Airlines only make a $4 profit per passenger

Summary:Airlines have razor-thin profit margins, but it's still shaping up to be a good year for the industry.

The International Air Transport Association revised its outlook for the global airline industry to an estimated $12.3 billion for 2013, up from $10.6 billion in its previous projection .

That's good news for global airlines because, if the projection holds, it would be the third strongest year for the industry since 2001.

Still, profit margins are worrisome. This year, airlines will bring in an estimated $711 billion in revenue, but only $12.3 billion of that is expected to be profit. That's a profit margin of less than 1.8 percent. Tony Tyler, IATA’s Director General and CEO, puts that number into perspective.

“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.”

Nonetheless, it's shaping up to be one of the best years in the last decade for the airline industry. What's contributing to that success?

Efficiency. The industry load factor -- or the average occupancy on a flight -- is expected to reach 80.3 percent, a record high and six percent higher than 2006. Baggage fees and other ancillary revenues -- which passengers are getting used to -- are also contributing, rising from 0.5 percent of revenue in 2007 to over 5 percent in 2013. It also doesn't hurt that the average price of oil is expected to be $108 a barrel compared to $111.8 last year.

The latest numbers also predict that 3.13 billion passengers will fly this year, the first time that number will have eclipsed 3 billion.

IATA's estimates provide a good look at broad trends in the airline industry because the organization represents 84 percent of global air traffic.

More numbers here.

Photo: Flickr/caribb

This post was originally published on Smartplanet.com

Topics: Innovation

About

Tyler Falk is a freelance journalist based in Washington, D.C. Previously, he was with Smart Growth America and Grist. He holds a degree from Goshen College. Follow him on Twitter.

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