Citing demand shocks stemming from the conflict in Syria and
"disappointing growth in several key emerging markets," the
International Air Transport Association downgraded by $1 billion to $11.7
billion its full-year 2013 profit outlook for airlines worldwide.
Still, airlines this year will sustain an industry profit
streak, which is expected to continue in 2014. Next year's projection of $16.4
billion in aggregate profit would represent "the second strongest year
this century after the record-breaking $19.2 billion profit in 2010,"
according to IATA. The 2013 and 2014 forecasts build on a $7.4 billion global
airline profit in 2012.
"Overall, the story is largely positive," according to
IATA director general and CEO Tony Tyler. "Profitability continues on an
improving trajectory. But we have run into a few speed bumps."
Those include "deceleration of growth" in such
markets as India, Brazil and, "to some extent," China, according to
IATA, as well as a stagnant cargo market and a volatile oil market arising from
the Syrian situation, which has hampered demand.
As for bright spots, IATA has seen "an acceleration of
improvements in developed markets," and, despite oil price volatility,
indicated that "jet fuel prices have softened slightly."
Additionally, overall passenger growth "remains
robust" this year with a projected year-over-year increase of 5 percent.
"Passenger numbers are expected to grow to 3.12 billion—the first time
that they have topped the 3 billion mark," according to IATA.
Leading the pack, North American airlines collectively are
expected to post a $4.9 billion profit this year, more than doubling their 2012
profit.
"Along with an improved overall economic outlook, the
North American industry's improved profitability is being driven by the impact
of a better industry structure," according to IATA, which cited the impact
of airline consolidation and joint ventures. Though modest, this year's expected
2 percent year-over-year increase in passenger demand "will outstrip the
1.6 percent expansion in capacity," according to IATA.
Aided by relative strength in Germany and the United
Kingdom, European airlines are projected to post a collective $1.7 billion in
2013 profits, up from IATA's previous projection of $1.6 billion. "Slowly
improving performance is largely being driven by long-haul markets and economic
stabilization in the eurozone," according to IATA.
Contrasting the improving outlook for North American and
European airlines, IATA cut by $1.5 billion to $3.1 billion its aggregate
profit projection for Asia/Pacific airlines, citing underperforming markets.
IATA forecast "robust passenger demand growth of 6.6 percent to be
outstripped by a 6.9 percent increase in capacity" in the region.
Meanwhile, IATA left unchanged its $600 million profit
outlook for Latin American carriers this year. "Economic weakness in
Brazil is being offset by performance improvements as a result of restructuring
and capacity discipline," according to IATA.
The profit outlook for Middle Eastern airlines of $1.6
billion "is marginally ahead of the $1.5 billion previously
forecast," according to IATA.
Meanwhile, only African carriers are expected to swing to a
loss this year, estimated to be $100 million in aggregate, down from a $100
million profit in IATA's prior outlook.
As for 2014, IATA noted that "rising business and
consumer confidence levels should indicate an uptick in the global business
cycle." The airline association expects oil prices to fall next year,
passenger demand to grow by nearly 6 percent year over year and the cargo
market to pick up.
"All regions will see improved profitability, but
divergence in performance will remain," according to IATA's 2014 outlook,
which pointed to ongoing strength in the North American market.