After slipping to abysmal levels during the economic slowdown, profitability of cargo airlines has returned to heydays.
A report by the International Air Transport Association (Iata) says profitability returned to pre-recession levels for US cargo airlines during the fourth quarter of 2009 and the first quarter of 2010. Asian cargo profitability was even better as business confidence in the region improved, with volumes, load factors and yields peaking.
“Net profit margins of around 4% and operating margins of
6% are close to pre-recession levels in 2006 and 2007,” says the report released by the global air transport body.
Iata estimates airlines need to achieve an operating margin of at least 8% to generate the return on capital most investors expected. It said the last three months had seen a sharp rise in the number of airlines achieving this — the percentage of airlines generating 8% operating margin jumped from 9% in Q4 of 2009 to 15% in Q1 of 2010. “By the second quarter, one-third of reporting airlines were generating shareholder value,” the report says.
As per Iata data, only 15% reported operating losses in the June quarter, compared to 60% in the March quarter. “There is always a large seasonal improvement in the second quarter but the trend is up,” says the report.
The survey, however, reveals that the outlook for yields, despite being positive, was not as optimistic as it was early this year even though were airlines expecting higher volumes over the next 12 months.
This, Iata said, could be because of the potential for capacity to
enter the market during the next 12 months as business sentiments improves.
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