Industry group predicts airline profits triple what was expected
North American and airlines worldwide with some exceptions can expect much larger profits this year than previously expected, predicts an industry association.
Airlines in North America are expected to see much stronger profits of around US$3.5 billion compared an earlier forecast $1.9 billion, according to the International Air Transport Association (IATA). Carriers in Latin America, the Middle East and Africa also were predicted to experience steady improvement.
Airlines in Europe, which represent a major part of the world’s air traffic, continue to struggle amid a stagnating economy, though their losses were likely to be around $1.3 billion, less than the $2.8 billion previously forecast.
“The industry recovery has been stronger and faster than anyone predicted,” said Giovanni Bisignani, the IATA director general. But he cautioned that with margins still at a “razor thin” average of 1.6 percent and fuel costs still representing about a quarter of operating costs, the industry could be seeing a near-term peak in profitability.
“This year is as good as it gets,”Bisignani said. “This is the peak of the cycle.”
In Europe, the IATA attributed the improvement to the impact of the weaker euro, which had stimulated exports and thereby bolstered carriers’ cargo business. The weaker currency was also encouraging more inbound travel to Europe from both business and leisure travellers.
Steady gains in passenger demand and a strong rebound in the air freight market led the IATA to more than triple its profit forecast for the world’s airlines to $8.9 billion this year. But the IATA also specifically cited the uncertain outlook in Europe and North America as the impact of government stimulating the economy.
Demand for airline tickets was continuing to outpace the number of available seats, driving up fares worldwide. The IATA said demand was expected to grow by 11 percent this year, while capacity would only expand by 7 percent.
With the recovery, manufacturers have been rebuilding their inventories, driving a sharp increase in cargo activity in the first half of this year.
But Brian Pearce, the IATA’s chief economist, said that the economic environment remained “extremely risky.” He said the recent round of government belt-tightening, particularly in Europe, left airlines vulnerable to another slowdown, which would likely restrain further growth in freight traffic.
The booming Asia-Pacific region remained the main driver of growth.
By David Wilkening
David
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