THE GLOBAL aviation industry performed better than expected in the first half of 2011, despite turbulent and uncertain economic conditions in Europe and the US, escalating oil prices, and political turmoil in the Middle East.
IATA’s 2011 industry profit expectations were upgraded to US$6.9 billion from the US$4 billion projected in June, as passenger demand remained robust in the interim. Weak profit margins are predicted across all regions in 2011, with the exception of Africa, which is expected to just break even.
Speaking today at a press conference held at IATA’s Asia-Pacific headquarters in Singapore, Tony Tyler, the association’s recently installed director general and CEO (TTG Asia Hot Moves, June 7), said: “Airlines are going to make a little more money in 2011 than we thought. Given the strong headwinds of high oil prices and economic uncertainty, remaining in the black is a great achievement.”
In fact, IATA data shows that passenger traffic grew by 6.4 per cent over the first seven months of the year. Latin America (9.7 per cent), followed by the Middle East (8.3 per cent) and Europe (7.2 per cent) are projected to see the biggest increases in passenger traffic in 2011.
This is expected to tail off by 2012, except in the case of Asia-Pacific and Africa, where higher than average capacity growth, alongside an extension of networks, are predicted to keep the airline markets in these regions humming along.
However, there are signs on the horizon that this may only be a fleeting respite, with cloudy skies expected in 2012.
IATA forewarned that operating conditions for the global airline industry were becoming increasingly sombre. Margins remain anaemic, reaching a paltry 1.2 per cent of turnover in the first half of the year. This figure is projected to decline to 0.8 per cent in 2012, with net profits expected to dip by nearly 30 per cent year-on-year to US$4.9 billion.
Europe is the main concern for IATA, due to the uncertainty caused by its unfolding debt crisis, and the ensuing global economic repercussions it poses. The region is forecast to see its profit shrink the fastest worldwide between 2011 and 2012 – from US$1.5 billion to just US$0.3 billion.
Brian Pearce, IATA’s chief economist said that even though airline markets were holding up at the moment, the path ahead was sure to be a turbulent one. “Essentially, the weakness we were predicting before (in the June forecast) has been shifted to 2012, because the main area of risk is still likely coming from the situation in Europe,” he said.
“Not many people know how it is going to play out. If a good resolution is reached, business and consumer confidence should come back.”
