Are Airline Results for 2013 a Good Omen for this Year?

The political world is still in turmoil and fears of a sliding back into a “cold war” attitude between Russia and the West are foremost in many people’s minds.
The possible effect on the aviation industry has been reported earlier by CFG.
However, general airline results for 2013 as well as the first quarter show carriers moving back into black figures in both the cargo and passenger sectors.

Tonnage is improving but yields remain under constant pressure due to ongoing overcapacity, predict heads of air cargo  /  source: IATA
Tonnage is improving but yields remain under constant pressure due to ongoing overcapacity, predict heads of air cargo / source: IATA
Main driver for cargo to upswing are semi conductors  /  source: IATA
Main driver for cargo to upswing are semi conductors / source: IATA

Passenger traffic demand continues to rise steadily and the cargo demand, even from the Far East, has moved up a notch or two.
European carriers are still facing many problems in being able to financially streamline their products. Much of this is in their view due to a still top heavy staff overhead costing which due to regulatory and tariff constraints, is hard to bring down.

Carriers making money?
A light in the tunnel for Air France is that to date over 8,000 staff have left on a voluntary basis and the carrier plans a further reduction of 1,100 flight crew as well. From this figure, cockpit crew redundancies would be 350 and cabin staff 850. Whether the carrier can manage this by end of this year, is still a question mark.
But still way into red figures!

Alitalia is in the final days of its due diligence with Etihad Airways. Whether the Italian unions will play ball remains to be seen.
Etihads plans to increase its share in Air Berlin to 49.9% fuels speculation that the Abu Dhabi based carrier will tie Alitalia and Air Berlin into a new European competitor as well as supplier for their long haul services.

Etihad, who has invested enormous sums in other airlines these past years, increased its 2013 profits by +48% over 2012. The carrier states that this was achieved by “combining organic growth with wide ranging partnerships.”

Then there is the struggling IAG group which proudly announced a €147m net profit for 2013. This compared to a 2012 net loss of €696m is indeed a step forward.

The Aeroflot Group also reports net profits of over $200m, which are attributed to an 18% increase in passenger revenues, without mentioning the hundreds of millions of royalties channeled into their coffers year after year by Moscow’s government.
Turkish Airlines, one of the world’s fastest expanding carriers, surprisingly ended 2013 with a drop in profit, but still reached a net result of more than $300m.

And, the list goes on!
How much of this is due an upswing in cargo net results still has to be analyzed.
However, IATA’s air cargo growth figures and prognosis still give reason to believe that providing we don’t enter into a trade war with Russia and that political restrictions remain low, then 2014 can end up with half way satisfactory figures all round.

Some examples:
February airfreight growth was up almost 3% on 2013, although January showed a plus of 4.3% and March promises to deliver an upswing of +4%.
Recent increases in world trade contributed about 2.0% points to the 2.9% rise in FTK’s.
A general improvement in business conditions which point to a stronger output and sales environment.
European carriers are starting to benefit from improved demand conditions in the euro zone, by up to 5.5%.

Asia Pacific carriers showed almost no change in FTK volumes compared to a year ago, but report no significant downfall either.
Load factors, with the exception of Asia Pacific and Africa, remain in line with those of 2013.
The general outlook for airfreight transport remains positive despite a still too slow growth in trade.
All of this should show a stronger performance than 2013 despite a still too restrained trade growth.

The air cargo industry, carriers as well as shippers and agents, is till walking on that tightrope but it looks as if the safety net has got somewhat stronger.

John Mc Donagh