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IATA expects airline profits to hit $18b in 2014

IATA expects airline profits to hit $18b in 2014

Industry leaders attend a panel discussion entitled “The Bottom Line” during the IATA’s 70th Annual General Meeting in Doha, Qatar on Monday. Photo: AFP

The International Air Transport Association (IATA) said Monday it expects airline companies to record combined net profits of $18 billion in 2014. Revenues were forecast to reach $746 billion, IATA Director General Tony Tyler said in Doha, pointing out that net margins are likely to stand at average 2.4 percent only.

“It sounds impressive. But the brutal economic reality is on revenues of $746 billion we will earn an average net margin of just 2.4 percent,” he said.

This amounted to less than $6 per passenger, noted Tyler, who was speaking at an IATA-organized annual conference of the airline industry in the Qatari capital.

“The good news is that airline profits are improving. The average return on invested capital today is 5.4 percent – up from 1.4 percent in 2008,” said Tyler. “But we are still far from earning the 7-8 percent cost of capital that investors would expect,” he noted.

Regulatory hurdles

He said there was still huge potential for development in the sector, saying that easing certain regulations could help.

The IATA has long complained of the difficulty of consolidating the sector, as some countries and regions have placed restrictions on investing in European and American companies.

Carriers have managed to partially get around the problem by creating alliances such as Skyteam, Oneworld and Star Alliance, although the aviation industry is still fragmented.

“Our customers expect efficient global connectivity. But the regulatory structure prevents the global consolidation that has happened in other industries,” Tyler said.

Qatar Airways CEO Akbar al-Baker, who headed the IATA’s general assembly this year, also stressed the importance of the sector for development in certain countries.

He urged the newly elected Indian government “to see aviation as a very important tool for economic growth in India.”

The IATA said in March that some 240 carriers representing 84 percent of global air traffic had revised down their profit forecast for 2014 to $18.7 billion from $19.7 billion.

Security concerns

Tyler stressed the need to work on security in the industry, particularly in the wake of the disappearance of Malaysia Airlines Flight MH370.

MH370 disappeared on March 8 en route from Kuala Lumpur to Beijing with 239 people aboard. An extensive search in the Indian Ocean has found no trace of the plane.

“A large commercial airliner going missing without a trace for so long is unprecedented in modern aviation. And it must not happen again,” Tyler said. The IATA and “experts from around the world are working together to agree on the best options to improve global tracking capabilities,” he noted.

Tyler said the industry was celebrating 100 years of aviation in 2014, and was expecting to carry 3.3 billion passengers and transport 52 million tons of cargo in 2014.

In total, some 50,000 destinations are linked through around 100,000 daily flights, while the industry generates more than 58 million job opportunities worldwide.

AFP

Latest developments in aviation field

Rolls-Royce

Rolls-Royce announced Wednesday the first run of the Trent 1000-TEN, which will power all variants of the Boeing 787 Dreamliner.

The engine, which is scheduled to be certified to 78,000 lbs thrust by the end of 2015, will offer commonality for customers operating a combination of 787 Dreamliner models and provide margin to Boeing requirements for 76,000lbs of thrust at entry into service.

The Trent 1000-TEN draws on technologies from the Rolls-Royce Trent XWB engine and Advance engine program, delivering thrust and efficiency improvements.

Airbus

The A350 XWB MSN2 completed successfully the “Early Long Flight” campaign involving two flights with passengers operated consecutively by Air France and Lufthansa cabin crews on Monday and Tuesday.

Early Long Flights are an important achievement toward the A350’s entry into service. Though not part of the technical certification program, these flights allow Airbus to assess the cabin environment and systems in flight ahead of final certification, ensuring that airlines will benefit from a fully mature aircraft from day one of commercial operations.

Boeing

The US Federal Aviation Administration has approved additional extended operations for the Boeing 787 Dreamliner. The move will allow 787s to be operated for up to 330 minutes from a landing field, and signals continued confidence in the airplane’s technical capabilities.

Dreamliners have been allowed to operate up to 180 minutes away from a landing field since they were introduced into service in 2011. Granting of the expanded operational permission will allow airlines to introduce additional routes after they meet the proof of capabilities requirements and receive approval from their own regulatory agencies.

Air France

During the summer 2014 season, Air France is serving Hong Kong with a daily flight, operated at night on the way there and back, thus making it easier for customers to rest prior to arrival at destination.

From May 27 to Sunday and from June 16 to 22, this flight is operated four times a week by Airbus A380 and three times a week by Boeing 777-300. From Monday to June 15 and from June 23 to October 25, 2014, this daily frequency will be exclusively operated by the Air France superjumbo.

Served by Air France for the past 75 years, Hong Kong is the second destination in China to be served by the A380 after Shanghai.

Dragonair

Dragonair has announced its collaboration with Summer Palace restaurant at China World Hotel and Sureño at The Opposite House to introduce new Chinese and Western dishes to the airline’s in-flight menus. From May 16, passengers flying on Dragonair flights from Beijing to Hong Kong will enjoy these delectable new dishes created by chefs from these two restaurants. Summer Palace is an award-winning restaurant famous for its fusion of Cantonese and Huaiyang cuisines. The new Western menu designed by Sureño offers authentic Mediterranean flavor.

Hainan Airlines

Hainan Airlines took delivery of its seventh Boeing 787 aircraft on Saturday, which is also the 500th aircraft delivery for the group. The new 787 will join Hainan Airlines’ North America network, increasing frequencies from Beijing to Seattle, Toronto and Chicago. The carrier is also scheduled to launch Beijing-Boston service on June 20, operated four times per week. The eighth 787 will be delivered to the airline this month and the final two will be delivered in 2015.

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