IATA has upped its 2012 profit forecast for Asia-Pacific carriers by US$300 million to US$2.3 billion profit for the year as part of a global upgrade.
IATA now expects the global industry to make a profit of US$4.1 billion, up from a previous US$3 billion estimate after a stronger than expected second quarter. IATA noted that with 40% of the global cargo market, Asia-Pacific carriers are the most exposed to weak cargo demand, but adds: “Soft cargo markets have been more than offset by relatively robust performance in passenger markets. China, for example continues to have the fastest growing major domestic market, experiencing 9.4% growth over the first eight months of the year.”
Despite the revision, the industry’s net profit margins fall from the 1.4% realized in 2011 to 0.6% (up from the previously forecast 0.5%). In a first look at 2013, the association sees global profits rising modestly to US$7.5 billion, though this is a net margin of just 1.1%.
“The European sovereign debt crisis lingers on. China continues to moderate its growth. And the impact of recent quantitative easing in Japan and the US will take time to yield growth. While some of these risks have diminished slightly over recent months, they continue to take their toll on business confidence. The outlook improvement is due to airlines performing better in a difficult environment,” said Tony Tyler, IATA’s director general and CEO.
Improved airline performance was evident in second quarter results, which showed operating profits close to those of the previous year, following a tough first quarter. “The evidence is showing that consolidation is producing positive results,” noted Tyler.
“Asset utilization in the passenger segment is high across many markets. In past cycles passenger load factors and aircraft utilization would have fallen by this stage, in the face of slowing demand and increasing aircraft deliveries. In the current cycle airlines have kept both load factors and aircraft utilization high. This has allowed yields to improve and spread fixed costs more widely. However, asset utilization 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.”