(MENAFN - Khaleej Times) The International Air Transport Association, or Iata, raised 2013 global airlines' profit forecast to 12.9 billion on the back of falling oil prices, growing trend of alliances and mergers, and said Middle East carriers are expected to post a net profit of 1.6 billion in 2013.
The Montreal-based organisation, in an upward revision, projected that the Middle East carriers would further increase their profits to 2.4 billion in 2014. Iata's earlier profit forecast was 2.1 billion for the Middle East and 11.7 billion for the global industry.
The global airline body observed that the region's hubs, particularly in the Gulf, continue to expand in support of growing long-haul connectivity.
"Strong oil revenues - as oil prices stay high - continue to support travel generated by domestic activity and the development of the tourist industry in the Gulf," Iata said.
In a statement, Iata said for 2013 airlines are expected to return a global net profit of 12.9 billion. This is expected to improve to a net profit of 19.7 billion in 2014.
The latest profit forecast is in the wake of Iata's upbeat outlook for global passenger growth to 3.91 billion by 2017.
The UAE is projected to add 29.2 million passengers over the next four years at a compound annual growth rate of 6.6 per cent as the Middle East will report the strongest international passenger growth with a 6.3 per cent CAGR.
The latest profit forecasts are improvements on the September forecast which anticipated an industry net profit of 11.7 billion in 2013 increasing to 16.4 billion in 2014. "The upward revision reflects lower jet fuel prices over the forecast period as well as improvements to the industy's structure and efficiency already visible in quarterly results this year," Iata said.
"Passenger markets continue to outperform the cargo business which remains stagnant both on volumes and revenues. Iata expects 2014 to be a second consecutive year of strengthening profitability (beginning from 2012 when airlines posted a net profit of 7.4 billion). Industry net profit margins, however, remain weak at 1.1 per cent of revenues in 2012, 1.8 per cent in 2013 and 2.6 per cent in 2014," it said.
The anticipated 19.7 billion profit in 2014 would come on projected revenues of 743 billion. While this would be the largest absolute profit for the airline industry - outstripping the 19.2 billion net profit that the industry returned in 2010 - it is important to note that 2010 revenues were 579 billion. The net profit margin in 2010 was 3.3 per cent, some 0.7 percentage points higher than the 2.6 per cent expected for 2014.
"Overall, the industry's fortunes are moving in the right direction. Jet fuel prices remain high, but below their 2012 peak. Passenger demand is expanding in the five-six per cent range - in line with the historical trend," said Tony Tyler, Iata's director-general and CEO.
He said efficiencies gained through mergers and joint ventures are delivering value to both passengers and shareholders. And product innovations are growing ancillary revenues. "Some airlines will out-perform our estimates and others will under-perform. But, on average, airlines will only make a net profit of about 5.94 per passenger in 2014," said Tyler.
Passenger demand is robust and passenger numbers are expected to reach 3.1 billion in 2013 and rise by six per cent to 3.3 billion in 2014. Airlines