Brighter skies forecast for world’s airlines
The world’s airlines can expect to generate higher profits in 2013, as a rise in passenger demand rise outpaces increased fuel costs, the International Air Transport Association (IATA) has said.
Releasing its latest profit forecast for the aviation industry today (20 March 2013), IATA projected that airlines around the world will generate a combined net profit of US$10.6 billion this year, up from previous forecast of US$8.4bn.
Airlines based in the Asian Pacific region are expected to deliver the largest profits, at US$4.2bn (up from US$3.2bn previously projected), while North American airlines are expected to report a US$3.6bn profit (compared to the earlier forecast of US$3.4bn). Middle Eastern carriers are expected to generate US$1.4bn (up from US$1.1bn) and European carriers are now forecast to report an US$800 million profit, rather than just breaking even.
“Industry profits are taking a small step in the right direction. Against a backdrop of improved optimism for global economic prospects passenger demand has been strong and cargo markets are starting to grow again. The economic optimism is also pushing fuel prices higher,” said Tony Tyler, IATA’s Director General & CEO.
Fuel costs, which have caused so many problems for airlines in recent years, are still increasing. Jet fuel is now expected to average US$130 per barrel this year (up from the US$124 projected in December), adding an extra US$9-10bn to airlines’ operating expenses. Overall, fuel will account for 33% of airline costs, unchanged from 2012.
Fortunately, this is expected to be offset by a US$12bn increase in revenues, with passenger demand now forecast to grow 5.4% (up from the 4.5% previously expected).
“The improvements in industry profitability are encouraging. But they must be kept in perspective. We are projecting that airlines will make a net profit of US$10.6 billion on US$671 billion in industry revenues. By comparison last year Nestle, a single company, made over US$11.5 billion in profit on revenues of about US$100 billion. Chronic anaemic profitability is characteristic across most of the aviation value chain when compared to other sectors. It will require more than improving economic conditions to fix. Neither the challenges nor the benefits of doing so should be underestimated,” said Tyler.