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IATA forecasts a strong 2014 for the industry, but airlines on average only retain 5 dollars per passenger

Wednesday, September 25th 2013 - 05:08 UTC
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CEO Tyler believes 2014 could become the second strongest year this century after the record breaking in 2010 CEO Tyler believes 2014 could become the second strongest year this century after the record breaking in 2010

The International Air Transport Association (IATA) has revised its 2013 global industry outlook downwards to 11.7 billion on revenues of 708 billion dollars, but anticipates that all regions during 2014 will see improved profitability, with divergence in performance and with strong emphasis in North America with 6.3 billion net profits.

However the balance between profit and loss remains delicate for the industry despite the forecast improvement for 2014, according to Tony Tyler, IATA Director General and CEO.

“A 16.4 billion dollars profit for transporting some 3.3 billion passengers means that airlines will retain an average of about 5.00 dollars per passenger. That very simple calculation demonstrates that even a small change in the operating environment—a new tax or other cost increase for example—could change the outlook quite significantly,” said Tyler.

European carriers are also expected to see a near doubling of profits next year to 3.1 billion (although even this will only generate an EBIT margin of 1.9% with only African carriers being lower).

Asia-Pacific is expected to see a modest improvement in profitability to 3.6 billion, largely on the back of improved cargo performance, the growing Chinese domestic market and the benefits of restructuring in Japan.

Carriers in Latin America are expected to see profits rise to 1.1 billion.

”Airlines are demonstrating that they can be profitable in adverse business conditions with efficiencies being generated through myriad actions: consolidation, joint ventures, operational improvements, new market development, product innovations and much more”, said Tyler.

He further pointed out that when market forces drive action, “we get results that both strengthen the industry and benefit the consumer. Quite simply, stronger airlines can invest more in improving connectivity and service innovations. If more policy makers incorporated that into the cost-benefit analysis when developing regulations, we would have a much healthier industry generating even broader economic benefits,” said Tyler.

Regarding the 2013 projected performance the IATA revised global outlook said that airline performance continued to improve in the second quarter; however at a slower pace than was expected with the previous projection (in June) of 12.7 billion. This reflects the impact on demand of the oil price spike associated with the Syrian crisis and disappointing growth in several key emerging markets.

Performance in 2013 is considerably better than the 7.4 billion net profit of 2012. The upward trend should continue into 2014 when airlines are expected to return a net profit of 16.4 billion. This would make 2014 the second strongest year this century after the record breaking 19.2 billion profit in 2010.

“Overall, the story is largely positive. Profitability continues on an improving trajectory. But we have run into a few speed bumps. Cargo growth has not materialized. Emerging markets have slowed. And the oil price spike has had a dampening effect. We do see a more optimistic end to the year. And 2014 is shaping up to see profit more than double compared to 2012” said IATA CEO Tony Tyler.

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