ETW STAFF – Mumbai
The International Air Transport Association (IATA) announced an upward revision to its industry financial outlook. For 2012 airlines are expected to return a profit of US$ 6.7 billion (up from the US$ 4.1 billion forecast in October). This is expected to improve slightly to US$ 8.4 billion in 2013 (marginally better than the US$ 7.5 billion forecast in October). Industry net post-tax margin, however, will remain weak at 1.0 per cent in 2012 and 1.3 per cent in 2013.
Improved prospects for 2012 are being driven by strong airline performance in the second and third quarters. Historically, when GDP growth has fallen below 2 per cent the airline industry has returned a collective loss. “With GDP growth close to the ‘stall speed’ of 2 per cent and oil at US$ 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, director general and CEO, IATA.
The improved performance is most evident 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. “It’s a diverging picture. Economies of scale are helping larger airlines to cope much better with the difficult environment than small and medium-sized carriers which continue to struggle,” said Tyler.