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IATA slashes 2012 profit forecast

By control on March 28, 2012

The International Air Transport Association has downgraded its global profit forecast for 2012 from $3.5 billion to $3 billion amid escalating fuel prices. It’s a number that could have been significantly lower, had cargo markets not stabilized and the U.S economy not improved, according to an IATA press release.

Even so, IATA Director General and CEO Tony Tyler said 2012 has been a challenging year for carriers. With oil at $115 per barrel — $16 higher than IATA forecasted in December — Tyler said the “risk of a worsening eurozone crisis has been replaced by an equally toxic risk: rising oil prices.”

Fortunately, capacity hasn’t grown as much as IATA originally projected. In December, IATA forecast that passenger and freight carriers would boost capacity by 3.1 percent amid a 2.9-percent increase in demand. The association’s revised forecast now has demand outstripping capacity by 0.4 percent.

In fact, passenger airlines are now seeing load factors equivalent to or above pre-recession levels, IATA revealed. However, according to the press release, “asset utilization in freight markets is more difficult to manage as around 40 percent of cargo capacity is in the belly of passenger aircraft, responding to different market pressures.”

Although freight markets rebounded slightly at the end of 2011, IATA said that cargo carriers have been affected by reduced confidence among Western consumers. Seafreight has also taken market share away from air transportation, according to the press release.

Nevertheless, IATA said that purchasing managers are becoming less pessimistic about airfreight, which should lead to an uptick in airfreight in the second half of 2012.

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