Airlines re-shape to help ride out the economic storm
Alliances, joint ventures and restructures are helping airlines keep their heads above the clouds, according to the latest report from IATA.
The International Air Transport Association said airlines are managing to cut costs and improve yields despite the tough business climate.
"Recent alliances and joint ventures have enabled economies of scale as well as offering more choice for passengers," it said in its latest industry financial update.
"A sharp fall in the number of new entrants, due to the lack of funding for start-ups, and a number of airline bankruptcies have also contributed to an improved industry structure which has allowed airlines to share efficiency gains between improved service for passengers and better returns for investors."
For 2012 airlines are expected to return a profit of $6.7 billion, up from the $4.1 billion forecast in October.
This figure is expected to improve slightly to $8.4 billion in 2013, marginally better than the $7.5 billion forecast in October.
Industry net post-tax margin, however, will remain weak at 1% in 2012 and 1.3% in 2013.
The report said despite high fuel prices and a slowing world economy, airline profits and cash flows held up at levels similar to 2006 when oil prices were about $45 a barrel lower and world economic growth was 4%.
"With GDP growth close to the ‘stall speed’ of 2% and oil at $109.5 a barrel we expected much weaker performance," said Tony Tyler, IATA director general and CEO.
"But airlines have adjusted to this difficult environment through improving efficiency and restructuring. That is protecting cash flows against weak economic growth and high fuel prices."
He said larger airlines were doing better than their smaller rivals.
"It’s a diverging picture. Economies of scale are helping larger airlines to cope much better with the difficult environment than small and medium-sized carriers which continue to struggle," said Tyler.
But while airlines in other regions are forecast to post a profit, European carriers are expected to only breakeven in 2012, and again in 2013.
by Bev Fearis
Bev
Editor in chief Bev Fearis has been a travel journalist for 25 years. She started her career at Travel Weekly, where she became deputy news editor, before joining Business Traveller as deputy editor and launching the magazine’s website. She has also written travel features, news and expert comment for the Guardian, Observer, Times, Telegraph, Boundless and other consumer titles and was named one of the top 50 UK travel journalists by the Press Gazette.
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