Canada’s airline industry is expected to stage a modest recovery in 2010, but remains well below pre-recession levels, the Conference Board of Canada said yesterday.

In its latest outlook for the industry, the board said the air-transportation sector will bounce back from a loss of $206 million in 2009 – its first since 2004 – and post profits of $197 million in 2010.

The industry was hurt by the recession’s massive job losses, a severe downturn in business activity, high fuel prices, and weak foreign and domestic demand. but the board expects it to benefit in 2010 and beyond from an eventual rebound in business confidence and spending, as well as increased consumer spending as labour markets recover.

“While many challenges remain … the Vancouver Olympics have provided a welcome, albeit temporary, boost to sales,” the board said in its report.

“Overall, the industry is expected to see a better year this year, but the recovery is expected to be slow.”

Higher, more volatile, energy prices and higher consumer savings rates will be the headwinds the industry faces.

The high Canadian dollar is expected to be a mixed blessing, making travel abroad cheaper for Canadians, but making destinations here more expensive for visitors from the U.S.

Although earnings and revenues will climb steadily over the next four years, it will be 2014 before profits surpass the recent high of $505 million in 2007, the board said.

In a separate report, the board said the accommodation industry faces a similar outlook, one of gradual recovery that will struggle to surpass pre-recession levels.

Earnings in the accommodation sector will remain relatively flat, the board said, ringing in at $465 million in 2010 from $470 million in 2009, the report said.

More Canadians are taking “staycations” and fewer travellers are coming from overseas and the U.S. Job losses in the U.S. contributed largely to that, as did the rising value of the Canadian dollar, the board said. “As a result, occupancy rates are now well below year-ago levels in every major region of the country.”

The market will be hurt by a strong loonie and the appeal it provides for Canadians to take trips abroad, and the disincentive it provides to foreign visitors.

Nevertheless, the board expects the Vancouver Olympics gave the industry a good boost and that leisure travel will rebound as the economic recovery takes hold.

Slow recovery seen for airlines