Iata lowers 2014 profit projection

Iata lowers 2014 profit projectionBy Phil Davies
Iata today revised downwards its airline industry outlook for 2014 to an overall profit of $18.7 billion from the previously forecast $19.7 billion.Higher oil prices were cited as the main reason, with rates now expected to average $108 per barrel – $3.5 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, according to Iata. Fuel currently accounts for some 30% of the average airline costs.

Overall industry revenues are expected to rise by $2 billion to $745 billion.

Passenger demand growth of 5.8% is expected this year, slightly weaker than the previously forecast 6%, but an improvement on the 5.3% growth for 2013. Passenger yields are expected to deteriorate by 0.3%.

The average fare per departing passenger is anticipated to be about $181 this year, with ancillary services potentially adding almost $14 on top.

Pilot projects continue to be launched in anticipation of the expected US Department of Transportation approval later this year of Iata’s New Distribution Capability.

“Modernising distribution standards will enable airlines to develop further innovations which enhance consumer choice and add value to the travel experience,” Iata said.

Director general and chief executive Tony Tyler said: “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%.”

The aviation industry retains on average $5.65 per passenger in net profit against $2.05 in 2012 and $4.13 in 2013 but 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,” said Tyler.

“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.”

Sourced from Travel Weekly

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