Friday 20 April 2018

Airlines expect to fly high in 2014 with global profits of €19.7bn

Tony Tyler, International Air Transport Association (IATA) Director General and CEO
Tony Tyler, International Air Transport Association (IATA) Director General and CEO

THINGS are looking up for airlines. It's been a turbulent few years for air carriers -- 9/11, the recession and the Icelandic volcanic ash crisis all had a catastrophic impact on the industry.

But now the International Air Transport Association (IATA) has announced a second year of increasing profitability, releasing yet another upward revision to its industry financial outlook.

For 2013, airlines are expected to return a global net profit of $12.9bn (€9.4bn), up from $11.7bn from its September forecast. Net profits in 2014, it said, should jump to a massive $19.7bn, up from the $16.4bn forecast just two months ago.

Carriers have lower jet-fuel prices to thank, as well as improvements to the industry's structure and efficiency.

Last week saw United and American Airlines ink a merger that will create the largest airline the world has ever seen.

Thus North American airlines are expected to generate the most profits and best margins of both 2013 and 2014. This consolidation is also improving connectivity for consumers, which translates to improved financial results.

IMPROVEMENTS

European airlines are also expected to see some improvements in profitability from successful joint ventures over the North Atlantic.

"Overall, the industry's fortunes are moving in the right direction" said Tony Tyler, IATA's director general. "Jet fuel prices remain high, but below their 2012 peak. Passenger demand is expanding in the 5-6pc range -- in line with the historical trend.

"Efficiencies gained through mergers and joint ventures are delivering value to both passengers and shareholders."

But one dark spot on an otherwise sunny horizon is European regulation.

At home, European carriers remain burdened by high costs, cumbersome regulation and high taxes. The UK government continues to increase its Air Passenger Duty unabated, having just confirmed the next increase to the world's largest aviation tax in April 2014.

"I am increasingly concerned that governments have not fully appreciated the critical role that aviation plays in our connected world. Regulatory and tax burdens incrementally, but significantly, rise year-on-year.

"Some governments even appear to be backtracking on deregulation and are micro-managing in areas such as passenger rights," said Tyler.

"Supporting aviation's enabling capabilities pays big economic dividends," said Tyler.

Ireland, thankfully, is the exception to the rule, with the complete abolition of air travel taxes in the latest budget.

In 2014, the sector will mark 100 years since the first scheduled commercial air service was inaugurated, a century in which developments in aviation changed the course of history and the way we live our lives.

Irish Independent

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