Last week IATA provided an interesting perspective on airlines coping with more uncertainty than usual. In the chart you see IATA suggests three scenarios that could play out. Next to each of these is their rating of the likelihood of that scenario playing out. IATA thinks the most likely scenario would be the “muddle through” option.
This appears to be a good guess. Economic uncertainty impacts commercial activity – the more risky the future looks the less investment occurs. If the economic picture is gloomy salesmen have a tougher time and tend to travel less, impacting airlines – which could delay airplane deliveries. Uncertainty at such a deep level is a bad outcome for airlines and consequently the entire aerospace food chain.
Almost as if to bolster just how weak things are looking, IATA also offered this chart.
Given the ECB move, look at the IATA scenarios again and note that IATA only sees a 10% chance things are worked out and a 90% chance things won’t work out. If muddle through is the best option, this is truly scary. For the EU’s airlines this is an uncomfortable situation.
Any reason for that huge spike in premium growth in the first half of 2011? Seems quite an anomaly. Besides, it doesn’t tell us anything about premium yields.
You’re right about the “scenarios” chart, very scary. However, the airline business isn’t where I’d put my money even in the best of times.