Airlines on recovery path, may post profit in 2010 except in Europe

With the global economy recovering, the International Air Transport Association (IATA) revised its 2010 industry outlook and is now projecting a profit of $8.9 billion, up from the $2.5 billion it had forecasted in June.

''The industry recovery has been stronger and faster than anyone predicted. The $8.9 billion profit that we are projecting will start to recoup the nearly $50 billion lost over the previous decade,'' said Giovanni Bisignani, IATA's director general and CEO.

But IATA was cautious and said that a reality check was in order since there are lingering doubts about how long this upturn will last, particularly in Europe and North America, where the after effects of recession still linger on.

''Even if it is sustainable, the profit margins that we operate on are so razor thin that even increasing profits 3.5 times only generates a 1.6 per cent margin.

This is below the 2.5 per cent margin of the previous cycle peak in 2007 and far below what it would take just to cover our cost of capital,'' said Bisignani.

IATA, which represents about 230 airlines comprising 93 per cent of scheduled international air traffic, said revenues were expected to grow to $560 billion, $15 billion more than previously forecast. This is only slightly below the $564 billion in revenues achieved in 2008 when the previous economic cycle peaked and prior to the start of the financial crisis.