Airlines gain unexpected profit from capacity and cost cuts
IATA, the International Air Transport Association, says that airline earnings for 2012 would be about 63 percent higher than previously forecasted as capacity cuts and mergers put in effect because of the economy take hold.
Industry-wide net income should reach $6.7 billion, versus a forecast of $4.1 billion in October. Profit in 2013 could increase to $8.4 billion, $900 million more than last predicted but still less than the $8.8 billion return in 2011.
Slow growth and fuel costs have dragged earnings down for the last two years. Airlines have responded by reducing capacity and cutting costs (actions often passed along to passengers in the form of extra baggage and booking fees).
IATA’s chief executive, Tony Tyler, told Bloomberg News that there are more opportunities for airline consolidation, especially in Europe, where the big three groups, Air France-KLM Group, Deutsche Lufthansa and International Consolidated Airlines Group could take on smaller carriers. He said that some small airlines may wind up casualties of the economy.
Outside of Europe, Asia-Pacific operators could see the largest drop with a profit of $3, down from $5.4. North America is one of the strongest regions in the report with a possible gain of $2.4 billion.
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