Business Round-Up
Asia-Pacific boosts IATA profit forecast
April 1st 2013
The good news for airlines from the International Air Transport Association’s (IATA) latest profit forecasts, released last month, is that the world’s carriers are going to make more money, nearly half of it thanks to higher income from Asia-Pacific carriers. Read More »
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| IATA director general, Tony Tyler: airline profits taking a small step in the right direction |
IATA raised its profit forecast for the year to $10.6 billion, up from an earlier forecast of $8.4 billion.
Asia-Pacific operators are forecast to deliver the largest contribution to industry performance with a $4.2 billion net profit expected for 2013, up from $3.2 billion previously projected. The association added Asian carriers, which carry about 40% of the air cargo market, will be the biggest beneficiaries of an expected upturn in cargo demand.
“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 IATA director general, Tony Tyler.
He warned that “considerable risks remain which could derail recovery” and added that with a 1.6% net profit margin “there is very little buffer between profit and loss”. Tyler made particular mention of Europe’s ongoing economic woes, and said the eurozone crisis was not over and could take a turn for the worse.
IATA’s forecast said cargo demand was expected to grow 2.7%, reversing the declining trend of the last two years. While cargo yields were predicted to be flat, it would be an improvement on the 1.5% decline previously projected.
Passenger demand is forecast to grow 5.4%, up from the 4.5% previously predicted. Yields are tipped to grow 0.4% rather than the 0.2% decline previously projected.
Fuel costs are continuing to increase. Jet fuel is expected to average $130 a barrel for the year (up from the $124.3/barrel predicted in December). This means a fuel bill of $216 billion for the year, $6 billion higher than December’s expectations. Fuel will account for 33% of airline costs.
IATA’s forecast said airline cash flows were showing better than expected performance, but it varied by region and airline size. Large Asian carriers had shown the most improvement.
In a comparison with 2006, the report said GDP seven years ago was 4%, well above the 2.4% expected this year. The cost of a barrel of Brent crude in 2006 was $65.1, well below the $109.5 expected this year.
“The improvements in industry profitability are encouraging. But they must be kept in perspective. Chronic, anemic 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 [that]. Neither the challenges, nor the benefits of doing so, should be underestimated,” said Tyler.
