IATA revises industry outlook upwards

Announcing an upward revision to its industry financial outlook, International Air Transport Association (IATA) has projected a return to profit of $6.7 billion, up from the $4.1 billion October forecast.

This is expected to improve slightly to $8.4 billion in 2013 (marginally better than the October forecast of $7.5 billion forecast. Industry net post-tax margin, however, would continue to be weak a 1.0 per cent in 2012 and 1.3 per cent in 2013.

The uptick in prospects for 2012 comes on strong airline performance in the second and third quarters. Despite high fuel prices and a slowdown in global economy, airline profits and cash flow levels remain comparable to 2006 when oil prices stood $45/barrel lower and world economic growth was 4.0 per cent.

Historically, when GDP growth has fallen below 2 per the airline industry posted a collective loss.

''With GDP growth close to the 'stall speed' of 2.0 per cent and oil at $109.5/barrel we expected much weaker performance. But airlines have adjusted to this difficult environment through improving efficiency and restructuring. That is protecting cash flows against weak economic growth and high fuel prices,'' said Tony Tyler, IATA's director general and CEO.

The improved performance is seen most in large airlines for which earnings before interest, taxes, depreciation and amortisation (EBITDA) averaged between 10 per cent and 15 per cent of revenue in the third quarter of the year.