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International airlines’ profit outlook declines – but still better than 2012 and heading for boom 2014


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International airlines’ profit outlook declines – but still better than 2012
and heading for boom 2014

IATA has revised its 2013 global airline profit outlook downwards to $US11.7 billion – a billion dollars less than the $US12.7 billion it was projecting in June.

“Airline performance continued to improve in the second quarter; however at a slower pace than was
expected,” the airline body announced.

“This reflects the impact on demand of the oil price spike associated with the Syrian crisis and disappointing growth in several key emerging markets.”

However performance in 2013 remains considerably better than the $US7.4 billion net profit of 2012.
According to IATA: “The upward trend should continue into 2014 when airlines are expected to return a net profit of $US16.4 billion.

“This would make 2014 the second strongest year this century after the record breaking $US19.2 billion profit in 2010.”

IATA director general Tony Tyler commented: “Overall, the story is largely positive. Profitability con-tinues on an improving trajectory.

“But we have run into a few speed bumps … The oil price spike has had a dampening effect.”

Nevertheless he is forecasting “a more optimistic end to the year”.
IATA is predicting that airlines will post the same operating margin (3.2 per cent) as in 2006, even with a 54 per cent hike in jet fuel prices.

Consolidation and joint ventures have helped the industry absorb the “enormous” fuel cost increase, IATA says. It also points to increased ancillary sales and reduced new entry due to tight financial markets as other key factors.

IATA notes that this optimistic outlook comes with global economic growth at only two per cent. Previously two per cent gross domestic product (GDP) growth was considered the point below which airlines posted losses.

 

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