IATA: African airlines unable to meet demand

2012-10-04 08:43

Multimedia   ·   User Galleries   ·   News in Pictures Send us your pictures  ·  Send us your stories

Singapore - The International Air Transport Association (IATA) has announced an improved performance forecast for airlines in 2012.

Airlines are expected to earn $4.1 billion in 2012 (up $1.1 billion from the $3.0 billion forecast in June). The revision will still see the industry’s net profit margins fall from the 1.4% realized in 2011 to 0.6% (up from the previously forecast 0.5%). 

In a first look at 2013, the association sees global profits rising modestly to $7.5 billion, though this is a net margin of just 1.1%.

According to the association, African airlines are expected to break even in 2012, an improvement on the previously forecast loss of $0.1billion. The Regions's airlines are said to have benefitted from strong growth of many African economies, boosted in some cases by investment and trade with China and others by strong oil revenues. Although, ATA says African airlines' performance remains mixed as on average, load factors are the lowest in the world and many African airlines are struggling to match capacity with demand.

“The European sovereign debt crisis lingers on. China continues to moderate its growth. And the impact of recent quantitative easing in Japan and the US will take time to yield growth. While some of these risks have diminished slightly over recent months, they continue to take their toll on business confidence. The outlook improvement is due to airlines performing better in a difficult environment,” said Tony Tyler, IATA’s Director General and CEO.

Improved airline performance was evident in second quarter results, which showed operating profits close to those of the previous year, following a tough first quarter. The evidence is showing that consolidation is producing positive results. Asset utilization in the passenger segment is high across many markets. In past cycles passenger load factors and aircraft utilization would have fallen by this stage, in the face of slowing demand and increasing aircraft deliveries. In the current cycle airlines have kept both load factors and aircraft utilization high. This has allowed yields to improve and spread fixed costs more widely. However, asset utilization has fallen in the weaker cargo market, adversely affecting Asia-Pacific airlines in particular, where this business makes up a larger share of total revenues.

“Even six years ago, generating a profit with oil at $110/barrel (Brent) would have been unthinkable. The industry has re-shaped itself to cope by investing in new fleets, adopting more efficient processes, carefully managing capacity and consolidating. But despite these efforts, the industry’s profitability still balances on a knife-edge, with profit margins that do not cover the cost of capital,” said Tyler.

“Aviation has an important role to play as the global economy struggles. Growth is the only way forward and a healthy aviation industry can stimulate that—linking stagnating developed economies to robust emerging markets. Aviation connectivity spurs growth at both ends. That is why it is important for governments to ensure aviation’s ability to be a catalyst for growth is not constrained. Unfortunately, in many parts of the world, it is an uphill struggle with high taxes, onerous regulation and insufficient infrastructure. All of this stunts industry growth to the detriment of the world economy,” said Tyler.

- IATA (International Air Transport Association) represents some 240 airlines comprising 84% of global air traffic.

Join the conversation!

24.com encourages commentary submitted via MyNews24. Contributions of 200 words or more will be considered for publication.

We reserve editorial discretion to decide what will be published.
Read our comments policy for guidelines on contributions.
NEXT ON NEWS24X

SHARE:

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
0 comments
Comments have been closed for this article.

Inside Travel

 
/News

#FindYourEscape with Traveller24

Your insider guide to exploring South Africa and the world...
 
There are new stories on the homepage. Click here to see them.
 
English
Afrikaans
isiZulu

Hello 

Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.


Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire 24.com network.

Settings

Location Settings

News24 allows you to edit the display of certain components based on a location. If you wish to personalise the page based on your preferences, please select a location for each component and click "Submit" in order for the changes to take affect.




Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.