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IATA: Industry Financial Forecast - March 2013

IATA Economics - Released 20 March 2013

Key points from our full report on the outlook
for airline financial performance in 2012-2013:

We've upgraded our forecast for 2013 net post-tax profits from $8.4bn to $10.6bn;
The direction is positive, but note that as a % of revenues that's an improvement of just 0.3% pts to a net margin of only 1.6%;

Another way of looking at this is that in 2013 airlines are forecast to generate just over $3 of net profit per departing passenger on $214 of revenue;
But that's better than we had been expecting in our December forecast;

The main reason for improvement is stronger revenues, as we expect faster passenger growth and a return to growth in cargo markets;
After two 'false dawns' in early 2011 and 2012 we think the balance of evidence supports our view that the recent upturn in business confidence will be sustained this year;

Stronger traffic growth should follow slightly faster economic growth and the concentration of that growth in emerging markets where the impact on travel is higher;
Yields are no longer expected to fall but that's largely just to compensate for the upward revision in forecast jet fuel prices;

Stronger economic conditions have boosted energy prices and our forecast for a $130/b jet fuel price leads to higher costs, partly offsetting higher forecast revenues;

Structural improvements are continuing to help airlines improve financial performance, in the face of high fuel costs and relatively subdued economic growth;

Asia-Pacific airlines are expected to benefit most from the (modest) improvement in cargo markets and generate the highest margins and profits in $-terms in 2013;

European airlines are expected to remain close to break-even, hampered by the recession in home markets;

North American airlines have seen the pace of their recent improvement slow, but consolidation is expected to help to further improve their profitability;
Returns on invested capital are improving industry wide, but still remain well below the cost of capital - considered a minimum by investors in most industries.

- IATA Economics -

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