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Friday, March 22, 2013

IATA Forecasts Improved 2013 Profitability for Airlines

Woodrow Bellamy III

Airlines are expected to post a net income of $10.6 billion in 2013, an improvement on last year’s earnings by nearly 40 percent, according to an improved airline industry forecast released by the International Air Transport Association (IATA) on Wednesday.

IATA said the new outlook expects airlines to produce a combined net post-tax profit margin of 1.6 percent, up from its previous 2013 forecast of 1.3 percent.

“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. We are seeing a $12 billion improvement in revenue, and a $9-10 billion increase in costs—most of which is related to fuel,” said Tony Tyler, director general and CEO of IATA.

Asia-Pacific region airlines are expected to lead the international market with $4.2 billion in profit, followed by North American airlines at $3.6 billion, according to the forecast.

The forecast also predicts improvements for carriers in Europe and Africa, who were expected to break even in the previous 2013 outlook. IATA expects European carriers to post net profits of $800 million and African carriers to net $100 million in profit.

Cargo demand is expected to grow by 2.7 percent, an improvement from IATA’s previous forecast of a 1.5 percent decline in cargo traffic for 2013. The new forecast also predicts passenger demand to grow globally by 5.4 percent, versus the previously forecast 4.5 percent.

Tyler said the improved outlook is subject to “curve balls” from governments in Europe and the United States.

“The U.S. budget sequestration will see cuts to air traffic management, security and border control that may cost more economically than the benefit of the cost savings achieved. And the U.K.’s Air Passenger Duty — the highest aviation tax in the world — will increase again on 1 April. Airlines don’t want special treatment, but they do need a joined-up policy framework that enables them to meet the growing needs for connectivity sustainably,” said Tyler. More

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