Abu Dhabi: Middle Eastern airlines can expect to see their profits rise significantly in 2011, the International Air Transport Association (IATA) said on Tuesday as it revised its 2010 industry outlook.
The IATA said carriers in the region had benefited from strong local economies and an expanded share of long-haul markets. The Association also predicted airlines in the Middle East could see their profits rise next year from $100 million (Dh367 million) to $400 million (Dh1.4 billion).
The forecast comes a day after the UAE reported an 8.7 per cent increase in air traffic movement.
The Association has now projected a profit of $8.9 billion globally (up from the $2.5 billion forecast in June).
The Association said the improved short-term outlook was being driven by a number of factors including increased demand and disciplined capacity management.
The long-term global outlook, however, is not as promising with the IATA estimating that profitability will drop to $5.3 billion (Dh19.4 billion) in 2011. The bleak warning came as consumer confidence continues to falter in Europe and North America.
Reality check
Giovanni Bisignani, IATA's director-general and CEO, said that the recovery (this year) was much faster than expected but that "there was no cause for celebration".
He said: "Remember, this is an industry that is $240 billion in debt. This year is as good as it gets for this cycle.
"Governments are running out of cash for pump priming. Unemployment remains high and business confidence is weakening; we expect the 3.2 per cent GDP growth of 2010 to drop to 2.6 per cent in 2011. "The $8.9 billion profit that we are projecting will start to recoup the nearly $50 billion lost over the previous decade. But a reality check is in order. There are lingering doubts about how long this cyclical upturn will last.
"Even if it is sustainable, the profit margins that we operate on are so razor thin that even increasing profits 3.5 times only generates a 1.6 per cent margin. This is below the 2.5 per cent margin of the previous cycle peak in 2007 and far below what it would take just to cover our cost of capital."
The IATA also said on Tuesday that travel and freight markets would remain stronger in Asia, the Middle East and South America. Oil prices were expected to remain constant at $79 per barrel.
Europe is the only region to remain in the red although the IATA downgraded predicted losses for the region's carriers from $2.8 billion to $1.3 billion.
Bisignani added: "There have been positive developments all over the world."
