IATA upgraded (03-Jun-2013) its global outlook for the airline industry:
- Revenue: USD711 billion its 2013;
- Ancillary revenues contribution: 5% (up from 0.5% in 2007);
- Airline industry profit: USD12.7 billion, up USD2.1 billion from previous projection;
- Net margin: 1.8%;
- Return on invested capital: 4.8%.
Passenger growth forecast:
- Passenger traffic: 3.13 billion;
- Passenger capacity: 4.3%;
- Passenger demand; 5.3%;
- Passenger load factor: 80.3%;
- Passenger yields: 0.3%.
- Freight volumes: 52.1 million tonnes;
- Freight yields: -2%;
- Oil prices (Brent): USD108 per barrel, compared with USD109.5 in previous forecast and a USD111.8 average for 2012;
- GDP growth: 2.2%, up from 2.1% growth in 2012. And it is about half the 4% growth recorded in 2006;
- Trade growth: 4%, up from 2.5% growth in 2012.
- USD4.6 billion profit in 2013, compared to previous projection of USD4.2 billion;
- Passenger demand: 6.3%;
- Capacity: 5.6%;
- Asia-Pacific will lead all regions both in terms of absolute profits and earnings before interest and taxes (EBIT) margin (5.0%). Main driver is strong growth in China and long-haul markets, supported by buoyant trade flows and other business activities. Stronger growth is also expected from Japan as market-stimulating measures take effect in the region’s second largest economy. Passenger travel in the region is expected to grow 6.3%, ahead of the expected 5.6% growth in capacity.
- USD4.4 billion profit, up from the USD3.6 billion projected previously;
- Passenger demand: 1.7%;
- Capacity: 0.7%.
- Structural changes, such as consolidation and efficiency measures in the domestic market are the main drivers of the better performance. Demand growth from passengers will be the slowest among all regions at 1.7%, reflecting both the maturity and sluggishness of the US domestic market. But this is significantly above the 0.7% expected expansion in capacity, and therefore further improvements in asset utilization are expected.
- USD1.6 billion profit, double the previous projection of USD0.8 billion;
- Passenger demand: 4%
- Capacity: 2.7%
- The region’s EBIT margin is expected to be just 1.3%, second lowest after Africa at 0.9%. Improvements in the Eurozone crisis have stalled in recent months, giving rise to fears of a third false dawn. In 2011 and 2012, improving trends dissipated when the crisis took unexpected turns for the worse. Economic conditions are the weakest in this region but consolidation on the North Atlantic market and within Europe is helping to improve financial performance.
- USD1.5 billion profit, up from the previous projection of USD1.4 billion;
- Passenger demand: 15%;
- Capacity: 12.6%;
- The region’s successful hubs continue to connect long-haul traffic, with particular strength in facilitating connectivity to emerging economies in Asia and Africa.
- USD0.6 billion profit, unchanged;
- Passenger demand: 9.8%;
- Capacity: 7.8%;
- Growth boosted by the effects of buoyant trade and other business flows with Asia and North America.
Africa: Profit of USD100 million;
- Passenger demand: 7.5%;
- Capacity: 6.7%.
- Africa will continue to be the weakest performers, with passenger load factors below 70% and operating margins averaging less than 1%. The region’s airlines continue to face high operating costs, especially for fuel, which is on average 21% more costly than in other parts of the world. Long-haul services face stiff competition from carriers outside the region, while significant aero-political barriers still stand in the way of enhanced regional connectivity. [more - original PR]
IATA: “This is a very tough business. The day-to-day challenges of keeping revenues ahead of costs remain monumental. Many airlines are struggling. On average airlines will earn about USD4 for every passenger carried - less than the cost of a sandwich in most places. Generating even small profits with oil prices at $108/barrel and a weak economic outlook is a major achievement. Improved performance is what’s keeping airlines in the black. Airlines are putting more people in seats. For the first time in history, the industry load factor is expected to average above 80% for the year. And with ancillary revenues topping 5%, it is clear that airlines have found new ways to add value to the travel experience and to shore-up the bottom line... All regions are expected to report a profit in 2013, with some being stronger than others. Overall, a trend is emerging that sees strengthening profitability among larger or niche airlines. The profitability of many smaller airlines - without the scale economies, market diversification or niche markets—faces greater challenges from high fuel prices and weak economic performance,” Tony Tyler, director general and CEO. Source: IATA, 03-Jun-2013.