After experiencing a two year dip in profits, the global airline industry is expected to see profits grow this year. The International Air Transport Association, a trade association representing carriers that account for 84 percent of global air traffic, revised its 2013 estimated profit margin to $10.6 billion (1.6 percent), up from a previous estimate of $8.4 billion (1.3 percent). Here's a look at the industry's profitability since 1998 from IATA's new report:
IATA points to an improved global economic forecast for 2013, increased industrial production, and business confidence as good indicators that it should be a better year for the airline industry. Because of this, passenger demand is expected to grow by 5.4 percent (previously projections were at 4.5 percent) and cargo demand is also expected to grow 2.7 percent (reversing a two year down trend). Since the beginning of 2013, share prices have also risen 7 percent despite the fact that fuel costs have gone up 5 percent. All this good news could, of course, come to a screeching halt, the report warns: "The Cyprus situation is risking a renewed Eurozone crisis. This forecast is conditional on the Eurozone remaining stable."
But Europe isn't the only region the industry is watching. The Asia-Pacific region and other emerging markets are having a major, positive, impact on the industry. Of the six regions Asia-Pacific is expected to see the highest profit margins (5.3 percent). Africa will see the largest growth of any region, moving from -0.4 percent to 1 percent. All regions are expected to be profitable this year.
But while the improved numbers are encouraging for the airline industry, IATA CEO Tony Tyler puts the numbers into sobering perspective.
"We are projecting that airlines will make a net profit of $10.6 billion on $671 billion in industry revenues. By comparison last year Nestle, a single company, made over $11.5 billion in profit on revenues of about $100 billion," Tyler said. "Chronic anemic profitability is characteristic across most of the aviation value chain when compared to other sectors. It will require more than improving economic conditions to fix."
Photo: Wikimedia Commons/curimedia
This post was originally published on Smartplanet.com