Positive airline sentiments clouded by Greece, China

ONGOING developments in Greece and fluctuations in the Chinese stock market may derail the airline industry’s performance for 2015, with IATA director-general and CEO, Tony Tyler, saying China may be the bigger issue for this region.

IATA, which updates the airline industry’s outlook twice a year, in June and December, had last month revised upwards its projection for the industry to a net profit of US$29.3 billion on revenues of US$727 billion, the first time in history that the industry would earn its cost of capital. But now it has identified the problems in Greece and China as “major risks” which could impact the industry’s performance regionally and beyond.

Asked by TTG Asia e-Daily what the sentiments on passenger demand are among its members in light of these issues – as well as MERS – Tyler, in Singapore for a media roundtable, said: “Generally speaking, (airline) people feel sanguine about passenger demand; cargo demand less so, as that’s shown sluggish growth in more recent months.

“Greece is a big worry for everybody, not just airlines. If the outcome of the Greek problem is a significant slowing down of economic activity in the Eurozone, that’s going to have a knock-on effect to all industries.

“MERS is a serious issue for Korean carriers and those operating to Korea. It does seem to have turned the corner, but we obviously have to keep vigilant.

“Perhaps the bigger thing in this region on demand is China with the problem with the Chinese economy and stock market issues and who knows where that will take us. That’s more of a concern. Having said that, serious problems in China have also been forecast over the years, yet the Chinese government has a skilful approach to managing the economy.”

The better forecast of US$29.3 billion net profit, meanwhile, was derived from better efficiencies, not so much lower fuel prices, Tyler said. These included airlines using more efficient aircraft, improved aircraft utilisation and, particularly in North America, revenues from ancillaries.

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