Asia-Pacific airlines expected to be best performers next year making US$2.3bil profit

From Star Online: Business
20th Dec 2012

PETALING JAYA: Asia-Pacific airlines are expected to be the best performers, contributing US$2.3bil profit next year, according to the International Air Transport Association (IATA).

This region will deliver the second highest absolute profit among the regions with earnings before interest and tax margins for Asia-Pacific airlines expected to grow significantly to 4.7%. Also, economies in this region remain the most dynamic and the deterioration in cargo markets is expected to come to an end next year.

“Our central forecast is for airline net profits to improve to US$8.4bil next year from US$6.7bil this year,” IATA chief economist Brian Pearce said.

He said Asia-Pacific airlines would retain the strongest margins while North American airlines would be the most improving ones.

“Europe, hampered by the eurozone crisis, would manage no better than breakeven,” he added.

Last week, IATA revised upwards airlines' profitability forecast but warned that profit margins might remain weak.

IATA expects the aviation industry to post US$8.4bil (RM25.2bil) in profit next year, up from US$7.5bil forecast in October.

The global body also revised upwards the aviation industry's financial outlook for this year with airlines expected to post a profit of US$6.7bil.

IATA director-general and CEO Tony Tyler said the numbers showed some improvement the expected US$637bil in revenue while net profit of US$6.7bil showed a net profit margin of 1%.

“And US$8.4bil (profit) on expected revenues of US$659bil next year will mean a net profit margin of 1.3%. The industry is keeping its head above water,” Tyler said.

In a presentation in Geneva, Switzerland, Pearce said both travel and cargo would register moderate growth next year. He said after two years of decline, a “small rise of air freight volumes” was expected next year while passenger numbers are forecast to expand to 3.1 billion next year. “Airline profits were squeezed in 2011 and this year by the slowdown in world trade and the rise in oil prices. Both are expected to ease next year, allowing some improvement in travel, cargo and airline profits,” Pearce said.

He also noted the decoupling of cargo and travel given the robust air travel but shrinking air freight.

“One unusual feature of aviation markets is the strong divergence between a robust expansion in air travel and the shrinkage of air freight since peaking in early 2010, after rebounding sharply from the recession.

“In past cycles, weakness in air freight has been a leading indicator of weakness in air travel. That has not been the case this time,” Pearce said.

Meanwhile, a study by IATA showed that air travellers were frustrated by the queuing time for security checks, removing of shoes and belts, removing of electronic items and liquids from their carry-on bags. The study also revealed that 75% would rather go through a full body scanner than have a full pat down by a security officer.

[Source]