IATA revised (01-Oct-2012) its global airline industry profit outlook for 2012 from USD3 billion to USD4.1 billion. The fall in profits from USD8.4 billion in 2011 will be "cushioned by improved airline performance", with net margins declining from 1.4% in 2011 to 0.6% in 2012 (up from the previously forecast 0.5%). IATA director general and CEO Tony Tyler said the outlook improvement is "due to airlines performing better in a difficult environment”, with airlines showing better 2Q operating profits, after a tough 1Q. IATA stated industry consolidation is producing positive results. Asset utilisation in the passenger segment is high across many markets, in contrast to previous cycles when passenger load factors and aircraft utilisation would have fallen in the face of slowing demand and increasing aircraft deliveries. This has allowed yields to improve and spread fixed costs more widely. However, asset utilisation has fallen in the weaker cargo market, adversely affecting Asia Pacific airlines in particular, where this business makes up a larger share of total revenues.
2012 'outlook drivers':
- GDP: Forecast unchanged at 2.1% for 2012;
- Oil Prices: Crude oil price forecast of USD110 per barrel unchanged for 2012. Jet fuel prices forecast has increased by USD1.20 per barrel to USD127.70. This is will add USD1 billion to the industry fuel bill, bringing an anticipated USD208 billion cost for the year;
- Passenger: Demand is expected to grow by 5.3% over the course of 2012, which is 0.5 ppt better than the previous forecast. Over the first eight months of 2012 passenger demand increased by 1.4 ppts ahead of capacity. Passenger load factors averaged 79.3% for the same period. Yield growth is expected to be 2.5% (1 ppt ahead of previous forecast);
- Cargo: Forecast 0.4% contraction, compared to a 0.3% expansion under the previous forecast. For the first eight months of 2012, cargo capacity grew 3 ppts ahead of demand. Matching cargo capacity to demand remains challenging. The weaker supply/demand environment has led to a more pessimistic outlook for cargo yields which are expected to average at 2.0% below 2011 levels (previous forecast for flat growth).
- Europe: Loss forecast to worsen from USD1.1 billion to USD1.2 billion. European carriers have seen moderate traffic growth but an indication of the difficult trading conditions can be seen in the premium travel market;
- North America: Profit outlook increased from USD1.4 billion to USD1.9 billion, owing primarily to the impact of tight capacity management;
- Asia Pacific: Profit outlook increased from USD2 billion to USD2.3 billion. The region’s carriers are the most exposed to weak cargo demand;
- Middle East: Profit outlook increased from USD400 million to USD700 billion. The region shown the strongest passenger traffic growth and carriers continue to expand their long-haul market share with connections through their expanding hubs;
- Latin America: Profit outlook unchanged at USD400 million. Region continues to show robust growth in traffic;
- Africa: Expected to break even in 2012, up from previous forecast of USD100 million loss.
2013 initial forecast:
- Profits: Rising "modestly" to USD7.5 billion, net margin of 1.1%;
- Global GDP: 2.5% (up from 2.1% in 2012);
- Passenger yields: Flat;
- Passenger traffic: 4.5%;
- Cargo traffic: 2.4%.
- Cargo yields: -1.5%;
- Industry revenue: USD660 billion, +3.8%;
- Industry fuel costs: USD208 billion, flat. [more - Forecast Highlights] [more - Full Forecast]