The International Air Transport Association (IATA) said on Thursday that the industry is likely to report a net profit of $19.7 billion in 2014, up from the expected $12.9 billion in 2013.
The sector is expected to fly 3.3 billion passengers next year, an increase of about 6 per cent over the 3 billion passengers that it expects to carry this year .
“We are approaching a point where the industry will move half the world’s population from one to another over the course of a year and do it safely,” IATA Director-General Tony Tyler said at the inauguration of the Global Media Day in Geneva.
IATA expects 2014 to be the second consecutive year of profit for the global aviation industry.
GDP expansion Brian Pearce, The anticipated profit for 2014 will come from projected revenue of $743 billion, which will be the largest absolute profit for the industry, IATA said.
IATA’s Chief Economist Brian Pearce said the forecast for 2014 is driven by the fact that global Gross Domestic Product is expected to expand by 2 per cent in 2013 and 2.17 per cent in 2014. Further, ancillary revenues are rising globally and there will be a slight reduction in the price of aviation fuel largely due to easing of tensions in West Asia .
“Margins for airlines, however, continue to remain thin and fragile. If we were to take a look at expected profitability of $19.7 billion in 2014 and divide it by the number of passengers expected to be flown, that represents only $5.94,” Pearce said.
Putting the figures in perspective, Tyler pointed out that McDonald’s in Geneva will make the same amount of profits by selling four Happy Meals at a cost of $30. “When compared to the airline industry, it begs the question whether $6 per passenger is a reasonable reward for airlines if you consider the technology, skills and capital that is invested,” Tyler said.
Weaknesses in some key growth markets, including India, are expected to limit the scale of improvement in the Asian region with the Asia-Pacific region expected to post $3.2 billion profit in 2013, which will be the third consecutive year of declining profits.