IATA expects a boost in airline profits

IATA said the industry's overall revenue in 2013 is expected to rise to USD 671 billion from USD 637 billion last year

The International Air Transport Association (IATA) expects a boost in airline profits in 2013, based on stronger revenue, but has warned that the impact of  the crisis in Cyprus could pose a risk to the revival of the sector.

“Industry profits are taking a small step in the right direction. Against a backdrop of improved optimism for global economic prospects, passenger demand has been strong and cargo markets are starting to grow again. The economic optimism is also pushing fuel prices higher. We are seeing a $12 billion improvement in revenue, and a $9-10 billion increase in costs—most of which is related to fuel,” said Tony Tyler, IATA’s director general and CEO.

IATA now expects airlines to produce a combined net post-tax profit margin of 1.6 per cent (up from the previously forecast 1.3 per cent) with a net post-tax profit of $10.6 billion (up from the previously projected $8.4 billion).

Tyler, however, warned all was not rosy.

“European Central Bank commitments with respect to the Euro zone crisis and the slow economic recovery in the US should be pointing us towards a durable, if weak, upswing. But we have had two false starts already. Improving conditions in early 2011 and 2012 disintegrated, as the Euro zone crisis intensified. And, it could happen again. The impact of the unfolding situation in Cyprus is a risk factor that cannot be ignored,”  Tyler said.

According to IATA, average jet fuel costs are expected to be around  $130 a barrel for the year (up from $124.3 a barrel projected in December). Overall, fuel will account for 33 per cent of airline costs, unchanged from 2012.

It expects Asia-Pacific airlines to post  a $4.2 billion net profit in 2013 (up from $3.2 billion previously projected and from the $3.9 billion reported for 2012). Asian carriers comprise about 40 per cent of the air cargo market and will be the biggest beneficiaries of the expected upturn in cargo demand. Carriers in the region are expected to see average demand growth of 4.9 per cent, slightly outpaced by a five per cent capacity expansion.