Second half of the year likely to be challenging for global airlines: IATA

04 September, 2012

International Airport Transport Association (IATA), an international industry trade group of airlines told this citizen journalist that in August Airline share prices have fell 3%, under performing the market, as investors view the impact of surging fuel prices as negative for airline financial performance during the second half of this year.

HOWEVER, AIRLINES' financial performance in second financial quarter was good, with operating profits held close to last year’s level. IATA said that the second half of the year looks more challenging with falling business confidence undermining passenger traffic growth, and the modest recovery of air freight markets running out of steam.

IATA said that the jet fuel prices have surged back to earlier levels, after some respite during the second quarter. The industry body analyzed that the crude oil prices were pushed higher by supply concerns and, possibly misplaced, optimism about economic growth.

Passenger yields have continued to improve so far this year, helped by still tight supply-demand conditions in a number of markets, but also driven higher by rising costs.

To respond to slowing demand and higher fuel prices airlines have slowed their capacity expansion plans. This move by the airlines has stabilized load factors in both passenger and freight markets, although aircraft utilization may have fallen.

However, the sharp rise in fuel prices has probably increased break-even load factors. As a result downward pressure on airline profitability looks to have increased at the start of Q3.