Air industry gains optimism but with warning signs

* IATA opens annual meeting with raised forecasts

* Ash cloud and labour unrest predominate
* Airbus (EADS.PA: ) to announce deals at Berlin air show

By Ben Berkowitz and Tim Hepher

BERLIN, June 7 (BestGrowthStock) – Global airlines looked on the
verge of banishing two years of economic misery with an abrupt
turnaround in industry forecasts on Monday.

New figures to be released at a major gathering of world
airlines in Berlin could put the industry back on the brink of
global profitability — something unthinkable even two months
ago during Europe’s volcanic ash crisis.

The upturn is expected to be the highlight of the opening of
an annual meeting of the International Air Transport Association
whose chief executive Giovanni Bisignani is expected to
highlight a rebound in Asia, Latin America and the Middle East.

“The environment is clearly improving in long-haul. Europe
is showing positive trends as well but there is still a lot of
price competition,” Lufthansa (LHAG.DE: ) deputy CEO Christoph
Franz told Reuters on the sidelines of the meeting.

Europe, mired in bad debts and bad feelings from the effects
of April’s ash crisis, is expected to lag the turnaround —
particularly if a summer of strikes paralyses air travel.

IATA most recently predicted worldwide industry losses of
$2.8 billion in 2010, as airlines cut prices to fill seats.

But airlines have been remarkably disciplined in holding
down capacity and are beginning to bear the fruits, airline
executives and lobbyists said.

“The industry is meeting in an atmosphere of some cautious
optimism. The situation remains both fragile and difficult,
particularly in Europe. But our overall outlook will be more
positive,” said IATA spokesman Anthony Concil.
That optimism could spread to planemakers represented at the
Berlin Air Show to be held back to back with the IATA summit. A
regional usually dwarfed by the larger Paris and Farnborough air
shows, the June 8-13 event could come into its own this year.

John Leahy, sales chief at Airbus, a unit of the aerospace
and defence group EADS, told Reuters he would be unveiling deals
at the show, but declined to elaborate. There has been
speculation that industry heavyweight Emirates [EMIRA.UL], the
top Airbus customer, could be bulking up its fleet soon.

‘SPEED DATING’

Airplane orders slumped last year on sharp falls in traffic.

But there were signs of an increasing buzz in Berlin meeting
rooms on Sunday night as airline bosses milled around with
engine suppliers, planemakers and back-office cost-cutters in
what one aerospace official likened to speed dating.

IATA said last Thursday that airline finances rebounded
strongly in the first quarter, a sign that the industry may be
shaking off the worst of the financial crisis. [ID:nLDE6520U6]

But, as so often with the airline industry, the good news is
tempered with more bad news.

In total some 700 delegates representing more than 100
airlines are at the meeting, which is likely to also focus
heavily on the industry’s response to Iceland’s volcano.

Strikes in Europe and unrest in Asia could add to the woes.

British Airways (BAY.L: ) is in the midst of the latest of a
series of cabin crew walkouts, and labour unrest looms at
Lufthansa.

BA chief executive Willie Walsh, in Berlin despite being
taunted by union leaders for not staying to negotiate an end to
the bitter dispute over conditions, declined interview requests.

German ground crews launched a warning strike at Berlin’s
airports last month, leaving the industry on edge.

In Asia, the issue is less labour and more politics.

Thai Airways International (THAI.BK: ) president Piyasvasti
Amranand told Reuters falling demand after recent violent
protests in Bangkok would cap the airline’s second-quarter
earnings after a strong start to the year.

Stock Analysis

(Additional reporting by Maria Sheahan, Angelika Gruber and
Adrian Murdoch; Editing by Kevin Liffey)

Air industry gains optimism but with warning signs