IATA Upgrades Profit Forecast

The International Air Transport Association (IATA) has upgraded its outlook for the airline industry by $2.1bn to a profit of $12.7bn in 2013. This compares to a $7.6bn profit generated in 2012. The $12.7bn profit represents a return on invested capital (ROIC) of 4.8 per cent, which will enable companies to pay debt and investors. “But returns of 4.8 per cent are still materially lower than the seven per cent to eight per cent average cost of capital required for the industry,” said Tony Tyler, IATA’s director general and CEO. IATA also predicted $711bn in revenues but said net profit margins will remain weak at 1.8 per cent. “This is a very tough business. The day-to-day challenges of keeping revenues ahead of costs remain monumental. Many airlines are struggling. On average airlines will earn about $4 for every passenger carried—less than the cost of a sandwich in most places,” said Tyler.

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