IATA warns of a tough year ahead

IATA warns of a tough year ahead

The International Air Transport Association (IATA) has changed its industry profit expectations to $6.9 billion from $4.0 billion which it projected in June.

IATA emphasized that, despite the improvements, profitability at these levels is still exceptionally weak (1.2% net margin) considering the industry’s total revenues of $594 billion.

In its first look at 2012, IATA is projecting profits to fall to $4.9 billion on revenues of $632 billion for a net margin of just 0.8%.

“Airlines are going to make a little more money in 2011 than we thought. That is good news. Given the strong headwinds of high oil prices and economic uncertainty, remaining in the black is a great achievement,” said Tony Tyler, IATA’s Director General and CEO. “But we should keep the improvement in perspective. The $2.9 billion bottom line improvement is equal to about a half a percent of revenue. And the margin is a paltry 1.2%. Airlines are competing in a very tough environment. And 2012 will be even more difficult,” said Tyler.

IATA’s forecast is built around global projected GDP growth of 2.5% in 2011 falling to 2.4% in 2012. Airline financial performance is closely linked to the health of world economies. Whenever GDP growth has slowed below 2.0% 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,” said Tyler.

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