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Airline Improvement Results from Lower Fuel Costs

For 2013, airlines are expected to return a global net profit of $12.9bn. This is expected to lead to a net profit of $19.7bn in 2014. Both are improvements on previous months. The upward revision reflects lower jet fuel prices over the forecast period as well as improvements to the industry's structure and efficiency. Passenger markets continue to outperform the cargo business, which remains stagnant both on volumes and revenues.

IATA expects 2014 to be a second consecutive year of strengthening profitability, beginning from 2012 when airlines posted a net profit of $7.4bn. Industry net profit margins, however, remain weak at 1.1 percent of revenues in 2012, 1.8 percent in 2013 and 2.6 percent in 2014.

The anticipated $19.7bn profit in 2014 would come on projected revenues of $743bn.

“Overall, the industry’s fortunes are moving in the right direction. Jet fuel prices remain high, but below their 2012 peak,” Tony Tyler, IATA’s director general and CEO, said. “We must temper our optimism with an appropriate dose of caution. It’s a tough environment in which to run an airline. Competition is intense and yields are deteriorating.  Cargo volumes haven’t grown since 2010 and cargo revenues are back at 2007 levels.  The passenger business is expanding more robustly. Some airlines will out-perform our estimates and others will under-perform.”

Forecast drivers include cargo demand, which remains largely stagnant. Airlines are expected to carry 51.6m tons of cargo in 2013, increasing to 52.5m tons in 2014. This modest increase in demand is expected to be offset by a decline in yields.

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