Airlines group lifts 2012 profit outlook for industry to $4.1billion from $3 billion

(Reuters)

The outlook for the airline industry is improving, with profits expected to reach $4.1 billion this year and $7.5 billion in 2013, the International Air Transport Association said Monday.

The industry group raised its forecast for 2012 from $3 billion, saying passenger numbers so far this year were robust.

“Airlines are keeping their heads above water better than we expected,” IATA Chief Executive Tony Tyler told reporters.

But he noted that profits this year will still be less than half the $8.4 billion that the industry earned in 2011.

Tyler blamed Europe’s economic crisis, oil prices averaging $110 a barrel, weak cargo demand and low business confidence for the slowdown.

A profit of $4.1 billion on industry revenues of $636 billion equates to a margin of just 0.6 percent, Tyler noted.

Europe’s airlines are expected to record a loss of $1.2 billion this year due to the eurozone financial crisis and high taxation, IATA said.

It projected a $2.3 billion profit for companies in the Asia-Pacific region, despite a modest slowdown in the Chinese economy.

“Chinese domestic demand is still growing at nearly 10 percent and the demand for regional and long-haul travel, including in the premium classes, has held up better than expected in the face of economic uncertainty,” said Tyler.

The greatest improvement is seen for North American carriers, where IATA raised its profit forecast by $500 million to $1.9 billion, thanks to cost savings.

Middle East and Latin American airlines are also expected to post a profit, while African carriers will break even, said IATA

Tyler said the situation was likely to improve in 2013 as average oil prices ease to $105 per barrel, and government and central bank measures push global GDP growth to 2.5 percent from 2.1 percent this year.

The projected profits of $7.5 billion next year equate to a margin of 1.1 percent on revenues of $660 billion, IATA said.

The group represents some 240 of the biggest international airlines worldwide.