A re-shaped airline industry is managing to ride out the economic storm, but its profitably still balances on a knife edge.
In its latest report, the International Air Transport Association has upwardly revised its global aviation outlook for 2012 and is predicting continued improvement in 2013.
The fall in airline profits from the $8.4 billion that the industry earned in 2011 will be cushioned by improved airline performance, it said.
Airlines are expected to earn $4.1 billion in 2012, up $1.1 billion from the $3.0 billion forecast in June.
In a first look at 2013, the association sees global profits rising modestly to $7.5 billion, though this is a net margin of just 1.1%.
But IATA was careful to stress that the more positive outlook isn’t down to outside factors.
"The European sovereign debt crisis lingers on. China continues to moderate its growth. And the impact of recent quantitative easing in Japan and the US will take time to yield growth. While some of these risks have diminished slightly over recent months, they continue to take their toll on business confidence. The outlook improvement is due to airlines performing better in a difficult environment," said Tony Tyler, IATA’s director general and CEO.
"Even six years ago, generating a profit with oil at $110/barrel would have been unthinkable. The industry has re-shaped itself to cope by investing in new fleets, adopting more efficient processes, carefully managing capacity and consolidating. But despite these efforts, the industry’s profitability still balances on a knife-edge, with profit margins that do not cover the cost of capital."
IATA’s report said the passenger market has performed well in the face of weak business confidence in Western economies.
Demand is expected to grow by 5.3% over the course of 2012, which is 0.5 percentage points, better than was foreseen in June.
European airlines are expected to post the largest loss of any region at $1.2 billion ($0.1 billion worse than previously forecast).
IATA said the region is "plagued by high taxes, inefficient air traffic management infrastructure and an onerous regulatory environment".
In 2013, European airlines are expected to be the only region in the red, although losses will be trimmed as a result of slower capacity growth and improved global trading conditions on long-haul markets.
by Bev Fearis
