The International Air Transport Association (IATA) has revised its 2013 global industry outlook downwards to US$11.7 billion on revenues of US$708 billion, although this performance is
considerably better than the US$7.4 billion net profit last year.
The upward trend should continue into 2014 when airlines are expected to return a net profit of US$16.4 billion and this would make next year the second strongest year this century after the record breaking US$19.2 billion profit recorded in 2010.
"Airline performance continued to improve in the second quarter although at a slower pace than was expected with the previous projection (in June) of US$12.7 billion. This reflects the impact on demand of the oil price spike associated with the Syrian crisis and disappointing growth in several key
"Overall, the story is largely positive. Profitability continues on an improving trajectory but we have run into a few speed bumps, including cargo growth has not materialised, emerging markets have slowed and the oil price spike has had a dampening effect.
"We do see a more optimistic end to the year and 2014 is shaping up to see profit more than double compared to 2012," director general and chief executive officer Tony Tyler said in a statement today.
This year, airlines are expected to post the same operating margin (3.2 per cent) as in 2006, even with a 54 per cent hike in jet fuel prices.
He said the industry has been able to absorb the enormous cost increase as a result of changes in the industry structure (through consolidation and joint ventures), increased ancillary sales and reduced new entry due to tight financial markets.
Moreover, the industry was expected to have a relatively good year even with global economic growth at two per cent, he said.
Airlines are expected to see a significant boost in 2014 with profits of US$16.4 billion on revenues totalling US$743 billion. Rising business and consumer confidence levels should indicate an uptick in the global business cycle which has a direct impact on airline profitability, while lower oil price as well as benefits of improving market structures on several regions are
expected to continue to drive performance and consumer benefits.
Meanwhile, IATA estimates oil prices to average at US$109 per barrel (Brent) for the year, which is US$1.0 higher than expected previously, while jet fuel prices have softened slightly.
Thus, it expects jet fuel prices to average at US$126.4 per barrel (US$1.0 less than expected) with net impact on the overall fuel bill (which is expected to total US$213 billion and account for 31 per cent of total costs) to be neutral.
IATA anticipates passenger growth this year to remain robust at five per cent -- to grow to 3.12 billion, the first time that they have topped the three billion mark while cargo markets remain in the doldrums with 0.9 per cent growth expected.-- Bernama