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            january 29, 2020

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IATA downgrades global airline profitability by US$1 billion in 2013


The International Air Transport Association (IATA) has downgraded airline profitability by US$1 billion to $11.7 billion for 2013 since its earlier more optimistic June forecast, according to the Shipping Gazette.
IATA's outlook for Asia-Pacific airlines has also been downgraded because of lower regional GDP growth. Asia-Pacific carriers are big in cargo markets and thus, the most affected, though offset by China's strengthening domestic market.
The profit lowering is due to slower growth trajectory than expected due to the effect of oil price spike associated with the Syrian crisis and slow growth in emerging economies. Nonetheless, results are still better than 2012's $7.6 billion profit forecast.
Cargo growth is forecast to grow by 0.9 per cent, down from a previous projection of 1.5 per cent. Yields will fall as much as 4.9 per cent in 2013 due to its direct link to passenger demand and in turn bellyhold capacity. Cargo revenues are forecast to drop by $8 billion to $59 billion from 2011 peak.
Airlines are forecast to return to net profit in 2014 of $16.4 billion in the strongest year this century after 2010 which will be supported by cargo increase of 3.7 per cent against cargo markets yields decline of 2.1 per cent.
"Profitability continues on an improving trajectory. But we have run into a few speed bumps. Cargo growth has not materialised," said IATA director general Tony Tyler, adding that he is still confident that 2014 is shaping up to be a positive year with profit more than double that of 2012.
The BRIC region has seen slowdown in growth to offset improvements in developed markets and in particular the US with North American airlines being the strongest performers.
European airlines is on the up as well from 2012 with bigger profits supported by the long-haul market and economic stability in the Eurozone, particularly in German and UK markets.
Despite economic slowdown in Brazil, improvement is expected on the back of restructuring and capacity discipline, said the report. The long-haul market between North and South America remains strong.
The outlook for Latin American carriers is unchanged. Economic weakness in Brazil is being offset by better performance because of restructuring and capacity discipline. The long-haul market between North and South America continues to grow.

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