The world’s airlines need more nourishment than an espresso – despite IATA’s raised forecast

IATA recently raised its 2013 net profit forecast from USD8.4 billion to USD10.6 billion. Although the outlook for fuel prices has increased since its previous forecast in Dec-2012, so have its passenger and cargo traffic and yield forecasts. IATA's forecast 2013 EBIT margin of 3.3% would be above mid-cycle, but below historic peaks. IATA releases contain other data with some interesting home truths.

Since the last aggregate net loss in 2009, the industry tightly controlled non-fuel costs, but fuel cost increases have eroded almost all the gains. Moreover, in spite of greater consolidation, real pricing power is still elusive. 2012's net profit is equivalent to the price of an espresso coffee for each passenger, a pittance compared with the capital invested in the industry and its future investment needs. The ongoing failure of this economically vital sector to cover its cost of capital is a conundrum that cannot continue indefinitely.

Only full global liberalisation of controls on market access and ownership are likely to resolve it and that might require a lot more espressos.