Glass half empty as airline profits surge 75 per cent

Issues & Trends – September 2011

Glass half empty as airline profits surge 75 per cent

THE world’s airlines will be more profitable than expected this year but IATA remains gloomy about prospects.

Releasing a revised forecast for total airline profits of $US6.9 billion in 2011 – a nearly 75 per cent increase over the $US4 billion predicted in June – an IATA statement cautioned “profitability is still exceptionally weak”.

The statement pointed out that the improved figures represent a net margin of 1.2 per cent on total revenues of $US594 billion.

Moreover the world airline body is projecting a fall in profits to $US4.9 billion on revenues of $US632 billion in 2012 – a net margin of 0.8 per cent.

“Airlines are going to make a little more money in 2011 than we thought. That is good news,” said IATA director general and chief executive Tony Tyler. “Given the strong headwinds of high oil prices and economic uncertainty, remaining in the black is a great achievement.

“But we should keep the improve-ment in perspective. The $US2.9 billion bottom line improvement is equal to about a half a per cent of revenue.”

The association is expecting weaker growth in 2012 because “debt-burdened Western economies look set for an extended period of weak economic growth – or worse.

“While developing economies look to be in much better shape, the prospects for industry growth are limited because many transport linkages are with developed nations.”

The improved airline profit fore-casts for 2011 follow a 7.3 per cent increase in international passenger markets in July, compared with the same month in 2010, while domestic markets showed weaker growth of 3.5 per cent year on year.

“Compared to pre-recession levels of early 2008, international passenger traffic has expanded by 12 per cent,” according to an IATA statement.

Overall load factors (domestic and international) have improved by half a percentage point over July 2010 to 83.1 per cent.

In Asia Pacific a 5.9 per cent capa-city increase ran ahead of demand growth of 4.9 per cent and load factors fell slightly to 80.2 per cent.

“Airlines in the region are still adjusting to two major challenges: slower growth in China and continuing post-earthquake/tsunami weakness in Japan,” IATA reported.


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