (33%) reported an increase in employee numbers in the three months to June, up from just 6% in April, and 45% expect to hire staff as services increase.

More than one third (36%) of airline CFOs expected their networks to shrink and 27% to reduce flight frequencies, down from 67% shrinking networks and 55% cutting frequencies in April.

The survey suggests pressure on airline finances has eased with almost three-quarters (72%) of CFOs reporting reduced losses.

But more than one quarter (28%) said Covid continues to have a major impact on operations.

Four out of five (81%) reported an increase in passenger volumes year on year during the quarter. Yet more than half (54%) reported unchanged or falling passenger yields as carriers attempt to stimulate demand through fare offers.

Half (48%) expected passenger yields to rise in the next 12 months, 37% forecast yields would remain unchanged and 15% expected failing yields amid tough competition “for the few travellers in the market”.

Almost half (45%) forecast costs would fall over the next year, up from 30% in Iata’s last three quarterly surveys. Yet one third (30%) forecast higher unit costs, citing rising fuel prices and increased airport charges.

Half the respondents (52%) forecast demand for air travel would recover to 2019 levels by 2023, with North America leading the way according to 42% of respondents, ahead of Asia-Pacific (21%) and Europe (21%). Asia-Pacific had been judged most likely to lead the recovery in April.

Just 15% predicted recovery by next year, while one third forecast demand would only reach pre-crisis levels in 2024 or later.

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