Global airline industry may record modest profits next year
New Delhi: Crisis-hit global airline industry may stem its growing losses and even record modest profits next year, with air carriers in Asia-Pacific estimated to post profits this year, IATA said on Monday.
A major reason for this upward revision by the International Air Transport Association (IATA) was better performance by the airlines through better matching of capacity to demand and various cost-cutting measures, IATA estimated in its latest financial forecast titled 'Downward Pressure Starting to Ease'.
Noting that the European sovereign debt crisis continued and China was experiencing moderate growth, IATA Director General and CEO Tony Tyler said, "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."
The global airlines' body estimated that Asia-Pacific airlines were set to post a USD 2.3 billion profit for 2012, which was USD 0.3 billion better than previously forecast.
But these carriers, which catered to 40 percent of the global cargo market, were "the most exposed to weak cargo demand".
While European airlines were expected to post the largest loss of any region at USD 1.2 billion, worse than previously forecast, those from North America were estimated to post profits of USD 1.9 billion in 2012, up USD 0.5 billion from the previous forecast, IATA predicted.
In its first look at 2013, IATA estimated a rise in industry profits to USD 7.5 billion, as forecasts pointed to "slightly stronger economic growth and lower oil prices".
The IATA said the Asia-Pacific carriers would "see a profitability boost from improved cargo volumes if not yields."
But Europe would be the only region where airlines would be in the red for 2013, "although losses will be trimmed as a result of slower capacity growth and improved global trading conditions on long-haul markets," it said.
Maintaining that oil prices have been volatile over the last three months, the IATA said jet fuel prices have risen by USD 1.20 a barrel in the June forecast to USD 127.70.
"This will add USD one billion to the industry fuel bill, bringing an anticipated USD 208 billion cost for the year," the airlines' body said.
However, the passenger market "performed well in the face of weak business confidence in Western economies", it said, estimating that demand was expected to grow by 5.3 percent over the course of 2012.
Over the first eight months of 2012, passenger demand increased by 1.4 percentage points ahead of capacity, it said, adding that these "tighter supply and demand conditions led to strong load factors which averaged at 79.3 percent for January to August 2012. This set the stage for a stronger yield growth which is expected to be 2.5 percent".
On the cargo side of the business, demand fell into negative territory from the 0.3 percent expansion anticipated in June.
"Cargo is expected to finish the year with a 0.4 percent contraction on 2011 levels. For the first eight months of the year, cargo capacity grew by 3.0 percentage points ahead of demand," the IATA study said.