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Global airline industry may hit turbulence: IATA
Publication Date : 24-09-2013
Global carriers are likely to earn less this year than expected due to uncertainty over the Syrian crisis and lacklustre demand in key emerging markets like China and India.
The subdued outlook has forced the International Air Transport Association (IATA) - the global voice of about 240 carriers - to reduce its earnings projections.
It now estimates a collective industry profit of US$11.7 billion this year, down from its June forecast of $12.7 billion.
Still, airlines are expected to do better this year than last year when profits hit US$7.4 billion, and even better next year, said Iata director-general and chief executive officer Tony Tyler Monday.
"Overall, the story is largely positive. Profitability continues on an improving trajectory. But we have run into a few speed bumps," he added.
Cargo growth has not materialised, emerging markets have slowed and the oil price spike as a result of the Syrian crisis have all had a dampening effect.
Despite the region's strong long-term growth potential, Asian carriers are feeling the heat of the sharp decline in the cargo sector.
Regional carriers are now expected to earn a collective profit of $3.1 billion, instead of a June forecast of $4.6 billion.
"Asia-Pacific carriers are the largest players in global cargo markets and the most impacted by its flat performance" Iata said in a statement.
Singapore Airlines' cargo arm, SIA Cargo, which suffered a S$40 million (US$32 million) operating loss in the three months to June 30, has put four of its planes up for sale, a move that will reduce its fleet to nine aircraft.
Despite challenges, airlines are pushing hard to drive efficiencies through joint ventures, new market development, product innovations and more, said Tyler.
Amid increasing competition, SIA will soon launch its first major cabin upgrade in more than five years.
The new products, which will debut on the airline's Singapore-London flight next week, offer more legroom for economy travellers, with seats that provide better back and neck support.
The in-flight entertainment screen is now 11 inches - one inch bigger.
Other carriers like Air France and Indonesia's Garuda are also rolling out new products.
SIA, Middle Eastern carrier Etihad and Malaysian low-cost airline group AirAsia have moved into India to take advantage of a recent rules liberalisation allowing foreign carriers to own up to 49 per cent of local Indian airlines.
Doha-based Qatar Airways has said it will join the Oneworld aviation alliance next month, making it the first of the three major Gulf region air carriers to enter such a cooperation.
Ultimately though, the balance between profit and loss remains "delicate", Tyler said.
A US$16.4 billion profit projection for next year, for an industry that will carry about 3.3 billion passengers, means airlines will retain an average of about US$5 per passenger.
Tyler said: "That very simple calculation demonstrates that even a small change in the operating environment - a new tax or other cost increase for example - could change the outlook quite significantly."