Airlines set for higher profits in 2014
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The world’s airlines are expected to record a second consecutive year of improved profits in 2014, according to IATA.
Releasing its latest industry profit forecast, the association said it expects airlines around the world to generate combined profits of US$18.7 billion in 2014. And while this marks a slight downward revision compared to its previous forecast of US$19.7bn, it still marks a considerabe increase from the US$12.9bn profits achieved in 2013.
The downward revision was attributed to an expected rise in the price of jet fuel. Oil prices are now predicted to average US$108 per barrel in 2014 – US$3.50 higher than previous projections. If realied, this would add US$3bn to on the industry’s fuel bill.
“In general, the outlook is positive. The cyclical economic upturn is supporting a strong demand environment. And that is compensating for the challenges of higher fuel costs related to geo-political instability. Overall industry returns, however, remain at an unsatisfactory level with a net profit margin of just 2.5%,” said Tony Tyler, IATA’s director-general & CEO.
North American airlines are expected to post profits of US$8.6bn in 2014 – the biggest contribution to global industry profits. IATA said this would be driven by “efficiencies gained through consolidation and the contribution of ancillary revenues”.
Asia Pacific carriers will have the second highest profits, at US$3.7bn, followed by airlines in Europe (US$3.1bn), the Middle East (US$2.2bn), Latin America (US$1bn) and Africa (US$100 million).
IATA warned however, that these forecasts could change considerably, depending on global events and government policies. The situation in the Ukraine for example, has already led to a rise in oil prices, while in Venezuela IATA accused the government of blocking US$3.7bn of airline money.
To gauge the real level of profitability among airlines, it is worth noting that carriers made an average of US$4.13 profit per passenger in 2013 – up from just US$2.05 in 2012.
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