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MidEast airlines to post $400m profits in 2012 - IATA

This is a drop from 2011 when region's carriers returned $1bn profits.
NEWS, Aviation

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Airlines in the Middle East are set to post profits of $400m this year, down $100m from previous forecasts, the International Air Transport Association (IATA) said on Monday.

IATA said this was a significant drop compared with 2011, when the region's carriers returned a profit of $1bn.

But the region's carriers would still outperform most of their global rivals, the aviation body said.

"The weakness of European originating traffic will damage long-haul markets, but Middle East airlines continue to lead the industry on growth," IATA said in a statement.

"Along with capturing long-haul passenger traffic through the Gulf hubs, they have been the beneficiary of 80 percent of the improvement in cargo markets during the past six months," it added.

Overall, capacity by the region's carriers is expected to expand by 13.3 percent, behind the 14.1 percent growth in demand.

IATA said global industry profits are expected to be $3bn, unchanged from the last update in March.

A fall in oil prices, stronger than expected growth in passenger traffic and a bottoming out of the freight market are driving some improvements in the profitability outlook, it said.

This will be the second year of declining returns since airline profits peaked in 2010 at $15.8bn with a net profit margin of 2.9 percent.

Compared with the previous forecast in March, North American and Latin American carriers are expected to see improved prospects while the outlook for African carriers is unchanged.

But the outlook for European, Asia-Pacific and Middle Eastern carriers has been downgraded, with European losses now expected to be $1.1bn, nearly double the previously forecast $600m loss.

Tony Tyler, IATA's director general and CEO, said: "The $3bn industry profit forecast has not changed. But almost everything in the equation has. Demand has been better than expected, so far this year. And fuel prices are now lower than previously anticipated, but that's on the expectation of economic weakness ahead.

"The Eurozone crisis is standing in the way of improved profitability and we continue to face the prospect of a net profit margin of just 0.5 percent," he added.

Oil prices have slipped below $100/barrel as the Eurozone crisis generates fears of recession, having been above $120/barrel earlier this year.

Even with this price softening, fuel is still expected to account for 33 percent of airline operating costs.
 

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