Airline financial outlook strengthens: IATA
The International Air Transport Association (IATA) recently announced an upward revision to its industry financial outlook.
For 2013 airlines are expected to return a global net profit of $12.9 billion. This is expected to improve to a net profit of $19.7 billion in 2014. Both are improvements on the September forecast which anticipated an industry net profit of $11.7 billion in 2013 increasing to $16.4 billion in 2014.
The upward revision reflects lower jet fuel prices over the forecast period as well as improvements to the industry’s structure and efficiency already visible in 2013 quarterly results.
IATA expects 2014 to be a second consecutive year of strengthening profitability (beginning from 2012 when airlines posted a net profit of $7.4 billion). Industry net profit margins, however, remain weak at 1.1% of revenues in 2012, 1.8% in 2013 and 2.6% in 2014. Within this aggregate forecast for the entire industry, performance of individual airlines and regions will vary considerably.
“Overall, the industry’s fortunes are moving in the right direction. Jet fuel prices remain high, but below their 2012 peak. Passenger demand is expanding in the 5-6% range — in line with the historical trend. Efficiencies gained through mergers and joint ventures are delivering value to both passengers and shareholders. And product innovations are growing ancillary revenues,” said IATA director general Tony Tyler.
“We must temper our optimism with an appropriate dose of caution. It’s a tough environment in which to run an airline. Competition is intense and yields are deteriorating. Cargo volumes haven’t grown since 2010 and cargo revenues are back at 2007 levels. The passenger business is expanding more robustly. Some airlines will out-perform our estimates and others will under-perform. But, on average, airlines will only make a net profit of about $5.94 per passenger in 2014,” he added.
