The International Air Transport Association (IATA) upgraded its industry profit expectation for 2011 to $6.9 billion, up from $4 billion it projected in June.

IATA emphasised that despite improvements, profitability at these levels is still weak at 1.2 per cent considering the industry's total revenues of $ 594 billion.

IATA also gave its forecast for 2012 where it pegged profits to be at $4.9 billion on revenues of $632 billion for a net margin of just 0.8 per cent.

Optimistic

“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 Mr Tony Tyler, IATA's Director General and CEO.

“But we should keep the improvement in perspective. The $2.9-billion bottomline improvement is equal to about a half a percent 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,” he added.

IATA's forecast is built around global projected GDP growth of 2.5 per cent in 2011 falling to 2.4 per cent in 2012. Airline financial performance is closely linked to the health of world economies.

The improved forecast is also based on passenger demand which has been stronger than anticipated in the background of the gloomy economic outlook. The forecast for passenger demand growth stands at 5.9 per cent for 2011 as against 4.4 per cent projected in June. Till July, passenger volumes globally have been up 6 per cent.

Asia-pacific carriers

For Asia-Pacific carriers, IATA raised the projections by $400 million to forecast a profit of $2.5 billion profit for airlines in the region in 2011. This is the largest absolute profit, the region has also seen the most dramatic downturn since 2010 where the region delivered $8 billion profit.

The weakness of air cargo markets also hurt airlines in the region which was owing to the larger share of cargo in airline revenues. The region continues to be affected by shocks from the Japanese earthquake and tsunami as supply chains and cargo markets remain effected. However, IATA expects a strong rebound late in the year continuing to 2012.

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