Global airline profit forecast revised upwards

The International Air Transport Association raised its 2012 global airline profit forecast 37% as carriers slow capacity growth to cope with higher fuel prices and waning travel demand.

Carriers may post $4.1bn (€3.2bn) of profits this year with a margin of 0.6%, the group — whose members account for 84% of global airline traffic — said in a statement. That compares with a June forecast for gains of $3bn and a profit of $8.4bn in 2011.

The group raised its forecast as airlines reported improved earnings in the second quarter, it said. Delta Airlines and US Airways Group beat analysts’ profit estimates, while Singapore Airlines posted its first increase in net income in seven quarters.

“The industry has re-shaped itself to cope by investing in new fleets, adopting more efficient processes, carefully managing capacity and consolidating,” Tony Tyler, IATA chief executive said.

He added: “The industry’s profitability still balances on a knife-edge, with profit margins that do not cover the cost of capital.”

The group expects carriers’ earnings to rise to $7.5bn next year on $660bn in sales, based on global gross domestic product growth of 2.5%.

European airlines are expected to post a loss of $1.2bn this year, compared with a previous forecast of $1.1bn, as a sovereign-debt crisis causes the eurozone’s economy to contract.

The region, IATA said, is also “plagued by high taxes, inefficient air traffic management infrastructure and an onerous regulatory environment”.

Air France-KLM Group and Deutsche Lufthansa AG have announced job cuts and reorganising operations. British Airways’ owner International Consolidated Airlines Group SA also plans job cuts at Spanish arm Iberia.

European airlines are expected to post a loss in 2013, the only region to lose money, IATA said.

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