Global airline profits set to soar this year

 
Marion Dakers
THE WORLD’S airlines are expected to make $12.7bn (£8.3bn) in profits this year, up 67 per cent on 2012 as fuel price hikes ease off and traffic grows, the industry group IATA said yesterday.

IATA has raised its 2013 outlook from the $10.6bn profit it forecast in March, and the prediction far surpasses the $7.6bn generated by the industry last year.

Annual passenger numbers are set to pass 3bn for the first time this year, IATA said, with strong growth expected to continue in Asia and markets linked to emerging economies.

All regions are expected to deliver an overall profit. In Europe, IATA doubled its earnings forecast to $1.6bn.

Carriers are set to fly fuller planes than ever before, with the industry body predicting a load factor of 80.3 per cent this year, or six percentage points above 2006 levels.

Margins are expected to remain thin at just 1.8 per cent, and IATA warned that costs will continue to pose problems for many carriers.

“The day-to-day challenges of keeping revenues ahead of costs remain monumental,” IATA director general Tony Tyler said at a meeting of more than 200 airlines in Cape Town.

Ancillary sales, such as extra fees for priority boarding or onboard food, exceeded $36bn last year, and Tyler said these revenues will make up around five per cent of total turnover this year.

Activity in air freight, however, is showing few signs of recovering from the effects of the recent economic slump, with IATA expecting flat volumes of 52.1m tonnes this year.

Brent crude, the oil benchmark that informs the cost of plane fuel, is predicted to fall to $108 a barrel this year, down from $111.80 last year and IATA’s previous forecast of $109.50. The price remains nearly twice as high as they were in 2006.

The consolidation taking place across the sector has generally left the larger carriers in a better position than the smaller firms, IATA said in its annual report.