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IATA financial forecast

IATA’s financial forecast (www.iata.org/economics) released in June 2008 said the outlook for airline profitability has deteriorated substantially since the March forecast, and all due to the extreme uncertainty over the future of oil prices. For this reason, two forecasts were conducted, one based on a consensus of over 60 oil experts which predicts some decline in oil prices, and the other based on the oil futures market which sees pricing remaining near current highs.

Soaring fuel prices and the deterioration of the economic situation not just in the US but also in parts of Europe and Asia, turned business travel growth negative in March. As a result capacity will be taken out in some markets, particularly in the US and further efficiencies are to be expected. Recovery of profitability is not expected to be achieved until 2010 or later. According to the IATA forecast based on the experts’ consensus, even if oil prices fall under US$100 per barrel, the US economic recovery is expected to be very limited in 2009.

Meanwhile, the Hong Kong International Airport (HKIA) recorded steady growth in May 2008, with passenger volume increasing 8.3% over May 2007, to 4.1 million. Cargo throughput rose 6.7%, to 314,000 tonnes, and aircraft movements grew 4.3%, to 25,810.

“May’s performance was encouraging, but high fuel prices are a major continuing concern for the aviation industry. There are already signs of some airlines slowing down their expansion, or reducing their operation to contain costs,” said Stanley Hui Hon-chung, CEO of Airport Authority Hong Kong. “The commencement of direct, weekend charter flights across the Taiwan Strait from July will have an impact on the number of passengers transferring through Hong Kong between Taiwan and the Chinese Mainland in the short to medium term.”