Airline profits set to surge in 2014
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The world’s airlines can expect an upturn in fortunes in 2014, after IATA forecast that next year would see the industry generate its highest profits since 2010.
According to IATA’s latest industry outlook, airlines are expected to generate total net profits of US$16.4 billion in 2014 – up from a revised forecast of US$11.7bn this year and the highest since the US$19.2bn achieved in 2010. And while this year’s forecast has actually been downgraded slightly from the previous projection of US$12.7bn, it still marks a significant improvement from the US$7.4bn profits generated by the industry in 2012.
The 2014 profit forecast is based on airlines generating combined revenues of US$743bn, following a predicted rise in business and consumer confidence. Oil prices are also expected to fall to US$105 per barrel next year, from US$109 in 2013.
Asia Pacific’s airlines are expected to see profits of US$3.1bn in 2013, rising to US$3.6bn in 2014, driven by the Chinese domestic market and restructuring in Japan. But the biggest gains are expected to be seen in North America, where airlines are likely to generate net profits of US$4.9bn this year and US$6.3bn in 2014, as the economy improves and airlines reap the benefits of tight capacity management.
In Europe, IATA forecast that airlines will achieve net profits of US$1.7bn in 2013 and US$3.1bn in 2014, while Middle Eastern carriers are expected to shrug off the Syrian crisis with profits of US$1.6bn and US$2.1bn in 2014 – their highest ever.
But despite the upturn in fortunes, IATA said that the balance between profit and loss “remains delicate”.
“Airlines are demonstrating that they can be profitable in adverse business conditions,” said IATA’s director-general & CEO, Tony Tyler. “A US$16.4bn profit for transporting some 3.3bn passengers means that airlines will retain an average of about US$5 per passenger. That very simple calculation demonstrates that even a small change in the operating environment — a new tax or other cost increase for example — could change the outlook quite significantly,” he added.
Global economic growth at 2.0% is expected to exceed 2.0% next year. Previously 2.0% GDP growth was considered the point below which airlines posted losses.
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