IATA survey: 70 per cent of airline CFOs downbeat on industry prospects over coming year

Airline CFOs are far from being upbeat about the prospects of the airline industry over the next 12 months, according to an International Air Transport Association (IATA) Business Confidence Index released yesterday. The CFO's expect soaring costs to erode profitability further despite rising traffic.

The quarterly survey presents a gloomy picture of prospects for airlines around the world, with financial heads of airlines saying that "business confidence slumped to new lows" in the second quarter "following the steep decline in Q1."

According to the report,  majority of the world's airlines "now expect to cut jobs in the next 12 months," and 70% of airline CFOs "expect a further deterioration" in profitability over the next year.

The gloomy forecast comes despite the fact that at least half of CFOs expect passenger traffic to grow over the next year and close to 60% expect an increase in cargo volume. There is " a strong recognition that the demand environment has become tougher in recent months," IATA said.

An overwhelming 85% of CFOs responding to the IATA survey expect "to see further increases in input costs over the next 12 months."

Though some measures, such as fuel hedging and some operational changes to increase energy efficiency can help, "most of the upward cost pressure is beyond the control of airlines," IATA said, adding that non-fuel cost improvements "in most cases were not sufficient to offset spiraling fuel costs."

There is also a limit to constant cost cutting exercises with CFOs saying that non-fuel cost efficiencies "will become increasingly harder to find" as carriers operate with smaller workforces and contend with "shortages [in]. . .labor skills."