IATA raises profit forecast for Mideast carriers

However aviation body warns of mixed performance for region.
NEWS, Aviation


The International Air Transport Association has increased its 2010 profit forecast for Middle East airlines four-fold to $400m, but has warned of a “mixed performance” among the region’s carriers.

The IATA forecast that the global aviation industry will report a profit of $8.9bn for this year, up from the $2.5bn it projected in three months ago.

“The industry recovery has been stronger and faster than anyone predicted. The $8.9bn profit that we are projecting will start to recoup the nearly $50bn lost over the previous decade,” said Giovanni Bisignani, IATA’s director general and CEO.

He added that global revenue is expected to grow to $560bn, $15bn more than previously forecast, but still below the 2008 figure of $564bn.

The Middle Eastern airlines have seen their projections for the year rise dramatically, from a June forecast of $100m profit to a renewed projection for $400m.

Bisignani added that this was due to the fact that Middle Eastern carriers “are gaining market share and introducing capacity (thirteen percent) at a slower pace than demand growth.”

In 2009, Dubai-based Emirates Airline reported revenues of $12.4bn and profit up 278 percent to $964m. With this expected to be maintained, or increased, this year, this implies that many of the Middle East carriers are expected to suffer major losses this year.

“We expect to see very mixed performance in the region,” said Brian Pearce, chief Economist at the IATA, adding that the Middle East region covers “a very broad region” from the Gulf to North Africa.

“We still see some problems in terms of the total figure,” he added, but believed that strong capacity and profitability for the main carriers would result in the improved overall profit figure.

With regards to 2011, IATA predictions are that the market will peak in 2010 and next year it will weaken and feel the impact of the end of Government stimulus packages.

“The real question in this forecast is how long we see the recovery lasting. It is clear that there will be a slowdown in the fourth quarter. We are already seeing that in our traffic. 2011 will be a much tougher year,” Bisignani said.

He added that the slowdown was due to capacity outperforming demand, which are expected to grow by six and five percent respectively. IATA forecast that the industry will post profits of $5.3bn next year, a year-on-year decline of 40 percent.

Speaking in relation to fuel costs, the IATA said it expected crude prices to be maintained at $79 into 2011, but jet fuel prices would rise from $90 this year to around $93 next year. This is due to excess capacity in 2010, which is expected to run out next year, the IATA added.

In 2010, Bisignani said he expected “the [global] fuel bill to decline from $140bn to $137bn.” This is expected to see fuel costs declining from 26 to 25 percent of overall industry costs this year.

IATA is an international trade body, created over 60 years ago, represents 230 airlines in 115 countries and around 93 percent of scheduled international air traffic. It represents 26 airlines in the Middle East.

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