IATA raises global profit forecast

The net profit margin is expected to be 1.8 per cent. But IATA pointed out that even this small margin would make 2013 the third strongest year for airlines since the events of 2001. In 2007 the industry earned 2.9 per cent net profit margin ($14.7 billion) and in 2010 airlines generated a 3.3-per-cent net profit margin ($19.2 billion). 

“This is a very tough business. The day-to-day challenges of keeping revenues ahead of costs remain monumental. Many airlines are struggling. On average airlines will earn about $4 for every passenger carried – less than the cost of a sandwich in most places,” said Tony Tyler, IATA’s director-general and chief executive officer. 

Brent oil prices are expected to average $108 a barrel, a little below the $111.80 average for 2012, thanks in part to increasing supply from North America. The outlook for global economic growth has deteriorated slightly since March as the recession in Europe proves to be deeper than expected. The beneficial impact of lower fuel prices is expected to offset the adverse effect of weaker economic growth, providing a moderate boost to industry profitability.

The industry load factor is expected to average 80.3 per cent, which is a record high. Overall passenger capacity is expected to expand 4.3 per cent, which is under the 5.3-per-cent anticipated growth in demand for the year. This will be the second consecutive year that airlines keep capacity additions below the growth of demand, in spite of high numbers of new aircraft deliveries. All regions are expected to see demand grow faster than capacity. The tight supply and demand conditions, however, are not expected to lead to significant yield improvements. Passenger yields are expected to grow by a modest 0.3 per cent in 2013.

A total of 3.13 billion passengers are expected this year – the first time in history that passenger numbers rise above the 3-billion mark.

Asia-Pacific airlines are expected to post a combined profit of $4.6 billion, up from the previous projection of $4.2 billion. It will lead all regions both in terms of absolute profits and earnings before interest and taxes (EBIT) margin (5.0 per cent). 

The main driver is strong growth in China and long-haul markets, supported by buoyant trade flows and other business activities. Stronger growth is also expected from Japan.