Low yields and rising costs will keep the aviation industry in the red next year, the International Air Transport Association (IATA) declared after revising its 2010 financial outlook from a US$3.8 billion global net loss to US$5.6 billion.

For 2009, the industry will bleed US$11 billion, confirmed IATA Director General and CEO Giovanni Bisignani. “We are ending a horrible year that closes a horrible decade. Between 2000 and 2009, airlines lost US$49.1 billion, an average of US$5.0 billion per year.”

“The worst is likely behind us,” he explained. “For 2010, some key statistics are moving in the right direction. Demand will likely continue to improve and airlines are expected to drive down non-fuel unit costs by 1.3% but airlines will remain firmly in the red.”

However, IATA predicts Industry revenues will rise by US$22 billion (4.9%) to US$478 billion in 2010, compared to 2009 .
Nevertheless, revenues remain US$57 billion (-11%) below the peak of US$535 billion in 2008 and US$30 billion below 2007 when passenger traffic was at similar levels to what is expected in 2010.

Following a decline of 4.1% in 2009, passenger traffic is likewise expected to grow by 4.5% in 2010, stronger than the previously forecast 3.2% in September. A total of 2.28 billion people are expected to fly in 2010, bringing total passenger numbers back in line with the peak recorded in 2007.

On the other hand, cargo demand will grow by 7% to 37.7 million tonnes in 2010, stronger than the previously forecast 5% in September, following a 13% decline in 2009. Total freight volumes will remain 10% below the 41.8 million tonne peak recorded in 2007.

Cargo demand is rising faster than world trade as depleted inventories are rebuilt. Once the inventory cycle completes, growth is expected to fall back in line with world trade.

In 2009, passenger and cargo yields plummeted by 12% and 15% respectively. Cargo yields are expected to improve by 0.9% in 2010 although passenger yields are not expected to improve from their extraordinary low level due to excess capacity in the market and reduced corporate travel budgets.

Capacity adjustments in 2009 were made at the expense of lower aircraft utilization, down 6%. An additional 1300 aircraft due for delivery in 2010 will contribute to 2.8% global capacity growth, putting continuing pressure on yields. On top of this, corporate travel buyers have adjusted their budgets to reflect lower premium fare levels.

With regards to fuel cost, an average oil price of US$75.0 per barrel (Brent) is expected in 2010, up considerably from the US$61.8 average expected for 2009. As a percentage of operating costs, fuel will be 26% in 2010. This is considerably lower than the 32% of operating costs that fuel comprised in 2008, but twice the 13% of operating costs that fuel represented in 2001-2002.