Airline profits expected to begin slow climb in 2010
Sept. 13, 2010, Ottawa - After losing money in 2009 for first time in five years, Canada’s airlines are expected to return to modest profitability this year, according to The Conference Board of Canada’s Canadian Industrial Outlook: Canada’s Air Transportation Industry-Summer 2010.
Passenger counts are up and airlines are enjoying a much-improved 2010, but the industry is still several years away from approaching its pre-recession profit levels,” said Maxim Armstrong, Economist. “Air travelers are willing to fly, but only if the price is right, so airlines have limited ability to increase fares even when costs such as fuel are on the rise.”
This year, prices are expected to remain virtually flat, increasing just 0.1 per cent. Airlines will have to wait until next year—when the economy is expected to be on more solid ground, and consumers and businesses are more confident in their financial situation—to boost their prices.
Pre-tax profits are expected to reach $192 million this year, a turnaround from a loss of $381 million in 2009. Even if passenger loads continue to strengthen, the industry is not expected to surpass its recent peak in profit levels – $530 million in 2007 – during the forecast period (through 2014).
With fuel accounting for more than one-quarter of operating costs, oil prices will continue to place pressure on airline profitability in the coming years. As well, the strength in the Canadian dollar makes it more difficult to attract international – particularly American – travelers. Finally, the uncertain economic recovery in the United States could limit passenger demand even more than forecast, posing a further risk to the Canadian industry.