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IATA Raised Its 2011 Profit Expectation

Release date: 20/09/2011

The International Air Transport Association has upgraded its profit forecast for this calendar year by more than 70 per cent to $US6.9bn, after the global economic gloom failed to stop people from flying.

Steve Creedy, The Australian

"Airlines put in a lot of effort for very poor return," IATA director general Tony Tyler said. "But given the very strong headwinds of high oil prices, the continuing European debt crisis, the shocks in Japan and inflation-fighting measures in China, air transport markets are holding up comparatively well.

"Certainly the industry is weak, but it is still profitable."

Mr Tyler said the global economy remained the biggest factor impacting the industry and GDP growth projections for 2011 had been downgraded from 3.2 per cent in June to 2.5 per cent.

He said historically the airline industry lost money when GDP growth slipped below 2 per cent, and it was now just above that threshold.

Despite the economic doom and gloom, however, people were still travelling.

"Over the first seven months of the year we saw passenger traffic expand by 6.4 per cent," he said. "That's based on strong business and consumer confidence at the beginning of the year."

The IATA forecast shows passenger growth has since slowed and the airline group is now predicting it will be 5.9 per cent for the year, but this is still up on its June estimate of 4.4 per cent.

But it is expected to slow again to 4.6 per cent next year.

By contrast, cargo has stagnated, contracting in July by 0.4 per cent and is expected to grow just 1.4 per cent for the year instead of the 5.5 per cent originally predicted.

While this is expected to triple to 4.2 per cent in 2012, Mr Tyler said airlines were headed for "another year in the doldrums".

"Relatively stronger economic growth and some rebound in cargo will help Asia-Pacific airlines to maintain their 2012 profits close to 2011 levels of $US2.3bn," he said.

"The rest of the industry will see declining profitability and the worst hit will be Europe, where economic crisis means the industry is only expected to return a combined profit of $US300m."

IATA is predicting the Asia-Pacific will return a combined profit of $US2.5bn this year, up $US400m on 2010, and deliver the biggest absolute profit of any region.

It will also record the most dramatic downturn after delivering a $US8bn profit in 2010, due to weakness in air cargo markets and the impact of events in Japan.

"A strong rebound is expected late in the year continuing into 2012," the forecast said.

Click here to read the story on The Australian website

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