Oct. 26--Airlines are upbeat about the prospect of improved profitability in the next 12 months, driven by growth in transport volume in terms of passengers and cargo, with an assist from lower input costs.
Some 63 percent of chief financial officers at the major carriers and heads of their cargo operations took a positive view in the latest survey by the International Air Transport Association.
As of Sept 30, the global airline body, which represents 239 airlines comprising 84 percent of global air traffic, issued an industry net profit projection of $11.7 billion for 2013 on revenue of $708 billion.
The expected performance trumps last year's net profit of $7.4 billion.
The October airline confidence survey reinforced IATA's September view that the upward trend should continue into 2014, when airlines are expected to return a net profit of $16.4 billion.
This would make 2014 the second-strongest year this century after 2010's record-breaking $19.2 billion profit.
The survey results have been broadly stable since April, with anywhere from 63-73 percent of respondents expecting profits to improve in the next 12 months.
Passenger travel will increase strongly in the year ahead, consistent with recent improvements in demand indicators. Cargo volume is also expected to improve but at a slower pace than passenger travel.
Input costs are reported to have declined in this year's third quarter despite a rise in jet fuel prices, with respondents citing cost management as the reason. Input costs will likely continue their decline in the year ahead.
Passenger and cargo yields are both expected to rise over the next 12 months, supported by an optimistic demand outlook, especially for the passenger business.
In its analysis issued at the end of last month, IATA said even with significant improvements expected next year, an industry profit of $16.4 billion implies a return on invested capital of just 5.2 percent.
That remains below the industry's weighted average cost of capital, which hovers between 7 percent and 8 percent.
Copyright 2013 - Bangkok Post, Thailand
