The International Air Transport Association (Iata) on Monday revised its net profit estimates for 2013 downwards to $11.7-billion on revenues of $708-billion, compared with the net profit estimates of $12.7-billion in June.

The latest forecast reflected the impact of the oil price spike associated with the Syrian crisis, as well as disappointing growth in several key emerging markets, on demand for air travel, the industry body stated.

However, the industry’s performance in 2013 was still considerably better than that of 2012, which only saw a net profit of $7.4-billion, Iata director-general and CEO Tony Tyler pointed out in a conference call with the media.

He added that this upward trend was expected to continue into 2014 when airlines were expected to return a net profit of $16.4-billion, which would make 2014 the strongest year this century after 2010 with its record breaking $19.2-billion profit.

Airline performance remained strong, with airlines expected to post a 3.2% operating margin, which was the same as that of 2006, despite the 54% hike in jet fuel prices.

“The industry has been able to absorb this enormous cost increase as a result of changes in the industry structure, through consolidation and joint ventures, increased ancillary sales and reduced new entries owing to tight financial markets, Iata said.

AFRICA LOSSES
Meanwhile, the industry body revised its former forecast of a $100-million profit for airline carriers in Africa downwards to a loss of $100-million, stating that long-haul markets faced stiff competition, while intra-African market development remained constrained by a restrictive regulatory environment.

Tyler pointed out that the expected $100-million loss was, however, in line with the loss of 2012, which meant that no real change took place over the past year.

“However, for next year, we foresee a $100-million profit for the African carriers,” he said.

North American airlines were expected to post the strongest performance with profits of $4.9-million, while European airlines were expected to record profits of $1.7-billion this year.

The outlook for Asia Pacific airlines was downgraded by $1.5-billion to $3.1-billion, while the outlook for Latin American carriers remained unchanged at $600-million, and the Middle East carriers were expected to post profits of $1.6-billion.

Globally, the passenger market was seeing robust growth of 5%; however, this was slightly below the 5.3% previously projected and 2012’s actual growth of 5.3%, Tyler said, adding that passenger growth in the emerging markets was slower than anticipated.

Further growth of 5.8% was expected in the passenger market during 2014; however yields were expected to continue to fall by 0.5%.

Meanwhile, cargo markets remained constrained, with the previously projected growth of 1.5% having been downgraded to 0.9% in the current forecast.

“The ability of airlines to match cargo capacity to demand is limited by the natural growth in belly capacity that occurs as airlines respond to passenger demand. As a result of this mismatch, cargo yields are expected to fall by 4.9% this year,” Iata said.

Tyler added that a significant improvement on cargo growth, to 3.7%, was expected for 2014; however, yields were expected to continue to fall by 2.1%.

“Overall, the story is largely positive. Profitability continues on an improving trajectory. But we have run into a few speed bumps. Cargo growth has not materialised. Emerging markets have slowed. And the oil price spike has had a dampening effect. We do see a more optimistic end to the year. And 2014 is shaping up to see profit more than double compared with 2012,” Tyler said.

CARBON-NEUTRAL GROWTH
Meanwhile, he also on Wednesday presented the industry position on the development of Market-Based Measures (MBMs) as a key tool to achieve carbon-neutral growth from 2020, in light of the International Civil Aviation Organisation’s (Icao’s) triennial assembly that would take place from September 24 to October 4.

He stated that Iata was proposing a single mandatory global carbon-offsetting scheme to be implemented from 2020 onwards.

“Aviation is a global industry and carbon emissions is a global challenge; therefore, we need to reach a global consensus on how carbon-neutral growth will be reached from 2020 onwards,” Tyler said, adding that Iata hoped that a firm resolution on what had to be done post-2020 would emerge from the Icao assembly.

He added that it was unlikely that a detailed scheme would emerge from the assembly, but rather that a set of principles that could lead to the design of a scheme would be decided upon.

Without a firm resolution at the Icao assembly, the industry could see the European Union once again attempting to implement its carbon emission scheme extraterritorially, which would take industry back to where it was a year ago, Tyler explained.

“Further, from an industry view, without real control, we could also see the proliferation of regional schemes, which would not be ideal,” he added.

Tyler further pointed out that the next Icao assembly would only take place in 2016, which, if the issue was not dealt with this year, would leave little time to successfully implement a solution before 2020.

“If we miss this opportunity, there is a real risk that we will not achieve what we have set out to achieve in terms of carbon emission reductions,” Tyler concluded.