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IATA raises Mideast profit forecast

DUBAI — Middle East airlines are on track to book a net profit of $800 million this year, sharply up from an earlier projection of $100 million, as they weather the impact of political unrest in the region while airlines globally are expected to post a net profit of $6.9 billion as stronger passenger numbers offset the impact of the weak global economy, the International Air Transport Association, or IATA, said on Tuesday.

The industry group said it expects the global aviation industry to make a $6.9 billion profit in 2011, up from $4 billion previously projected, but warned that the recovery is still weak and global airline earnings would likely drop 29 per cent next year as Europe’s debt crisis and higher costs dent profitability.

In June, IATA, which represents around 230 airlines in over 115 countries, slashed its profit forecast for the Middle East carriers to $100 million, down 89 per cent from its earlier forecast of $900 million.

It also had predicted that the global airline industry profit would plunge 54 per cent to $4 billion compared with the $8.6 billion profit forecast made in March and a 78 per cent drop compared with the $18 billion net profit recorded in 2010.

“Airlines are going to make a little more money in 2011 than we thought. That is good news. Given the strong headwinds of high oil prices and economic uncertainty, remaining in the black is a great achievement,” said Tony Tyler, IATA’s director-general and CEO.

“But we should keep the improvement in perspective. The $2.9 billion bottom line improvement is equal to about a half a per cent of revenue. And the margin is a paltry 1.2 per cent. Airlines are competing in a very tough environment. And 2012 will be even more difficult,” said Tyler.

The global travel group said Middle East carriers are the second largest beneficiary of the better than expected passenger demand.

“The region’s carriers are expected to make $800 million, up from the $100 million projected in June. Holding up against potential demand shocks associated with political instability, the region’s carriers grew passenger traffic 8.3 per cent compared to a capacity increase of nine per cent in the first seven months of this year. An EBIT margin of three per cent is projected.”

However, net profit in 2012 is predicted to weaken further to $4.9 billion due to the expected deterioration of world economic conditions, Tyler said.

“Despite the economic doom and gloom, people are travelling.”

In the seven months to July, passenger volumes were up 6.4 per cent over the year before but cargo had stagnated because of a slowdown in world trade.

· issacjohn@khaleejtimes.com