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Iata projects US$4.1b profit for airlines

Publication Date : 02-10-2012

 

Operating conditions may still be tough but global airlines are more optimistic today than they were three months ago.

The International Air Transport Association (Iata) expects airlines to earn a collective profit of US$4.1 billion this year, up from its June forecast of $3 billion.

Next year should be even better, with profits expected to surge to $7.5 billion.

Airlines are in a bitter-sweet place, said Iata's chief executive and director-general Tony Tyler at a press briefing in Singapore yesterday.

"Airlines are keeping their heads above water better than we thought... in a very difficult operating environment," he said.

"But we should not get too excited," Tyler added.

The profit estimate for this year is still a sharp dip from the $8.4 billion achieved last year and, based on revenues of $636 billion, the net profit margin is a dismal 0.6 per cent, he said.

The euro zone crisis is continuing despite the best efforts of politicians, the slowdown in China continues, and oil prices remain high and volatile, Tyler said. The cargo sector also remains sluggish.

He said: "You are probably wondering how airlines have squeezed out some extra profit in these conditions. Indeed, only a few years ago, turning a profit with oil prices over $100 per barrel would have been unthinkable.

"And today, we are predicting a profit at $110 (a barrel) in a weak economic environment."

Airlines are in a better place today than in June for several reasons, he said. People are now flying in greater numbers despite the economic uncertainty, and carriers have also worked hard to improve their operational performance.

Many carriers have restructured their businesses, cut costs, improved processes and invested in more fuel-efficient aircraft. This has resulted in more older planes being parked.

According to data compiled by aerospace firm Ascend Worldwide, airlines have grounded 1,242 planes since January last year. All in, a record 3,258 commercial jets - 13 per cent of the global fleet - are now sitting idle.

Turning to the different regions, Iata said Asia-Pacific carriers are expected to be the best performers this year, with a US$2.3 billion profit.

This is $300 million more than forecast in June.

In an update last week, the Association of Asia-Pacific Airlines said member carriers, including Singapore Airlines and Cathay Pacific, carried a total of 18.5 million international passengers in August, 6.8 per cent more than a year earlier.

Air freight markets, though, remain depressed for Asia-Pacific carriers which account for about 40 per cent of the global cargo market.

Total demand fell 4.4 per cent year on year.

The association's director-general Andrew Herdman said: "The overall trend in international air travel demand remains encouraging... While the overall pace of global economic activity is clearly slowing, Asian economies have so far remained relatively resilient with domestic demand still supporting business- and leisure-related travel."

 

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