The global airline industry will generate $11.7 billion in profit on $708 billion in revenues, according to the latest prediction from the International Air Transport Association.
In June, the organization projected profits of $12.7 billion, but slow growth in key markets caused IATA to revise its prediction.
Airlines are expected to reach a profit of $16.4 billion next year, which is a far cry from the $7.4 billion generated in 2012. IATA expects cargo to grow by 3.7 percent in 2014, but sees yields falling by 2.1 percent.
In 2013, however, air cargo is a relatively small part of the overall profitability picture. IATA pegs cargo’s growth for 2013 at 0.9 percent, adjusting its expectations down from 1.5 percent. The main culprit seems to be overcapacity made more drastic by increased passenger demand, which is bringing unneeded belly capacity into the market. While passenger revenues have climbed by $68 billion since 2011, cargo has fallen by $8 billion during the same stretch.
The association also predicts cargo yields will fall 4.9 percent this year.
“Overall, the story is largely positive. Profitability continues on an improving trajectory. But we have run into a few speed bumps,” IATA’s Tony Tyler said in a statement. “Cargo growth has not materialized. Emerging markets have slowed. And the oil price spike has had a dampening effect. We do see a more optimistic end to the year.”
Oil prices have risen by $1 per barrel more than previously expected, but the cost of jet fuel has averaged $1 less than the agency predicted. Oil’s impact on the airline industry has been felt more though lackluster demand.
IATA predicts North American airlines to lead the way in 2013, posting $4.9 billion in profits, an increase of the previously predicted $4.4 billion and more than double its 2012 result. IATA increased its forecast for European airlines and Middle Eastern airlines by $100 million each. The profit for Latin American airlines is still expected to end the year at $600 million.
IATA downgraded its 2013 expectations for Asia-Pacific and African carriers.
Still, Tyler remains hopeful for next year.
“Airlines are demonstrating that they can be profitable in adverse
business conditions," he said. "Efficiencies are being generated through myriad
actions — consolidation, joint ventures, operational improvements, new
market development, product innovations and much more. When market
forces drive action, we get results that both strengthen the industry
and benefit the consumer."