ATW Daily News

IATA: Airline CFOs optimistic following relatively stable third quarter

Wednesday October 28, 2009

IATA reported that airlines experienced "further weakness in financial and market conditions during the third quarter," but noted that "the rate of deterioration did appear to stabilize." In its latest Airline Business Confidence Index released this week, the organization said an October survey of airline CFOs worldwide revealed that "confidence. . .that conditions will improve during the next 12 months rose markedly" compared to the last survey in July. "The gain. . .appears to be supported by evidence of rising economic growth and, so far, capacity restraint which is raising load factors and tightening supply-demand conditions." But it cautioned that "these supports are fragile" and pointed out that "the experience of the third quarter was that at best there was not further deterioration," hardly evidence of a surging recovery. In fact, more than 90% of respondents indicated that profitability fell during the three months ended Sept. 30 owing to "the ongoing effect of weak demand. . .compounded by low yield levels."

Nevertheless, more stable results compared to recent quarters and solid signs this month led more than 73% of surveyed CFOs to say that "profitability over the next 12 months will improve," changed from July when more than 46% predicted "further deterioration in profitability." IATA noted that "this does not mean that a return to profit is expected. It does mean that the majority are now expecting losses to diminish" over the next year. CFOs in different regions had contrary responses, however. For example, "a significant minority of European airlines expected a further deterioration" whereas "all the airlines in Asia expected an improvement," IATA explained.

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