The International Air Transport Association (IATA) has adjusted upward its industry financial outlook for 2013 and 2014 as passenger demand continues to expand, but profitability continues to be low as cargo volumes and revenues remain largely stagnant.
Airlines are expected to return a global net profit of US$12.9 billion in 2013, up from the September forecast of $11.7 billion. Net profit in 2014 is now estimated at $19.7 billion on projected revenues of $743 billion, from a net profit of $16.4 billion predicted in September.
The upward revision reflects lower jet fuel prices over the forecast period, improvements to the industry’s structure and efficiency, and a buoyant passenger market, said IATA.
But while 2014 is expected to be a second consecutive year of strengthening profitability, industry net profit margins, however, remain weak at 1.1 percent of revenues in 2012, 1.8 percent in 2013, and 2.6 percent in 2014.
The air cargo industry in particular is looking at a less-than-rosy outlook, with volumes that haven’t grown since 2010, and cargo revenues for 2013 and 2014 that are seen to be basically unchanged from 2007 levels, said IATA.
Airlines are expected to carry 51.6 million tonnes of cargo in 2013, increasing to 52.5 million tonnes in 2014. This modest increase in demand is expected to be offset by a decline in yields of 2.1 percent in 2014.
Despite the stagnation in the cargo industry, belly capacity continues to be introduced as airlines seek to maximize on the robust passenger demand. Cargo revenues are expected to reach $60 billion in both 2013 and 2014.
IATA said having an adverse impact on the cargo business is the “on-shoring” of production, which is driven by a rise in protectionist measures by governments aiming to stimulate domestic economies and the waning effects of earlier liberalization as costs rise in previously low-labor-cost locations.
It added that these conditions are likely to extend over several years.
The World Trade Organization’s Bali agreement to liberalize markets and improve trade facilitation is expected to be good news for the air cargo industry.
“Removing the red tape that restricts and slows trade is a positive goal,” said Tony Tyler, IATA’s director general and CEO.
For Asia-Pacific airlines, they are expected to post a profit of $3.2 billion in 2013, which will be a third consecutive year of declining profits. The trend is expected to reverse in 2014 with a slight uptick to $4.1 billion.
Profitability of the region’s airlines is subdued by the ongoing weakness in cargo demand and the impact of an expected delivery of 710 new aircraft next year.
Photo: Pieter v Marion