SINGAPORE, Sept 20 – Airlines globally are expected to post a net profit of $6.9 billion this year as stronger passenger numbers offset the impact of the weak global economy, industry group IATA said Tuesday.,
The new forecast by the International Air Transport Association was better than its last projection of $4.0 billion, made in June, but is still far off the $16 billion airlines earned in 2010.
And net profit in 2012 is predicted to weaken further to $4.9 billion due to the expected deterioration of world economic conditions, IATA director general and chief executive Tony Tyler told a news conference in Singapore.
“Why are we doing better than previously expected? It’s about travel volumes,” Tyler said at IATA’s Asia Pacific office.
“Despite the economic doom and gloom, people are travelling.”
In the seven months to July, passenger volumes were up 6.4 percent over the year before, Tyler said, adding however that cargo had stagnated because of a slowdown in world trade.
Cargo volumes expanded only 1.0 percent in the first seven months of the year compared to the same period last year.
Revenues for the full year are forecast at $594 billion, but fuel prices continue to be a drag, with a projected total fuel bill of $176 billion seen to account for 30 percent of industry costs.
This is based on crude prices at $110 a barrel, which would translate into jet fuel at $126.50.
Airlines are expected to run into fiercer turbulence next year amid fears over the impact of the eurozone debt crisis and the struggling US economy.
Global airline revenue next year is projected at $632 billion.
“In our first look at the 2012 outlook, we conclude that it will be a year of sluggish growth and weak profits, with net profits forecast at $4.9 billion,” IATA said.
While developing economies are in much better shape, the majority of the air transport market is still linked to developed countries, according to IATA.
“The fourth quarter of this year and early 2012 may well see the weakest point of markets.”
Oil prices are expected to fall slightly to an average $100 a barrel next year, “but due to the impact of hedging, it will actually increase fuel to 32 percent of costs,” Tyler said.
“And for the first time, the industry fuel bill is expected to exceed $200 billion.”
Asia Pacific carriers are expected to turn in a profit of $2.5 billion this year, $400 million better than IATA’s June forecast, although earnings are weighed down by weak cargo volumes due to the impact of the Japanese tsunami and earthquake in March on the supply chain.
North American airlines are expected to deliver a net profit of $1.5 billion, while their European counterparts are likely to make $1.4 billion.
Middle East airlines should book a net profit of $800 million this year as they weather the impact of political unrest in the region and Latin American carriers should earn $600 million.
African airlines may well slip back to losses of around $100 million next year.
For European carriers, “the weak euro is helping the industry on volumes — encouraging inbound travel and boosting exports,” Tyler said.
But next year, the profitability of European airlines is expected to fall sharply to $300 million, with the decline accounting for over half of the projected drop in profits for the industry worldwide, he said.