The global airline industry is expected to post a large profit this year and see a significant increase in passenger traffic, an airline trade group announced yesterday.
The news came alongside a somewhat favorable forecast from Moody’s Investors Service but also amid lackluster gains in domestic air travel, as well as rules proposed by the Obama administration that would impose new restrictions and obligations on air carriers.
Airlines are interlinked with airport finances. Many airports rely on passenger facilities charges, or PFCs, for revenue they use to back their bonds.
Market participants said yesterday that it was too early to tell how the proposed rules and profit forecasts would affect airport finances.
Moody’s raised its outlook for the global passenger airline industry over the next 12 to 18 months to stable from negative. Analysts for the agency anticipated passenger growth in the next year and a half, but their outlook could fall once again if the global economic slowdown continues to drag down air travel.
Moody’s said airlines that cut down on flights or routes during the recession may start slowly reinstating that capacity, which would be a boon to airports that have lost passenger traffic as a result of capacity cuts.
In a separate special comment for this month, Moody’s said that airports tend to be more proactive in protecting bondholders than entities that are less-frequent participants in the bond market.
Moody’s outlook announcement came as the International Air Transport Association predicted airlines will post a global profit of $2.5 billion in 2010, with North American carriers expected to make a $1.9 billion profit. North American airlines suffered a total loss of $2.7 billion last year.
The predictions are huge jumps over the group’s March forecast for airlines to lose $2.8 billion globally in 2010, and for North American carriers to lose $1.8 billion this year.
In addition, the group predicted passenger traffic will grow 7.1% this year.
The IATA also said it expects industry revenues of $545 billion this year, up from $483 billion in 2009 but less than airlines’ pre-recession revenues of $564 billion in 2008.
“We thought that it would take at least three years to recover the ... drop in revenues in 2009,” said Giovanni Bisignani, director general and chief executive officer of the IATA, which represents 230 airlines. “But the $62 billion top-line improvement this year puts us about 75% on the way to pre-crisis levels.”
Meanwhile, the Obama administration last week proposed a package of new rules that would impose new requirements and obligations on airlines.
If the rules were adopted, airlines would have to better compensate passengers who were bumped from flights, and could be required to refund luggage fees — which currently are a large income source for airlines — if checked bags do not arrive on time.
Passengers would be able to book and cancel flights within 24 hours without having to pay penalties.