Global airlines to post $10.6-bn profit in 2013: IATA

Global airline industry is likely to make a net profit of $10.6 billion, 30 per cent up from the December forecast of $8.4 billion, on the back of improved passenger demand and revival in cargo markets, the International Air Travel Association (IATA) said yesterday.

The projected profit is 58 per cent more than the cumulative net profit of $6.7 billion reported by the airline industry in 2012.

IATA's director general and CEO Tony Tyler said, ''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.''

Revenues during the year are expected to reach $671 billion, up by $12 billion compared with the December forecast. Passenger demand is expected to grow 5.4 per cent while cargo demand is likely to increase 2.7 per cent reversing the declining trend during the past two years.

''The economic optimism is also pushing fuel prices higher. We are seeing a $12-billion improvement in revenue, and a $9-10 billion increase in costs - most of which is related to fuel,'' Tyler said.

IATA now expects the airline industry to improve its post-tax profit margin to 1.6 per cent from the earlier estimated 1.3 per cent.

An upward revision of the global gross domestic product to 2.4 per cent from 2.1 per cent during the year is expected to have a positive impact on the airline industry. IATA believes that the industry had bottomed out in the third quarter of 2012, after which there have been signs of improvement in business confidence.

Nevertheless, considerable risks remain in the eurozone, including the latest potential bailout of Cyprus, that could derail the recovery, IATA said.

''European Central Bank commitments with respect to the eurozone crisis and the slow economic recovery in the US should be pointing us towards a durable, if weak, upswing, Tyler said.

Aircraft fuel costs are showing an increasing trend which are expected to average at $130 per barrel, a 5-per cent increase over last years $124 a barrel.

The IATA said that the airline efficiency has improved compared with few years ago. The operating margins in 2006 and the projected margin for 2013 are comparable at 3.2 and 3.3 per cent respectively.

This is despite the fact that the 2006 GDP was 4 per cent and crude price was $65 a barrel against 2.4 per cent growth expected this year and the projected crude price of over $109 a barrel.

Region-wise, Asian-Pacific liners are forecast to make the maximum profit of $4.2 billion, followed by North American airlines with $3.6 billion.

European carriers are expected to make a profit of $800 million, although the domestic market is weak due the eurozone crisis.

Middle Eastern airlines are likely to post a profit of $1.4 billion, while Latin American carriers are expected to return a profit of $600 million, and African airlines a profit of $100 million.

''The improved outlook despite the difficult operating environment demonstrates the efficiencies and improvements achieved as the industry has restructured itself over the last decade,'' Tyler said.

''With a 1.6 per cent net profit margin, there is very little buffer between profit and loss,'' he further added.