Airline earnings forecast reduced

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London - Airline earnings for this year would be $1 billion (R11bn), or 5 percent, lower than previously predicted as political tensions drove up oil prices and growth in emerging markets slowed, the International Air Transport Association (Iata) said yesterday.

Carriers would earn a combined net income of $18.7bn, versus the $19.7bn forecast on December 12, the Geneva-based industry group said. Revenues would reach about $745bn, almost $2bn higher than previously projected.

“This can be characterised as a tweak,” Iata chief executive Tony Tyler said.

“The overall story is positive. Staying in the black is a major achievement reflecting the restructuring that has taken place.”

The cost of crude would rise to an average $108 a barrel, $3.50 higher than expected, adding about $3bn to the industry’s fuel bill, Iata said.

Kerosene accounted for about 30 percent of airline expenses, though an economic upturn was spurring demand to a level that largely compensated for the impact on oil prices of geopolitical instability, it said.

North American carriers would make the biggest earnings contribution, generating $8.6bn this year, $300 million better than earlier projections, Iata said, aided by the formation of American Airlines Group from a merger of AMR and US Airways Group.

The deal followed the takeover of Northwest Airlines by Delta Air Lines and the UAL-Continental Airlines merger.

European carriers will post net income of $3.1bn this year, a $100m drop from earlier forecasts, while Asia-Pacific operators should lift earnings to $3.7bn and carriers in Africa will earn money for the first time since 2010. – Bloomberg


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