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Iata sees $4bn profit; ME airlines to earn $700m

Geneva, October 2, 2012

The International Air Transport Association (Iata) has lifted its global aviation outlook for 2012 stating that the airlines industry will earn a $4.1 billion profit for the year compared to $3 billion forecast in June.

Middle East carriers are expected to post $700 million profit, up $300 million from the previous forecast, Iata said.

Announcing the upward revision, Tony Tyler, Iata’s director general and CEO said the airline profits which plunged from the $8.4 billion that the industry earned in 2011 will be cushioned by improved airline performance.

The revision will still see the industry’s net profit margins fall from the 1.4 per cent realized in 2011 to 0.6 per cent (up from the previously forecast 0.5 per cent). In a first look at 2013, the association sees global profits rising modestly to $7.5 billion, though this is a net margin of just 1.1 per cent.

"The European sovereign debt crisis lingers on. China continues to moderate its growth. And the impact of recent quantitative easing in Japan and the US will take time to yield growth," remarked tyler..

"While some of these risks have diminished slightly over recent months, they continue to take their toll on business confidence. The outlook improvement is due to airlines performing better in a difficult environment," he added.
 
According to him, improved airline performance was evident in second quarter results, which showed operating profits close to those of the previous year, following a tough first quarter.

"Although global cargo markets have been basically flat since the end of last year, the region’s carriers have captured the majority of what growth there has been," he remarked.

Over the first eight months of the year, the Middle East region’s cargo capacity has expanded by 13 per cent while demand has increased by 14 per cent, said Tyler.

The region has also shown the strongest passenger traffic growth with a 17.1 per cent increase in demand outstripping a 13.2 per cent increase in capacity, he added.

The region’s carriers continue to expand their long-haul market share with connections through their expanding hubs. The share of international passenger traffic held by its carriers has expanded from 4.8 per cent in 2002 to 11.5 per cent in August 2012.

"The evidence is showing that consolidation is producing positive results. Asset utilization in the passenger segment is high across many markets. In past cycles passenger load factors and aircraft utilization would have fallen by this stage, in the face of slowing demand and increasing aircraft deliveries," said the IATA chief.

In the current cycle airlines have kept both load factors and aircraft utilization high. This has allowed yields to improve and spread fixed costs more widely. However, asset utilization has fallen in the weaker cargo market, adversely affecting Asia-Pacific airlines in particular, where this business makes up a larger share of total revenues.

“Even six years ago, generating a profit with oil at $110/barrel (Brent) would have been unthinkable. The industry has re-shaped itself to cope by investing in new fleets, adopting more efficient processes, carefully managing capacity and consolidating. But despite these efforts, the industry’s profitability still balances on a knife-edge, with profit margins that do not cover the cost of capital,” said Tyler.

The IATA chief pointed out that Aviation had an important role to play as the global economy struggles.

"Growth is the only way forward and a healthy aviation industry can stimulate that - linking stagnating developed economies to robust emerging markets. Aviation connectivity spurs growth at both ends. That is why it is important for governments to ensure aviation’s ability to be a catalyst for growth is not constrained."

"Unfortunately, in many parts of the world, it is an uphill struggle with high taxes, onerous regulation and insufficient infrastructure. All of this stunts industry growth to the detriment of the world economy," he added.-TradeArabia News Service




Tags: Airline | Middle East | travel | aviation | International Air Transport Association |

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