Back in December 2009, the International Air Transport Association (IATA) put out a forecast predicting 2010 airline losses of $5.6 billion. Three months down the line, IATA now forecasts a more modest 2010 loss of $2.8 billion. They also lowered the 2009 loss estimate to $9.4 billion from the previously forecast $11.0 billion loss.

Giovanni Bisignani, IATA

Speaking at a press conference in Geneva, Giovanni Bisignani, IATA Director General and CEO, said that the improvement is largely driven by increasing passenger numbers, while airline capacities remain at the 2009 lows, leading to the bump in ticket prices and improved revenues.

Passenger demand fell by 2.9% in 2009 but is now expected to grow by 5.6% in 2010. Revenues will rise to $522 billion, a $43 billion improvement on 2009.

IATA also offers a regional breakup. The recovery is led mostly by the Latin American and Asia-Pacific markets whose carriers posted international passenger demand gains of 6.5% and 11.0% respectively in January. North America and Europe are lagging behind with gains of 2.1% and 3.1% respectively for the same month.

Latin America seems especially hot right now, with an expected $800 million profit – the only world region slated for a 2010 profit in the airline sector. The Feb 2010 OAG report indicates that the number of flights in Latin America grew by 12%, along with a 15% capacity growth.

The biggest loss makers are Europe ($2.2 billion) and North America ($1.8 billion). Even though North American demand is expected to improve by 6.2% in 2010, the red ink is attributable to intra-North America premium travel, which was still down 13.3% as of December.

Even here, the new IATA forecast offers some hope, with the posit that long-haul premium travelers are back in the game, and premium travel as a whole now appears to be heading for a cyclical recovery in volume terms. If the sentiment spreads quickly enough to short-haul routes, we could be looking at one more upward revision from the IATA in a few months.

To be noted that with the better forecast, the price of fuel has also gone up. The new IATA estimate pegs the average oil price to US$79 per barrel. Higher fuel prices combined with an expected increase in capacity will add another $19 billion to the industry fuel bill, bringing it to an expected $132 billion in 2010.

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