IATA Revises Upwards 2012 Global Airlines Net Profit Forecast To US$6.7 Billion.

Date: 13 December 2012

IATA Revises Upwards 2012 Global Airlines Net Profit Forecast To US$6.7 Billion. 

GENEVA (Bernama) - The International Air Transport Association (IATA) has revised upwards its industry financial outlook this year with airlines expected to return a profit of US$6.7 billion, up from the US$4.1 billion forecast in October, bolstered by strong airline performance in the second and third quarters.

These figures are expected to improve to US$8.4 billion in 2013, marginally better that the US$7.5 billion forecast in October, driven by slightly higher economic growth and lower fuel prices. Industry net post-tax margin, however, is expected to remain weak at 1.0 per cent in 2012 and 1.3 per cent in 2013.

"It is good that we are moving in the right direction, but the year ahead is shaping up to be another tough one for the aviation industry," said IATA's Director General and Chief Executive Officer, Tony Tyler, at the IATA Global Media Day 2012 here Thursday. However, he emphasized that despite the improved prospects, overall, the industry remained weak, adding that the US$6.7 billion expected net profit was a fall from the US$8.8 billion that the industry made in 2011 and the 1.0 per cent net profit margin was well below the 7-8 per cent needed to recover the industry's cost of capital.

Reviewing the improved prospects for this year, he said despite high fuel prices and a slowing world economy, airline profits and cash flows held up at levels similar to 2006 when oil price was about US$45 per barrel lower and the world economic growth was 4.0 per cent. "With GDP growth close to the stall-speed of two per cent and oil at US$109.5/barrel, we expected much weaker performance but airlines have adjusted to this difficult environment through improving efficiency and restructuring. That is protecting cash flows against weak economic growth and high fuel prices."

The improved performance was most evident in large airlines for which earnings before interest, taxes, depreciation and amortization (EBITDA) averaged between 10 per cent and 15 per cent in the third quarter of the year. "It's a diverging picture. Economies of scale are helping larger airlines to cope much better with the difficult environment than small and medium-sized carriers which continue to struggle," said Tyler.

Changes to industry structure were also contributing to the improved airline financial performance seen since the second quarter where in the difficult business environment of the past year, airlines have been seeking to lower costs and improve yields through restructuring.

On regional performance, North American carriers are expected to end 2012 with a collective net profit of US$2.4 billion (from US$1.7 billion profit in 2011) and European carriers are expected to breakeven (US$400 million worse than 2011 but US$1.2 billion better than the October estimate largely attributable to the results in the second and third quarter).

Asia-Pacific carriers are expected to post a net profit of US$3.0 billion (+US$700 million on the October forecast), Middle East airlines (US$800 million) while the outlook for Latin American airlines is unchanged at US$400 million and African airlines are expected to end at breakeven, unchanged, from the previous forecast and from 2011.

Meanwhile IATA Chief Economist, Brian Pearce said after two years of decline, a small rise in air freight volumes was expected in 2013 while passenger numbers were forecast to continue to expand next year moving above the three billion mark to 3.1 billion. "Asia Pacific airlines will retain the strongest margins in 2013, North American airlines are the most improving region, and Europe, hampered by the Eurozone crisis, can manage no better than breakeven," he said.

More than 100 journalists and media personnel from across the globe are attending IATA's Global Media Day event to hear perspectives from panelists including Tyler who would touch on various elements in the industry including outlook, security, environment and safety.

From Azlina Aziz 

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