JOC Staff | Dec 13, 2012 11:18AM EST
The world’s airlines, benefiting from capacity cuts, lower costs and accelerating consolidation, are expected to book combined net income of $6.7 billion this year, up from a forecast of $4.1 billion in October, the International Air Transport Association said.
IATA also upgraded its 2013 forecasts, saying the industry will post earnings of $8.4 billion, $900 million higher than its previous prediction.
Despite the improved prospects, however, the industry remains in a weak condition, IATA cautioned. The projected 2012 profit is well below the $8.8 billion earned in 2011 and its 1 percent net profit margin is well below the 7 to 8 percent needed to recover the industry’s cost of capital.
Europe is expected to post the biggest improvement, with its carriers breaking even rather than losing $1.2 billion as previously forecast. That would represent a $400 million decline from 2011, however.
North American airlines are expected to close 2012 with a collective net profit of $2.4 billion compared with $1.7 billion in 2011.
Asia-Pacific carriers likely will post the biggest drop in profits, to $3 billion from $5.4 billion in 2011, reflecting weak cargo markets and slowing economic growth in China.
Strong passenger growth, up 5.3 percent from 2011, and a 3 percent increase in yield is driving the improved performance. Cargo markets, by contrast, have contracted 2 percent and cargo yields are down 2 percent from last year, IATA said.
“Although world trade is still expanding, the pattern of economic growth — concentrated in the emerging markets — has favoured ocean over air freight,” IATA said.
Cargo demand is expected to grow 1.4 percent in 2012 while yields likely will soften 1.5 percent due to excess capacity.