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European airlines’ 2013 profit forecast doubles


Europe’s airlines expected to post profits of $1.6 billion

Global airlines are expected to post an industry-wide profit of $12.7 billion in 2013, an increase from a previous March forecast of $10.6 billion, the International Air Transport Association has said at its annual general meeting in Cape Town. Lower oil prices and cost cuts are succeeding in pushing back the effects of difficult economic conditions.
Margins remain weak, however. The upgrade in IATA’s global outlook for the airline industry foresees a total $711 billion in revenues and a net profit margin of 1.8%.
Nevertheless, “indicative of the characteristically razor thin profits of the airline industry, even this small margin will make 2013 the third strongest year for airlines since the events of 2001. In 2007 the industry earned 2.9% net profit margin ($14.7 billion) and in 2010 airlines generated a 3.3% net profit margin ($19.2 billion).”
Tony Tyler, IATA’s director general and CEO: “This is a very tough business. The day-to-day challenges of keeping revenues ahead of costs remain monumental. Many airlines are struggling. On average airlines will earn about $4 for every passenger carried – less than the cost of a sandwich in most places.”
European airlines are expected to report profits of $1.6 billion, double the previous projection of $0.8 billion. This is a significant improvement, IATA says, but the region’s EBIT (earnings before interest and taxes) margin is expected to be just 1.3%, second lowest after Africa at 0.9%. Demand remains strong, with expected RPK growth of 4%, well ahead of a 2.7% capacity expansion. “Economic conditions are the weakest in this region but consolidation on the North Atlantic market and within Europe is helping to improve financial performance,” IATA said.
[pictured: View over Øresund; photo courtesy Copenhagen Airport]


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