Airlines raised $30bn cash by debt and equity last year: Iata

International passenger capacity was down seven per cent in November-December 2009. (AFP)

World airlines' equity prices rose 25 per cent in 2009, underperforming the market but allowing $30 billion (Dh110bn) cash raising, according to the financial monitor report for November-December 2009, released by International Air Transport Association (Iata).

The aviation trade body said in the report that signs of financial improvement started in Q3 last year but airlines are still likely to lose $11bn during 2009 as a whole.

Iata revealed in December that Middle Eastern airlines would see their losses shrink to $300 million in 2010. In 2009, the region's carriers lost approximately $500m. The global aviation industry has been predicted to accrue wider losses of $5.6bn this year due to yield weakness.

The Middle Eastern airlines were the only ones to record positive growth throughout 2009, having ended November 2009 with a 16.5 per cent increase in passenger demand.

International passenger capacity, meanwhile, was cut seven per cent and freight by 10 per cent in the November-December 2009 period, allowing a recovery in load factors.

Iata further revealed that international fares, on an average in 2009, were about 10-15 per cent down on the 2008 average. However, since the second quarter, average passenger fares for both premium and economy seats have been rising.

"This is likely to be a composition effect with higher load factors allowing airlines to make fewer of the cheaper fare categories available in both seat classes," Iata said.

"The second half [2009] improvement will not prevent the year producing the largest fall in airline revenues seen by the industry. But it does suggest revenues will improve at a reasonable pace during the early part of 2010 at least." The report added that Asia-Pacific airlines – where economic recovery has been most visible – were the strongest performers, up 35 per cent during the year. US airlines ended the year where they began, while European airlines stocks were up 14 per cent.

"However, airlines underperformed global and regional equity markets as investors judged that a return to airline profitability will be slow. Airlines used financial market strength to raise considerable cash reserves. During the year, a total of $25bn of cash was raise from issuing new debt and $5bn from new equity," according to the Iata report.

Furthermore, Q3 financial results for almost 100 major airlines showed a small profit of $0.9bn in this seasonally strong quarter, and an improvement over the same period in 2008. However, Q4 is expected to be "seasonally weak" and so an $11bn 2009 full-year net loss is still expected.

Meanwhile, despite the signs of returning travel and freight demand, airlines have continued to be cautious about capacity. During November international passenger capacity was only up a fraction, month-to-month, but falls last year caused the year-on-year decline to moderate. Since August freight capacity has started to return.

 

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