Global Airline Profits to Hit Record High in 2014

The global airline industry is projected to collectively post a record high profit in 2014 as jet fuel prices drop, passenger demand increases and carriers reduce operating costs, the International Air Transport Association (IATA) said Thursday Dec. 12. 

 

IATA is forecasting airlines will turn a $19.7 billion profit on $743 billion in revenue for 2014, an increase from 2013's $12.9 billion. If airline's achieve that estimate, it would mark two consecutive years of growth and surpass the previous $19.2 billion record profit achieved in 2010. 

 

However, the airline industry is still extremely competitive and airlines are still seeing lower profit margins with relatively high jet fuel costs. Carriers are expiated to generate a profit of $5.94 per passenger in 2014, a 2.6 percent profit margin decreased from 3.3 percent in 2010. 

 

"Overall, the industry’s fortunes are moving in the right direction. Jet fuel prices remain high, but below their 2012 peak. Passenger demand is expanding in the 5 to 6 percent range — in line with the historical trend," said Tony Tyler, chief executive of IATA. "We must temper our optimism with an appropriate dose of caution. It’s a tough environment in which to run an airline … Some airlines will out-perform our estimates and others will under-perform." 

 

Regionally, North American airlines are projected to post the highest combined net profit worldwide, with IATA expecting the region to reach $5.8 billion in 2013 and $8.3 billion in 2014. Although the group said "higher government fees on airlines and their passengers as a result of the Congressional budget deal, risk damaging both airlines, investors and passengers."

 

Airlines based in the Asia Pacific region are expected to come in second behind North America in both years, with $3.2 billion in 2013 and $4.1 billion in 2014. International passenger demand growth is expected to be driven by the Asia Pacific region over the next five years, with IATA anticipating China will account for 24 percent of all new international passengers through 2017. 

 

Africa is the weakest of all regions, with airlines collectively expected to record a $100 million loss in 2013 and a $100 million profit in 2014. 

 

“Airlines have shown that they can rise to the challenges of a difficult trading environment. That’s good news for economies and consumers that depend on global connectivity. But I am increasingly concerned that governments have not fully appreciated the critical role that aviation plays in our connected world. Regulatory and tax burdens incrementally, but significantly, rise year-on-year. Some governments even appear to be backtracking on deregulation and are micro-managing in areas such as passenger rights,” said Tyler.