Middle East airlines profit outlook up

Dubai: Middle Eastern carriers are expected to post a profit of $1.4 billion (Dh5.14 billion) this year, up slightly from the $1.1 billion previously forecast and stronger than the $900 million profit recorded in 2012, the International Air Transport Association (IATA), said on Wednesday as it upgraded financial outlook for the global airline industry.

The aviation watchdog said it expects global airline industry to reap profits of $10.6 billion this year — up from the previously projected $8.4 billion, on the back of more passengers and cargo handled. IATA’s 240-member airlines carry 84 per cent of all passengers and cargo.

Highlighting the Middle East growth, IATA said in a statement that the growing role of the region’s airlines in providing connectivity to developing markets is reflected in “strong” traffic growth.

It added that the Middle Eastern airlines are expected to add 12.8 per cent in capacity in 2013, which will be outpaced by demand growth of 13.7 per cent.

According to IATA estimates, the region’s carriers rank third in terms of operating profitability with an Earnings Before Interest and Taxes (EBIT) margin of 3.4 per cent, after Asia-Pacific (5.3 per cent) and North America (4.1 per cent).

The industry’s overall revenue this year, meanwhile, is expected to reach $671 billion from $637 billion last year, while costs will go up to $649 billion from $623 billion, IATA said.

“Industry profits are taking a small step in the right direction. Against a backdrop of improved optimism for global economic prospects passenger demand has been strong and cargo markets are starting to grow again,” said Tony Tyler, IATA’s Director General and CEO. “The economic optimism is also pushing fuel prices higher. We are seeing a $12 billion improvement in revenue, and a $9-10 billion increase in costs — most of which is related to fuel.”

Overall, fuel will account for 33 per cent of airline costs this year, unchanged from 2012.

Further outlining considerable risks that remain and could derail recovery, Tyler said: “We have had two false starts already. Improving conditions in early 2011 and 2012 disintegrated as the Eurozone crisis intensified. And it could happen again. The impact of the unfolding situation in Cyprus is a risk factor that cannot be ignored.”

He also said that while the improvements in industry profitability are encouraging, they must be “kept in perspective”. “The only way out of the current economic difficulties that we see around the world is growth,” he pointed out.