Cruise Climb - 2011

Cruise Climb - 2011

Published: 23-March-2011

If 2010 was a year of recovery, change and consolidation, 2011 is expected to be a year of gradual growth, stabilization and caution as the industry experiences a slower revival than witnessed in 2010.  With the adjustment to end of year reports, IATA confirmed a revised profit estimate for 2010 of $15.1 billion, as the industry experienced better economic conditions and better capacity utilization, with freight levels leading the recovery to pre-2008 peaks.

During 2010 Airbus achieved record deliveries, achieved increased outputs for a ninth consecutive year, and recently expressed optimism that 2011 would offer a further increase in deliveries. Highlights for the year included the launch of the new A320neo (new engine option) which offers a 15% fuel burn reduction, and the milestone achievement of exceeding 10,000 Airbus orders achieved on 29 December .  At the close of 2010, Airbus reiterated their 2010-2029 forecasts, that 26,000 new passenger and freight aircraft will be required to satisfy demand by 2029.  From this forecast, 10,000 passenger aircraft are expected to be replacements to offer a more eco-efficient option, with 15,000 required for further growth within the industry.  These numbers represent significant growth expectations when the current international passenger fleet of 14,000 aircraft is considered .

Airbus Chief Operating Officer, John Leahy stated that “the recovery is stronger than predicted and reinforces both the resilience of the sector to downturns and that people want and need to fly” .  Boeing’s Chairman, Jim McNerney, also stated that Boeing will be “entering 2011 well positioned for growth with a large order book (&) increasing global demand for commercial airplanes” .

Across the board, 2011 is expected to provide more subdued growth, with current IATA forecasts predicting expected revenues of $594 billion, with reduced profit estimates of $8.6 billion and net profit margins of 1.4%. IATA Director General & CEO, Giovanni Bisignani noted that “the world is moving again… the challenge is to turn the demand for mobility into sustainable profits”. 2011 is expected to be a more challenging year for the industry with increased oil prices caused by uncertainty in the Middle East, increased taxes – particularly in European markets, European debt crises, the stabilization of yields, slower global GDP growth and reduced growth in passenger volumes .

IATA’s Jan 2011 business confidence survey shows a continued positive outlook, however there is muted expectation for further significant improvements, in line with the forecasts above.  A significant expectation however, is the outlook for increased employment levels, driven by increased traffic volumes, market expansion and new services.  Whilst 2011 is predicted to be a year of continued, although slower growth, the cautious optimism is underscored by Bisignani’s December statement – “The industry is fragile and balancing on a knife edge. any shock could stunt the recovery”