February 27, 2024

Airline Trade Group Sees Bigger Profits This Year

PARIS — Worldwide demand for air travel remains well above average, despite clear signs of a broad economic slowdown, an industry group said Tuesday as it substantially raised its profit forecast for the year.

But the deepening debt crisis in Europe and stagnant jobs growth in North America are likely to put the squeeze on both business and leisure travel by the year-end holiday season, the International Air Transport Association said. It said demand was likely to remain weak well into the first half of next year.

The association, which represents most of the world’s airlines, raised its forecast for combined 2011 profit to $6.9 billion, a big improvement from the $4 billion predicted in June. But collective profits in 2012 are likely to drop to $4.9 billion, the trade body said.

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

The revised profit forecast for this year is still well below the $8.6 billion the association forecast March 2 — just days before the earthquake, tsunami and nuclear accident in Japan, which has sharply curtailed air travel to Japan, one of the world’s largest economies. That disaster coincided with a series of popular uprisings in North Africa and the Middle East, which led to a surge in oil prices to more than $100 a barrel.

“Even with the extra shocks this year, people are still flying,” Mr. Tyler said.

The new outlooks are a sharp drop from the nearly $16 billion that carriers earned in 2010. Mr. Tyler said that the coming months would be challenging for an industry that has historically delivered profit margins in the low single digits.

“It looks like we are headed for another year in the doldrums,” he said. “Business confidence is declining. It is difficult to see any potential for significant profitable growth.”

Asian airlines are once again expected to deliver the bulk of global profits this year, to the tune of $2.5 billion — although that is a fraction of the $8 billion earned in the region in 2010. The decline was largely the result of a sharp drop in air cargo traffic after the disasters in Japan; the association said it expected a strong rebound later this year and continuing into 2012.

Meanwhile, European carriers have benefited from an increase in inbound tourist traffic, fueled by a relatively weaker euro. But while the region’s airlines are likely to make a profit of about $1.4 billion in 2011, down from $1.9 billion in 2010, that is expected to plummet to just $300 million next year as the effects of government austerity and declining economic growth takes hold.

“A long slow struggle lies ahead,” Mr. Tyler said.

In North America, the association predicted airlines would achieve a collective net profit of $1.5 billion this year, down from $4.1 billion in 2010.

The association, which revises its financial forecast quarterly, represents 230 airlines that account for 93 percent of international air traffic.

Article source: http://feeds.nytimes.com/click.phdo?i=2e83395d0de1912d17ab4810d991148b

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