Wed, Jun 10, 2015 - Page 14 News List

N America airlines profit, while others still struggle

LAGGARDS:European carriers have been battered by sluggish economies and high taxes, while the Asian market is mixed, with cargo carriers bearing the brunt


As fuel prices drop and more planes fly filled to capacity, North America is leading the airline industry in profits while much of the world still struggles, officials said on Monday.

Airlines are projected to make US$29.3 billion in collective profit on revenues of US$727 billion this year, International Air Transport Association (IATA) director-general Tony Tyler said at the group’s annual meeting in Miami Beach, Florida.

Earlier profit projections had estimated a year-end profit of US$25 billion for the industry as a whole.

“For the first time in IATA’s records, the industry as a whole is earning its cost of capital,” he said.

Airlines are making on average about US$8.27 per passenger, Tyler said, describing this as “a hard-earned 4 percent net profit margin.”

A fall in the price of oil has helped boost fortunes in the airline industry, but the rising value of the US dollar has canceled out much of those gains for some carriers.

“The strongest driver of improved profitability is efficiency,” Tyler told reporters. “This year, we expect airlines to fill 80.2 percent of their seats, a record high.”

Furthermore, industry performance is far from uniform, with North American and Middle East airlines performing the best, he added.

About half the industry’s profits — about US$15.7 billion — come from North American airlines.

Meanwhile, European, Asia-Pacific, African and Latin American carriers are performing below average, he said.

Many of the challenges airlines face involve disputes with governments, and the lack of cost-efficient infrastructure to meet demand.

“A look around the world shows many deficiencies,” Tyler said.

Europe faces a “quadruple whammy of faltering economies, high taxes, onerous regulation and failing efforts toward a Single European Sky.” It is also expected to see a 12 percent shortfall in airport capacity by 2035.

The Asian market is mixed, with some carriers performing well, but those involved with cargo “in the doldrums,” Tyler said.

The Middle East is reporting the fastest growth, but military conflicts, high infrastructure costs and crowded skies are the region’s main challenges.

Latin America is being held back by major economic woes, and the key market of Venezuela has yet to resolve an impasse with international carriers that has held up US$3.7 billion in payments since October last year.

Meanwhile, Africa struggles with poor regulatory oversight and safety concerns.

Despite a series of high-profile crashes in the past year or so, Tyler insisted that “flying has never been safer,” with just one jet lost for every 4.4 million flights.

He described the disappearance of Malaysia Airlines Flight MH370 in March last year, the shooting down of Malaysia Airlines Flight 17 over war-torn Ukraine in July last year and the deliberate crash by a copilot of a Germanwings flight into the French Alps in March as “extraordinary events.”

He said improved tracking standards are being developed to report on an airline’s whereabouts every 15 minutes, and the technology should be widespread within the next three years.

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