Forecast: Airlines to Earn Just $4 Profit Per Passenger, but $12.7 Billion Overall in 2013

Airlines will earn an average of just $4 for every passenger carried in 2013 — less than the cost of a sandwich in most places — according to the International Air Transport Association (IATA), which this week released an upgraded global outlook for the airline industry, despite carriers’ slim margins, which total just 1.8 percent.

IATA’s latest forecast predicts airlines will collect $12.7 billion in profit in 2013 on $711 billion in revenues, up $2.1 billion from the $10.6 billion in profit IATA previously predicted in March. If its expectations come to fruition, this will be the third strongest year for airlines since the events of 2001, an achievement that IATA attributes to greater efficiencies, including a record high load factor of 80.3 percent, and increased ancillary revenues, including baggage fees.

“Generating even small profits with oil prices at $108/barrel and a weak economic outlook is a major achievement,” IATA Director General and CEO Tony Tyler said in a statement. “Improved performance is what’s keeping airlines in the black. Airlines are putting more people in seats. For the first time in history, the industry load factor is expected to average above 80 percent for the year. And with ancillary revenues topping 5 percent, it is clear that airlines have found new ways to add value to the travel experience and to shore-up the bottom line.”

For North American airlines, IATA predicts a $4.4 billion profit, up significantly from the $3.6 billion previously projected. “Structural changes, such as consolidation and efficiency measures in the domestic market, are the main drivers of this better performance,” IATA explained. “Demand growth from passengers will be the slowest among all regions at 1.7 percent, reflecting both the maturity and sluggishness of the U.S. domestic market. But this is significantly above the 0.7 percent expected expansion in capacity, and therefore further improvements in asset utilization are expected.”

The world’s most profitable airlines this year will be those in Asia-Pacific, according to IATA, which forecasts a $4.6 billion profit for carriers in that region. By contrast, European, Middle Eastern and African airlines are expected to post $1.6 billion, $1.5 billion and $100 million in profits, respectively.

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