IATA: Global Aviation Slowly Climbing

国际航空  Date:2013-4-25 13:15:57  View :

The International Aviation Transport Association (IATA) recently raised the global airline industry profit expectations, and it expects that the global aviation industry net profit in 2012 is $6.7 billion (expected $4.1 billion for October), the profit for $2013 is 8.4 billion (expected $7.5 billion for October). But the industry net profit rate is still low, only 1.0% in 2012 and 1.3% in 2013.

The strong performance of airlines in the second quarter and the third quarter drove IATA expectation rising. Despite high fuel prices and slowing overall world economy, the airlines' profits and cash flow remain the level similar to that in 2006 when the price was about $45 a barrel and the world economic growth rate was 4.0%.

Historically, when the gross domestic product (GDP) growth rate falls below 2%, the aviation industry will suffer collective loss. “Along with the GDP growth rate close to 2.0%—the “Stall Speed” and oil price of $109.5 a barrel, we had expected much weak industry performance. But airlines got used to the hard environment by improving their efficiency and restructuring. In the situation of weak economy growth and high fuel prices, such actions protect the cash flow, ”said Mr. Tony Tyler, IATA director and Chief Executive Officer.

Industry structure change has also pushed the airlines financial performance improvement since the second quarter. Under the difficult operating environment of last year, airlines had been improving their profits through structural adjustment and reducing costs. The initiatives of the recently formed alliances and joint venture have promoted the scale economy and provide more choices for the passengers. Due to lack of venture capital, industry new entrant population reduces sharply, in addition to some airlines bankruptcy, and these factors have contributed to the improvement of industry structure, enabling the airlines to share the efficiency gains from the passenger service level improvement and improved investor returns.

The performance improvement is the most obvious on major airlines. In the third quarter of this year, the major airlines’ Earnings Before Interest,Taxes,Depreciation and Amortization (EBITDA) are 10% ~ 15% of the average income. Mr. Tony Tyler said: “This is a present state of differentiation situation. Scale economy can help airlines better cope with the difficult economic environments, but the small and medium-sized aviation carriers are not so lucky and they are still struggling their way.

Strong traffic growth rate (5.3%) and 3.0% earnings rate improvement brought positive impact on the overall performance. Despite the global economic slowdown, business travel has received relatively steady support from the International Commodities and Services Trade. Both the passenger traffic and the passenger revenue have played a positive role. In contrast, the freight market scale shrank by 2.0%, while the cargo revenue dropped 2.0% based on 2011 level. Although the world trade continues to expand, economic growth model mainly focusing on emerging markets is helpful to sea rather than air.

While the current oil price falls a little compared with the forecast in October, the fuel price does not fall because of it. Due to the expanding profits of the refineries, the average cost of jet fuel is expected to reach $129.5 a barrel, higher than the previously expected price by $1.8 a barrel.

IATA stresses that although the outlook has improved, the whole industry performance remains weak this year, and the net profit of $6.7 billion falls considerably compared with the net profit of $8.8 billion of aviation industry in 2011, and 1.0% of the net profit margin is far lower than the net profit margin of 7% ~ 8% needed by the industry recovery cost of capital.

In regional terms, North American Airlines expected to reach $2.4 billion net profit in 2012, a little improved than $1.7 billion in 2011, which was mainly helped by the significant improvement made by the asset utilization from recent industry consolidation. Pre tax profit rate is 3.4%, the highest in all regions.

Asia Pacific Aviation Co. net profit will be $3 billion, higher than the expectation in October by $700 million. Asia-Pacific region has the highest total profit in various regions, its EBIT Margin of 2.9% is the highest only next to North American Airlines. Compared with the $5.4 billion profits of the airlines in Asia-Pacific region in 2011, Asia-Pacific Airlines profit of this year has plunged greatly, the reason is that the region is suffering from the sluggish freight market and the pressure from slowing China's economic growth.