In terms of regional profitability, the airline industry in Africa is expected to remain the weakest performer, with the International Air Transport Association (Iata) expecting the continent to post “barely positive” profits of $100-million for this year.

This would represent a margin of only 0.8% on revenues, or $1.64 a passenger.

“Performance is improving, but slowly. Intercontinental markets are increasingly opening to stiff competition, but barriers to development of intra-Africa connectivity remain high. The region’s airlines also suffer from high taxation, high infrastructure costs, and high fuel costs, which are often related to taxation,” the association stated in its ‘Economic Performance of the Airline Industry’ report.

Airlines in North America were delivering the strongest financial performance and were expected to post net after-tax profits of $9.2-billion this year, largely on the back of consolidation and the contribution of ancillary revenues.

Load factors for this region had risen to record levels, with the passenger load factor reaching 83.7% in April.

Airlines in Europe continue to be burdened by high regulatory and infrastructure costs, with this region expected to generate a net profit of $2.8-billion this year, representing profit of only $3.23 per passenger and a margin of just 1.3%.

This was despite “considerable” efficiency gains as witnessed by the 80.7% load factor achieved in April.

In the Asia-Pacific region, airlines were expected to earn $3.2-billion in 2014 – up on the $2-billion realised in 2013.

However, profit per passenger, at $2.98, was below the industry average, as was the net margin of 1.6%. A moderate improvement in cargo markets this year, however, is expected to give the region’s airlines a boost, while passenger demand was expected to experience a healthy growth of 7.4%.

In the Middle East, airlines were expected to deliver a net profit of $1.6-billion in 2014, representing a profit per passenger of $8.98 and a margin on revenues of 2.6%.

“Average yields are low but unit costs are even lower, partly driven by the strength of capacity growth. This strong growth is being accommodated by major developments of airport infrastructure, particularly in the Gulf region,” said Iata.

Meanwhile, Latin American airlines faced a mixed environment, with a weak home market hampering performance, but a degree of consolidation and some long-haul success were expected to boost net profit above $1-billion this year.

This represented $4.21 per passenger and a margin of 3%.

“[In total], airlines are expected to earn a net profit in 2014 of $18-billion for a net profit margin of 2.4%. This will be up from earnings of $6.1-billion in 2012 and $10.6-billion last year,” said the report.

IMPROVED CONNECTIVITY

Elaborating further on the state of the global airline industry, Iata expected global spend on air transport to reach $746-billion in 2014, equalling 1% of world gross domestic product.

The number of passengers was expected to reach 3.3-billion as travelers benefitted from a growing global network and airfares that were expected to fall 3.5% in real terms.

Businesses were also benefitting from the growth in connectivity and a 4% fall in freight rates, after inflation.

Employment supported by aviation had reached some 58-million jobs worldwide, while airlines were making “enormous” investments in modernising fleets.

“This year, the industry will take delivery of 1 400 aircraft worth some $150-billion,” Iata noted.

Moreover, the association expected investors to see more favourable returns from airlines in 2014, with the industry average return on invested capital expected to increase from 4.4% in 2013 to 5.4% in 2014.

Commenting on the findings of the report, Iata CEO Tony Tyler said the drive by airlines to improve performance and profitability needed to be supported by the various governments.

“That means a regulatory structure that facilitates success, the provision of cost-efficient infrastructure to meet consumer and business demands and a reasonable tax burden. Governments should understand that the real value of aviation is the global connectivity it provides and the growth and development it stimulates, not the tax receipts that can be extracted from it,” he asserted.

Tyler’s comments came on Monday as Iata’s yearly annual general meeting and World Air Transport Summit got under way in Doha, Qatar.