The global airline industry is expected to make higher profits this year than previously forecast, according to the latest projections from IATA.
The association said that it was now predicting that the industry would make a combined post-tax profit of $10.6 billion in 2013 compared to a previous forecast of $8.4 billion made in December.
If the industry makes this level of profits, it will represent the third highest profit margin since 2000. IATA has estimated that airlines made a profit of $6.7 billion in 2012.
IATA said this increase was being driven by signs of improvement in economic activity around the world as well as a “structural improvement in the airline industry’s financial performance”.
Director general Tony Tyler said: “Industry profits are taking a small step in the right direction. Against a backdrop of improved optimism for global economic prospects passenger demand has been strong and cargo markets are starting to grow again.
“The economic optimism is also pushing fuel prices higher. We are seeing a $12 billion improvement in revenue, and a $9-10 billion increase in costs—most of which is related to fuel.”
But IATA also warned that this recovery in business confidence could still be derailed by factors such as the current financial crisis in Cyprus.
Tyler added: “European Central Bank commitments with respect to the eurozone crisis and the slow economic recovery in the US should be pointing us towards a durable, if weak, upswing.
“But we have had two false starts already. Improving conditions in early 2011 and 2012 disintegrated as the eurozone crisis intensified, and it could happen again. The impact of the unfolding situation in Cyprus is a risk factor that cannot be ignored.”
European airlines are now being forecast to make an overall profit of €800 million this year which would compare to a $300 million profit in 2012 but IATA warns that it is “the market that will be most affected by volatility caused by the eurozone crisis”.
Despite the improved forecast, Tyler said that aviation industry was continuing to suffer from “chronic anemic profitability”.
“We are projecting that airlines will make a net profit of $10.6 billion on $671 billion in industry revenues,” said Tyler. “By comparison last year Nestle, a single company, made over $11.5 billion in profit on revenues of about $100 billion.”