IATA downgraded its global 2012 profit forecast - but upped its 2011 profit estimation and 2012 full year profit prediction for Asia-Pacific carriers as the region continues to prove its resilience.
The overall profit forecast was reduced by US$500 million to US$3 billion, compared to US$3.5 billion in December. This was primarily due to average oil prices now expected to be US$115 per barrel, instead of US$99.
However, the 2011 profit estimate for Asia-Pacific carriers has been upped from US$3.3 billion to US$4.8 billion, partly due to a better than expected performance by Chinese carriers.
"For 2012, the region’s airlines are expected to again deliver the largest absolute profit - US$2.3 billion - which is US$200 million more than estimated in December. Higher fuel costs will more than halve profits this year but the region’s relatively strong economies will continue to generate more rapid growth in travel and cargo than the other large regions," said IATA.
Meanwhile, Middle East carriers have also seen their profit forecast upped to US$500 million, up from the previously forecast US$300 million. "Financial performance was already seen to be better than previously expected in 2011, with an upgrade from US$400 million to US$1 billion. In the passenger business, load factors have improved by a slowdown in the introduction of new capacity, and long haul markets have been relatively robust," IATA noted.
IATA says the US$500 million overall downgrade woul dhave been worse but for four factors.
• The avoidance of a significant worsening of the Eurozone crisis
• Improvement in the US economy
• Cargo market stabilization
• Slower than expected capacity expansion.
“2012 continues to be a challenging year for airlines. The risk of a worsening Eurozone crisis has been replaced by an equally toxic risk—rising oil prices. Already the damage is being felt with a downgrade in industry profits to US$3.0 billion,’’ said Tony Tyler, IATA’s director general and CEO
Overall capacity (passenger and cargo combined) is expected to grow by 3.2% in 2012 (based on announced schedules) which is behind the 3.6% expected expansion in demand. This is a reversal of the expectation in December of capacity expansion (3.1%) outstripping demand (2.9%).
Passenger demand is expected to grow by 4.2%, which is 0.2 percentage points ahead of the December forecast. IATA says that Cargo markets stabilized at low levels in the fourth quarter of 2011. "The pattern of rising sea freight and low level of air cargo is linked to Asian economies buying bulk commodities while Western consumer confidence is weak. Reduced pessimism among purchasing managers is expected to support a moderate upturn in air cargo during the second half of the year."
IATA is now forecasting a 2.0% yield improvement in 2012 for passenger and cargo, compared to a flat forecast made in December.