Tags: airline | profit | forecast | Asia

IATA Cuts 2013 Airline Industry Profit Forecast

Monday, 23 Sep 2013 11:05 AM

 

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Global airlines cut their 2013 industry profit forecast by 8 percent to $11.7 billion, citing weaker growth in parts of Asia and a worsening slowdown in freight demand.

The International Air Transport Association, which represents some 200 carriers, said the $1 billion downgrade from its previous forecast for the whole industry in June also reflected a spike in oil prices driven by the Syrian crisis.

"The industry situation is not improving as quickly as we had expected," IATA Director General Tony Tyler said.

"I should stress that this is still an improvement over the 2012 profit of $7.4 billion."

For 2014, IATA predicted a rebound in profits to $16.4 billion on hopes of rising business and consumer confidence and a respite in oil prices. However, its chief economist warned any prolonged spike in fuel costs could upset this scenario.

"Emerging market growth in India, Brazil and to a certain extent China has been slower than anticipated," Tyler told reporters on a conference call.

"This has been somewhat balanced by improvements in the U.S. economy as well as a stabilization in the eurozone."

IATA raised its forecasts slightly for North American and European airlines as U.S. carriers consolidate and cut capacity, and Europe's financial crisis shows signs of easing.

But Tyler said he was concerned about a U.S. government attempt to block a proposed merger between U.S. Airways and American Airlines, saying it contradicted a general shift away from regulation in air transport.

For Asia, which is set to become the leading power in aviation in coming years, IATA chopped a third off its profit forecast to $3.1 billion.

Although China's domestic market continues to grow and Japan's monetary expansion is boosting that country's carriers, China's international routes and Indian markets face pressure.

Asia is particularly exposed to stagnant growth in cargo markets that reflect weak international trade and an oversupply of plane belly capacity caused by growth in the passenger fleet.

IATA sees growth of just 0.9 percent in air cargo traffic, which handles a third of the world's trade by value, compared with a previous forecast of 1.5 percent and well below global passenger growth of 5 percent predicted for this year.

© 2014 Thomson/Reuters. All rights reserved.

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