IATA predicts $18.7 billion airlines profit in 2014

Geneva – The International Air Transport Association (IATA) announced that the airline industry remains on track to deliver a second consecutive year of improved profitability.

This is despite a slight downward revision to its industry outlook for 2014 to an industry profit of $18.7 billion from the previously forecast $19.7 billion.

The main driver of the downward revision is higher oil prices which are now expected to average $108.0/barrel (Brent) which is $3.5/barrel above previous projections. The $3 billion added cost on the industry’s fuel bill is expected to be largely offset by stronger demand, especially for cargo, which is being supported by a strengthening global economy. Overall industry revenues are expected to rise to $745 billion ($2 billion greater than previously projected).

“In general, the outlook is positive. The cyclical economic upturn is supporting a strong demand environment. And that is compensating for the challenges of higher fuel costs related to geo-political instability. Overall industry returns, however, remain at an unsatisfactory level with a net profit margin of just 2.5%,” said Tony Tyler, IATA’s Director General and CEO.

The aviation industry retains on average $5.65/passenger in net profit. This is improved from $2.05 in 2012 and $4.13 in 2013. But it is below the $6.45 achieved in 2010.

“The efficiencies of improved industry structure through consolidation and joint ventures is providing more value to passengers and helping airlines to remain profitable even in difficult trading conditions. But we still need governments to understand the link between aviation-friendly policies and broader economic benefits. In many parts of the world the industry’s innate power to drive prosperity through connectivity is compromised by high taxes, insufficient infrastructure and onerous regulation,” said Tyler.

IATA outlook forecasts are estimates of the aggregate performance of the global air transport sector and should not be taken as an indicator of individual airline performance which can vary greatly in magnitude and direction from the global outlook.

Regional performance by airlines highlights there is a wide range of challenges and opportunities. All regions are expected to see higher profits and EBIT margins in 2014 than in 2013.

North American airlines are expected to post a profit of $8.6 billion—the biggest contribution to industry profits. This is $300 million better than previously projected, reflecting the strength of the economic recovery in the US.

European airlines are expected to post a $3.1 billion profit. That is $100 million less than previously forecast, but more than double the $1.2 billion profit posted in 2013.

Asia-Pacific airlines are expected to post profits of $3.7 billion and an EBIT margin of 3.4%. This is an improvement over 2013, helped by a slightly better outlook for cargo markets. Airlines in this region have the largest share of the international air cargo market.

Middle Eastern airlines are expected to post a $2.2 billion profit.Latin American airlines are expected to post a $1 billion profit. 

African airlines are expected to post a $100 million profit, unchanged from the previous forecast, but reversing the $100 million loss in 2013 according to IATA statement.

March 12, 2014