IATA cuts Gulf carriers' profit forecast to $400m

Beijing: The profit forecast for the Middle Eastern carriers has been downgraded slightly by International Air Transport Association (IATA) to $400 million (Dh1.468 billion) for 2012, from the March projection of $500 million on worsening European crisis, higher oil prices and the political situation in the Middle East. The projected drop is a significant, according to IATA, compared with 2011, when the region’s carriers returned a profit of $1 billion. “Since our last forecast, profitability [of Middle Eastern airlines] is down slightly to $400m from $500m earlier. It’s still a reasonably good picture compared to the industry,” said Tony Tyler, IATA’s Director-General and Chief Executive. According to IATA’s forecast, the weakness of European originating traffic will “damage” long-haul markets, but “Middle East airlines continue to lead the industry on growth”. Along with capturing long-haul passenger traffic through the Gulf hubs, they have been the beneficiary of 80 per cent of the improvement in cargo markets during the past six months,” IATA said. Overall, capacity by the region’s carriers, meanwhile, is expected to expand by 13.3 per cent, behind the 14.1 per cent growth in demand. Asked if the Middle East market showed signs of improvement over last year, Brian Pearce, Chief Economist at IATA, said: “Last year, that market was hit very much due to the Arab Spring. This year, we are seeing a rebound — we have seen travel and air cargo traffic return. So, in terms of travel generated and the impact of economic growth in the region, we are fairly positive about the expansion going on.” “We have seen acceleration in both capacity of airlines and the traffic they gained,” he added. “Faster growth is the short answer.” In terms of traffic, the strongest markets have been those linked with Asia, Latin America, and the Middle East, where economies have been more “robust”, IATA said. “Although airlines face the common challenges of high fuel prices and economic uncertainty, the regional picture is diverse. Carriers in the Americas are seeing improved prospects for 2012. The rest of the world is seeing reduced profitability. For European carriers, the business environment is deteriorating rapidly resulting in sizable losses,” said Tyler. Cargo demand, however, has bottomed out, following a sharp fall in 2011, in line with the moderate improvement of business confidence in a number of economies outside Europe, according to IATA, with only Middle Eastern airlines seeing “significant volume gains”. From gulfnews