Pacific Islands Regional Airlines Will Lead the Way on Profit Hikes

April 19, 2013
Airlines from the Pacific along with some Asian carriers will lead the world in profit hikes in 2013, the global International Air Transport Association (IATA) revised forecast shows.

SYDNEY, April 17 -- Airlines from the Pacific along with some Asian carriers will lead the world in profit hikes in 2013, the global International Air Transport Association (IATA) revised forecast shows.

Profit potential of Pacific-based airlines like Australia's Virgin Blue and the Qantas group, Air New Zealand are unrivalled in the world when you merge the bottom lines for such Asian giants as Cathay Pacific, Thai Airways, Singapore Airlines, Malaysian Airlines, Air China, China Southern, China Eastern and Japan Airlines.

Together, the region will generate US$4.2 billion this year'surpassing the initial projected figure of US$3.2 billion and that of last year. Net profits, however, for the 240-member airlines of IATA could have been significantly higher this year if it were not for government impediments and soaring fuel prices.

Speaking for 240 airlines in 115 countries, IATA member companies which carry 84% of the world's air traffic, its chief executive anticipates profit levels for airlines in 2013 to be third largest since 2000.

'It's a small step in the right direction,' IATA's Tony Tyler outlined in his latest figures. This year's promising Pacific and Asian results will set the global airline industry's net profit margin to 1.6%.

'That tells you something about how difficult the airline business is.' It expects airlines globally to rake in US$10.6 billion in net profit, up from an earlier forecast of US$8.4 billion and substantially better than the US$7.6 billion achieved in 2012.

Founded in 1945 by 57 member airlines, IATA now represents air passenger and cargo movements worth nearly $2.2 trillion annually. From the South Pacific region, Air Pacific, Air Vanuatu, Air Niugini, Air Tahiti Nui, AirCalin, Air Tahiti and Guam's Continental Micronesia are avid members of IATA'responsible for connecting around 3 billion people every year.

'The fortunes of the industry rise and fall with the global economic cycle,' said Tyler. Europe's ongoing recession, slow recovery in the United States and natural disasters in Japan have led to slowdown in world travels. But some astute strategic planning by airlines in the region will ensure a huge rebound to rising profitability in 2013.

Airlines deliver tremendous value 'Aviation is a catalyst for economic growth and prosperity...and an industry that can generate sustainable returns can do that more effectively.'

While recent mergers and new code-sharing between Australian regional carriers like Virgin with Etihad and Qantas with Emirates will ignite new rivalry for passenger travels between the two regions of the Pacific and Middle East, it can only add revenue to the regional airlines. Middle Eastern airline profits are expected to rise by more than half this year to US$1.4 billion as they extend their routes around the globe.

IATA anticipates that about a third of the world's trade by value dollars is with goods shipped by air'moving a bumper 50 million tons of cargo every year. Tyler reckons that once the atrocities and economic slowdown around Europe, America, Africa and the Middle East subside, the regional Pacific and other airlines will be able to reap greater profits.

'Efficiency gains have seen the airlines making some money in very difficult (high oil prices and weak economic growth),' he said

'A few years ago, that would have been impossible. But we still are nowhere near approaching what would be considered a normal return in other industries.' Returning a margin of 5.3%, the airlines from Asia Pacific are world beaters when it comes to contributing to the industry's profits. It is followed by North America at 4.1% ($3.6 billion in profits) and the Middle East at 3.4%, Europe $800 million, Latin America $600 million, Africa $100 million.

Tyler pointed out that improvements in the industry's profitability were encouraging, but must be kept in perspective. 'Chronic anaemic profitability is characteristic across most of the aviation value chain when compared to other sectors. 'It will require more than improving economic conditions to fix. Neither the challenges nor the benefits of doing so should be underestimated.'

Government gate access He said governments around the world and especially in Europe and the United States were deterring airlines from cashing in on further opportunities in the aviation industry.

Airlines have capacity to increase traffic flow from developing countries in Asia and the Pacific to Europe but government regulations like the new UK passenger duty from this month and a move towards a single European sky were inhibiting carrier companies from expanding operations in that region.

'Many governments don't seem to understand. Just look at the knocks that the industry is taking,' cautioned Tyler.

Governments with open deregulation policies have found that airlines are contributing to their country's growth by way of employment, tourism, air cargo and increasing access to the outside world.

'That is why we will continue to remind governments to engage the industry in a partnership to create a joined-up policy framework that enables a sustainable aviation industry and encourages the benefits it brings.'

Tyler said IATA has observed that restrictive government regulations and taxes only suffocate airlines from doing their business in a much greater profitable manner.

'There is a long list of government-generated impediments to providing the connectivity that could have a very powerful and positive impact on generating economic growth that is so desperately needed.'

He said the relationship with governments goes far beyond safety, security, and sustainability. As aviation is one of the fastest growing industries in the world, it needs government backing to prosper.

'A perfect world would have open markets and a level playing field. That is not the case today.'.. (GLOBAL TRAVEL INDUSTRY NEWS) Published by HT Syndication with permission from PACNEWS. For any query with respect to this article or any other content requirement, please contact Editor at [email protected]

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