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Thursday, July 31, 2014
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Published: Wednesday, 3/12/2014

Airlines lower forecast for record 2014 profit

ASSOCIATED PRESS

GENEVA  — The global airlines industry still expects a record profit for 2014, just not quite as high as expected, officials said today, citing the impact of rising jet fuel prices.

But the cost of fuel isn’t the only challenge. Venezuela’s decision to block airlines from taking profits out of the country, the Ukrainian political crisis and a vanished Malaysian jetliner are adding uncertainty to the outlook, said Tony Tyler, director-general and CEO of the International Air Transport Association.

The Geneva-based group, which represents 240 airlines, or 84 percent of total air traffic, says the profit this year is expected to be $18.7 billion, a downgrade from the $19.7 billion it forecast in December, as fuel prices have been higher than expected since then. Oil prices are now expected to average $108 per barrel, $3.50 per barrel above previous projections.

That profit figure is still well above the 2013 profit of $12.9 billion and 2012’s revised figure of $6.1 billion. It’s also higher than the previous record profit of $17.3 billion earned in 2010.

This year, the upward revision to oil prices is expected to add $3 billion to the industry’s jet fuel bill, only partially offset by an extra $2 billion in revenue expected from stronger demand in passenger and cargo traffic.

Total revenues in 2014 are forecast to total $745 billion, while the profit margin is expected to remain thin, at just $5.65 per departing passenger this year. That would be up from $4.13 per passenger in 2013, but still below the $6.45 notched in 2010.

The other issues facing the industry this year, Tyler said, include the Venezuelan government’s decision to keep foreign airlines from taking $3.7 billion in earnings out of the country as well as Ukraine’s instability pushing up oil prices and the disappearance of Malaysia Airlines Flight MH370 over Southeast Asia.



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