Airlines are on course for improved profits in 2013 because of higher-than-expected passenger travel and a recovery in air cargo markets, the industry’s main trade body said on Wednesday.
Airlines on course for rise in profits
By Andrew Parker in London
Airlines are on course for improved profits in 2013 because of higher-than-expected passenger travel and a recovery in air cargo markets, the industry’s main trade body said on Wednesday.
But the International Air Transport Association cautioned that industry earnings could still be hurt by the eurozone crisis, and expressed deep concern at the “draconian” bailout in Cyprus that proposes a tax on bank deposits.
Iata said stronger revenues were the main reason for its upgrade to this year’s profit forecast, with passenger air travel expected to increase faster than previously expected, complemented by a return to modest growth in air cargo after two years of decline.Iata upgraded its closely watched industry performance forecast, saying it expected airlines to record a combined net profit of $10.6bn this year, up from a previous estimate of $8.4bn. This compares with Iata’s estimate that airlines made a combined net profit of $7.6bn last year.
Tony Tyler, Iata’s director-general, said industry profits were taking a “small step” in the right direction, against the backdrop of optimism about global economic prospects.
But the eurozone crisis could still take another turn for the worse. “The impact of the unfolding situation in Cyprus is a risk factor that cannot be ignored,” said Mr Tyler.
European airlines are expected to report combined net profit of $800m this year, up from $300m in 2012, in spite of the eurozone’s problems. Iata said European airlines were able to offset weakness in domestic markets during 2013 with strong demand for long-haul travel to emerging markets.
Asian airlines are expected to be the biggest contributors to the industry’s earnings this year, generating net profit of $4.2bn. These airlines carry about 40 per cent of the world’s air cargo and should be the biggest beneficiaries of the recovery in freight transport.
North American airlines are predicted to be the second most profitable carriers, with net profit of $3.6bn this year. US airlines are reporting improved earnings after a wave of consolidation that is set to continue with the proposed merger of American Airlines and US Airways.
Another key reason that Iata is forecasting improved industry profits this year is that airlines – notably in the US and to some extent in the European Union – are increasing capacity by less than the rate of air traffic growth.
Earnings have traditionally been eroded by airlines deploying far too much capacity on routes, resulting in price wars, but restraint is now emerging in some developed markets.
However, Mr Tyler said airlines were still suffering from “anaemic profitability”, adding that the EU was exacerbating the situation with proposed passenger rights legislation that would increase the cost of flying.
Copyright The Financial Times Limited 2013. |
