World airlines to return $6.7b profit in 2012, Africa expected to breakeven

Airlines globally are expected to make a profit of $6.7 billion at the end of the year 2012, the International Air Transport Association (IATA) said December 13, 2012 in the upward revision to its industry financial outlook.

Earlier in October this year, the Geneva-based group forecast a $4.1 billion profit for airlines in 2012.

And according to IATA, airlines’ profit is expected to rise from the projected $6.7 billion in 2012 to $8.4 billion in 2013.

“This is expected to improve slightly to $8.4 billion in 2013 (marginally better than the $7.5 billion forecast in October),” IATA said in its outlook.

It however indicated that the net post-tax margin of the airline industry “will remain weak at 1.0% in 2012 and 1.3% in 2013”.

IATA explains that improved prospects for 2012 are being driven by strong airline performance in the second and third quarters indicating that despite high fuel prices and a slowing world economy, airline profits and cash flows held up at levels similar to 2006 when oil prices were about $45 per barrel lower and world economic growth was 4.0%.

IATA said African airlines are expected to end the year 2012 at breakeven—unchanged from the previous forecast and from 2011.

The aviation group noted that, while the continent’s economy is expanding rapidly, African carriers are “suffering from strong competition on long-haul routes, high cost structures and a regulatory regime that inhibits the development of intra-Africa links”.

For 2013, African airlines are expected to post a third consecutive year of breakeven performance with earnings before interest and taxes (EBIT) margin of 0.1%, the outlook said.

IATA acknowledged that Africa’s economic growth and trade flows are robust but airlines’ performances remain uneven.

By Ekow Quandzie