IATA downgrades industry net profit to $11.7 bn

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The International Air Transport Association (IATA) Monday downgraded its outlook on the net profit of the global industry from $12.7 billion to $11.7 billion in 2013 from last year.

According to IATA, slow cargo segment growth, slowdown in emerging markets and high oil prices have led it to downgrade its earlier projection.

However, despite the downgrade, the current expected net profit of $11.7 billion will be more than 58.10 percent from $7.4 billion in 2012.

"Overall, the story is largely positive. Profitability continues on an improving trajectory. But we have run into a few speed bumps. Cargo growth has not materialized. Emerging markets have slowed. And the oil price spike has had a dampening effect," said Tony Tyler, director general and chief executive, IATA.

"We do see a more optimistic end to the year. And 2014 is shaping up to see profit more than double compared to 2012," Tyler said in a statement.

IATA expects that an upward trend will continue into 2014 when airlines are expected to return a net profit of $16.4 billion.

"This ($16.4 billion) would make 2014 the second strongest year this century after the record breaking $19.2 billion profit in 2010," the statement said.

IATA further said that it expected the industry to post 3.2 percent as operating margin, despite a 54 percent hike in jet fuel prices.

"Industry has been able to absorb this enormous (fuel) cost increase as a result of changes in the industry structure (through consolidation and joint ventures), increased ancillary sales and reduced new entry due to tight financial markets."

Passenger growth is expected to be five percent, although slightly below the 5.3 percent which was previously projected.

"Passenger numbers are expected to grow to 3.12 billion -the first time that they have topped the 3 billion mark," the statement added.