by Staff Writers
Singapore (AFP) Sept 20, 2011
Airlines globally are expected to post a net profit of $6.9 billion this year as stronger passenger numbers offset the impact of the weak global economy, industry group IATA said Tuesday.
The new forecast by the International Air Transport Association was better than its last projection of $4.0 billion, made in June, but is still far off the $16 billion airlines earned in 2010.
And net profit in 2012 is predicted to weaken further to $4.9 billion due to the expected deterioration of world economic conditions, IATA director general and chief executive Tony Tyler told a news conference in Singapore.
"Why are we doing better than previously expected? It's about travel volumes," Tyler said at IATA's Asia Pacific office.
"Despite the economic doom and gloom, people are travelling."
In the seven months to July, passenger volumes were up 6.4 percent over the year before, Tyler said, adding however that cargo had stagnated because of a slowdown in world trade.
Cargo volumes expanded only 1.0 percent in the first seven months of the year compared to the same period last year.
Revenues for the full year are forecast at $594 billion, but fuel prices continue to be a drag, with a projected total fuel bill of $176 billion seen to account for 30 percent of industry costs.
This is based on crude prices at $110 a barrel, which would translate into jet fuel at $126.50.
Oil prices are expected to fall slightly to an average $100 a barrel next year, "but due to the impact of hedging, it will actually increase fuel to 32 percent of costs," Tyler said.
"And for the first time, the industry fuel bill is expected to exceed $200 billion." The fuel cost will be on projected 2012 revenues of $632 billion.
Shukor Yusof, an aviation analyst with Standard & Poor's Equity Research in Singapore, said IATA's upgraded forecast this year was on the cards given the buoyant air travel market in the first half of 2011.
But he added that the forecast for 2012 is under threat.
"We think 2012 could present formidable challenges for airlines," Shukor told AFP.
"Volatile oil prices, a weakened US economy and the debt crisis in Europe could all combine to clobber even the most resilient of regions, and the carriers that are located there."
If any unforeseen natural disasters -- such as the Japan catastrophe in March -- should strike, "the projected profit of $4.9 billion for 2012 may look overly optimistic," he added.
Asia Pacific carriers are expected to turn in a profit of $2.5 billion this year, $400 million better than IATA's June forecast, although earnings are weighed down by weak cargo volumes due to the impact of the Japanese tsunami and earthquake in March on the supply chain.
North American airlines are expected to deliver a net profit of $1.5 billion, while their European counterparts are likely to make $1.4 billion.
Middle East airlines should book a net profit of $800 million this year as they weather the impact of political unrest in the region and Latin American carriers should earn $600 million.
African airlines may well slip back to losses of around $100 million next year after breaking even this year.
For European carriers this year, "the weak euro is helping the industry on volumes -- encouraging inbound travel and boosting exports," Tyler said, adding however that "we do not see this improvement as sustainable."
Next year, the profitability of European airlines is expected to fall sharply to $300 million, with the decline accounting for over half of the projected drop in profits for the industry worldwide, he said.
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