Asia airlines to make industry's profit of US$6.9

Asia Pacific airlines will make the bulk of the revised industry's profit expectations of US$6.9 billion this year from US$4 billion on stronger than anticipated passenger demand, thanks largely to the continud penchant for air travel. Asia Pacific carriers are expected to chalk up US$2.5 billion in profits in 2011, which is the largest absolute profit compared with other regions, the director-general and chief executive officer of the International Air Transport Association (IATA) Tony Tyler said. "It is very resilient region when it comes to air traffic," he said. "Airlines are going to make a little more money in 2011 than we thought. Despite the doom and gloom, people are travelling," said Tyler, adding that the brisk passenger demand would help to compensate the stangant air freight sector since the start of this year. Oil prices have also remained consistent with the previous forecast of US$110 per barrel, which is still higher than US$79.4 per barrel last year. Although, the industry's outlook for 2012 remains weak with profits to fall to US$4.9 billion as debt burdened western economies gear up for an extended period of weak economic growth or worse, Asia Pacific would continue to be profitable, he told Bernama during a teleconference from Singapore. "Relatively stronger economic growth and some rebound in cargo will help Asia Pacific airlines to maintain their 2012 profits close to 2011 levels at US$2.3 billion. The rest of the industry will see declining profitability." "The worst hit is expected to be Europe where the economic crisis means the industry is only expected to return a combined profit of US$300 million. A long slow struggle lies ahead," said Tyler. Geneva-based IATA, which represents some 230 airlines, said the industry's financial performace is closely linked to the health of the world's economies and the forecast is built around the global gross domestic product (GDP) projected growth of 2.5 per cent this year falling to 2.4 per cent in 2012. "Whenever GDP growth has slowed below two per cent, the airline industry has lost money. We will be perilously close to that level at least through 2012. The industry is brittle. Any shock has the potential to put us in the red." He said the US$2.9 billion bottom line improvement for this year's outlook 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. He said the industry did a good job in filling up the seats and managed to restore passenger load factors back to the 2010 highs. By July, the global passenger load factor stood at 83.1 per cent. As for air freight, he said it has been stagnating since the start of the year and IATA slashed its full-year volume growth projection from 5.5 per cent to 1.4 per cent. Airlines are expected to carry 46.4 million tonnes of cargo in 2011, down from the previous forecast of 48.2 million. Air freight volumes reached their post-recession peak in May 2010, largely driven by re-stocking. July's traffic was four per cent lower than that level. It appears unlikely that a revival in air freight will begin before 2012. However, for the Asia Pacific region a strong rebound in air freight is expected late in the year continuing into 2012, IATA said in a report. The shocks from the Japanese earthquake and tsunami continue to affect supply chains and cargo markets, in which Asia Pacific carriers have the largest market share, it said.