The International Air Transport Association (IATA) revised its current industry financial outlook to a profit of $6.7 billion from the $4.1 billion forecast in October 2012. This was primarily due to strong airline performance in the second and third quarters after an acute p worsening in the first quarter.
In spite of the slowing world economy, business travel was supported by more strong international trade in goods and service. This contributed to a convinced picture for both passenger volumes and yields.
Notwithstanding high fuel prices and financial turmoil in world economy, airline profits and cash flows withstood at levels similar to the year 2006 when oil prices were approximately $45 per barrel lower and world economic growth was 4.00 percent. During the year 2012 the various cost cutting measure by major airlines helped the financial performance.
During the year US airlines continue to improve their profitability. Overall profitability did not worsened as much as expected, despite the weakness of cargo markets.
In Europe, where home markets have been damaged by the euro-zone crisis, performance has improved although IATA still anticipates the regions only to break even.
The improved performance in the year 2012 has been partially due to consolidation in the airline industry including the merger of United and Continental in the USA, to form the world's largest airline.
The past year 2012 has witnessed the best ever for safety, with none of IATA members losing a western built aircraft in the past 12 months.
The US and European region were maintaining strong growth with long-haul connection traffic but unfortunately the traffic performance was no doubt weakened by the Arab spring and hanging around instability.
Overall performance of airlines has been positively affected by strong passenger traffic growth of5.3 percent and a three percent improvement in yields. In contrast cargo markets shrank by two percent and cargo yields were down two percent on 2011 levels.
Economies of scale helped larger airlines to cope much better with the difficult environment than small and medium-sized carriers which continue to battle.
IATA released for global airlines a brighter profit forecast for the year 2013. Historically it is observed when GDP growth has fallen below 2 percent the airline industry has returned a corporate loss.
With GDP growth close to 2.0 percent and oil at $109.5 per barrel, the major airlines conformed to the hard environment through improving skilfulness and restructuring.
IATA's profit improvement for 2013 is driven by slightly higher economic growth and slightly lower fuel prices. However, expectations for an acceleration of global economic growth next year have diminished.
It is expected that the airline combined profit should reach $8.4 billion. Next year IATA airlines expect to carry more than 3 billion passengers for the first time. Over the next year, passenger demand is forecast to rise by 4.5pc.
For the past couple of years the airline industry was disturbed by dull world trade growth and high oil prices. For the next couple of years there is a chance of better growth and a little decline in oil prices. Nevertheless there is fear that the improved profitability could be subverted by continued economic uncertainty in Europe and the USA.
Economies in this region are expected to remain the most dynamic and the deterioration in cargo markets is expected to come to an end in 2013.
Economies in this region remain the most dynamic and the deterioration in cargo markets is expected to come to an end in 2013.
IATA, whose 240 member airlines carry 84 percent of all passengers and cargo, said the industry's overall revenue in 2013 is expected to rise to $659 billion from $637 billion this year, while costs will go up to $640 billion from $623 billion.
The continuing financial uncertainty hovering over the European economy, high taxes and inefficient infrastructure will continue to plague the continent's industry next year. There are opportunities for further consolidation of airlines in Europe, Major carriers such as Lufthansa, KLM and international Airlines Group, despite their own struggles, may try to buy up some of the smaller airlines.
U.S. carriers will lead a recovery in the global airline industry's profits next year, the industry's trade group forecast mainly due to restructuring efforts, rather than an improvement in the overall economic climate, which will likely remain depressed.
North American airlines are expected to do best in 2013, recording a combined net profit of $3.4 billion, ahead of $3.2 billion in Asia Pacific, $1.1 billion in the Middle East and $700 million in Latin America, the IATA estimated.
Asia-Pacific carriers are expected to post a net profit of $3 billion. The region may be under pressure from weak cargo markets and slower economic growth in China.
Emerging economies such as China, India and Latin America were now increasing global growth and were transporting huge commodities by sea rather than flying low-volume, high-value goods.
The U.S. and Europe have lost their historic authority and were now responsible for just 9 percent and 7 percent respectively of trade growth.
Middle East airlines are expected to post a profit of $800 million, $100 million over the October outlook. That is slightly below the $1 billion that Middle East carriers made in 2011.
The outlook for Latin American airlines is unchanged at $400 million. Along with North America, it is the only region to see an improvement on 2011 when the region's carriers recorded a profit of $300 million.
Latin America will see net profits rise by $300 million to $700 million. Strong trade flows and robust growth in this region support revenues and improvements continue from consolidation in Brazil.
African airlines are expected to end the year at break even. Their forecast will remain to the level of 2011.Cargo demand is expected to increase by 1.4 percent in 2013, not enough to make up for the 2 percent decline suffered in 2012.
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