IATA recently boosted its forecast for full-year 2007 global airline industry earnings by 9.8 per cent to US$5.6 billion but lowered its projection for 2008by 18.8 per cent to $7.8 billion.
The organization’s projection for airlines’ worldwide collective 2007 net profi t is up from the $5.1 billion forecastin June despite rising oil prices.
“Higher oil prices were more than offset by stronger-than-expected demand for passenger traffi c and a general improvement in airline fi nancial performance,” it said, noting that its new forecast is based on a $67 average crude oil barrel price for the year, up from $63 used in its June forecast.
But oil prices could catch up to airlines next year, IATA warned. “While we are more optimistic for 2007, the continuing high price of oil combined with turmoil in credit markets is a cause for concern in 2008,” DG and CEOGiovanni Bisignani said.
The industry net profi t forecast for 2008 is down from the $9.6 billion predicted in June. “The impact of the credit crunch puts some question marks over the industry’s performance next year and the continuing high price of fuel will become more diffi cult to mitigatewith effi ciency gains,” Bisignani said.
Underlying the forecast is a “substantial shift in relative regional performance, primarily driven by capacity increases,” IATA said. Since 2001, Asia/ Pacifi c-based carriers have increased their capacity 42% and improved loadfactors by 2 points, it said.
By contrast, North American carriers have grown capacity by just 11% while improving load factors by 6 points. European carriers expanded capacity 29% with load factors showing a 5-pointgain.
“These factors led to an increase in North American carriers’ unit revenues driving expected [2007] net profi ts to $2.7 billion, the highest among the major regions,” IATA said.
“Conversely, poorer yields from Asia/ Pacifi c carriers combined with sluggishness in cargo markets saw a decline in absolute profi ts from $1.2 billion in 2005 to an expected $700 million in 2007.
Europe’s carriers continued to benefi t from buoyant long-haul markets, improving profi tability continually from $1.6 billion in 2005 to an expected $2.1 billion this year.”
