THE International Air Transport Association (IATA) yesterday announced the airline industry remains on track to deliver a second consecutive year of improved profitability for 2014.
This is despite a slight downward revision of its industry profit forecast from US$19.7 billion to US$18.7 billion, the main driver of which is higher oil prices now expected to average US$108/barrel (Brent), US$3.5/barrel above previous projections.
The US$3 billion added cost on the industry’s fuel bill is expected to be largely offset by stronger demand, supported by a strengthening global economy, while overall revenues are expected to rise to US$745 billion ($2 billion greater than previously projected).
However, IATA director general and CEO, Tony Tyler, said:“ Overall industry returns remain at an unsatisfactory level with a net profit margin of just 2.5 per cent.”
The industry retains on average US$5.65/passenger in net profit, improved from US$2.05 in 2012 and US$4.13 in 2013, but below 2010’s US$6.45.
“The efficiencies of improved industry structure through consolidation and joint ventures is providing more value to passengers and helping airlines to remain profitable even in difficult trading conditions.
“But we still need governments to understand the link between aviation-friendly policies and broader economic benefits. In many parts of the world, the industry’s innate power to drive prosperity through connectivity is compromised by high taxes, insufficient infrastructure and onerous regulation,” said Tyler.
IATA expects passenger demand passenger demand growth of 5.8 per cent this year, slightly weaker than previously forecast (six per cent), but an improvement on the 5.3 per cent growth for 2013. Passenger yields however are expected to deteriorate by 0.3 per cent.
As airlines continue to introduce new product options, ancillary services may add almost US$14 to the expected average fare per departing passenger of about US$181.
GDP growth projections for 2014 have been raised from 2.7 to 2.9 per cent. Improvements in the global economic outlook are largely being driven by developed economies – job creation in the US, the end of fiscal austerity in Europe and a much weaker yen are stimulating demand.
While China appears to be continuing on a trajectory of impressive growth, key emerging economies such as India and Brazil face major economic challenges.
Regional performance by airlines highlights there is a wide range of challenges and opportunities. All regions are expected to see higher profits and EBIT margins in 2014 than in 2013.
Asia-Pacific airlines are expected to post profits of US$3.7 billion and an EBIT margin of 3.4 per cent, an improvement over 2013. Forecast for the profits of airlines in this region in 2014 is US$400 million less than the previous projection.
