Airlines expect next year’s profits to reach new high

REASONABLE REWARD?:An airline industry expert said margins in the industry are dropping, with next year’s profits likely to be about US$6 per passenger


Sat, Dec 14, 2013 - Page 15

The global airline industry expects its profits to jump to a record high next year, helped by falling jet fuel prices, rising travel demand and cost-cutting.

The International Air Transport Association on Thursday said it forecasts a profit of US$19.7 billion — well above the US$12.9 billion expected this year and the US$7.4 billion made last year.

However, the Geneva-based group, which represents 240 airlines, or 84 percent of total air traffic, said margins are dropping.

Next year’s profit would come from projected revenues of US$743 billion. By contrast, 2010’s US$19.2 billion profit was made on revenues of just US$579 billion.

Tony Tyler, director-general and chief executive officer of IATA, said that the profit would amount to a little less than US$6 per passenger.

“To put that into perspective, the McDonald’s down the road here in Geneva will make about the same amount of profit by selling four Happy Meals,” Tyler told reporters.

“It begs the question of whether US$6 per passenger is a reasonable reward for airlines if you consider the technology, skills and capital that is invested,” he said.

Passenger traffic has been expanding by about 5 percent to 6 percent and jet fuel prices remain high, but below their peak last year, Tyler said.

The US$12.9 billion net profit the industry expects for this year, based on US$708 billion in revenue, is itself a significant improvement on the group’s earlier forecasts.

He attributed that to “a slight fall in the high price of oil” and the efficiencies of mergers and joint ventures, along with more success at cutting costs. More airlines, for example, are charging passengers separately for food, baggage and other items.

IATA chief economist Brian Pearce expects these factors to continue to help the industry into next year.

Fuel prices are forecast to ease further due to new supply discoveries and the possible return to oil production of Iran.