Airlines expect sharp reversal, to $2.5B profit

The worldwide airline industry will post a $2.5 billion profit in 2010, a sharp reversal from a $2.8 billion loss predicted just two months ago by the International Air Transportation Association.

Despite the overall recovery, European airlines will still lose about $2.8 billion this year because of a stagnating economy, the Iceland volcano eruption, labor strikes, and a currency crisis, the trade group representing 230 airlines worldwide said Monday.

Prospects for airlines have improved in recent months as economic growth in Asia and the United States has increased demand for travel, aided by cost cutting and seat and flight capacity reductions last year.

"The global economy is recovering from the depths of the financial crisis much more quickly than could have been anticipated," chief executive officer Giovanni Bisignani said at IATA's annual meeting in Berlin. "Airlines are benefiting from a strong traffic rebound that is pushing the industry into the black."

Industry revenues are projected to be $545 billion this year, up 13 percent from $483 billion in 2009. Passenger travel is expected to grow by 7.1 percent in 2010, while cargo business will expand by 18.5 percent, the group said.

Asia-Pacific carriers are expected to earn the largest profit, $2.2 billion this year, more than double the forecast of $900 million in March. Airlines in North America are expected to post a profit of $1.9 billion, a reversal from the $1.8 billion loss predicted two months ago.

Premium first- and business-class travel rebounded in the first quarter at an annualized growth rate of 20 percent, "and economy travel is now back to pre-recession levels," the group said.

However, further cost cuts and airline restructuring are needed to be "sustainably profitable," Bisignani said. "We must all be prepared for a greater change."