IATA to downgrade airline profit forecast on rising fuel prices

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IATA is set to cut its forecast for this year’s airline industry profits as fuel prices continue to rise more quickly than expected.

IATA is scheduled to release its next industry financial forecast on June 4 during the group’s annual general meeting (AGM) in Sydney.

Speaking at an Australasian Aviation Press Club event before the AGM, IATA director general Alexandre de Juniac signaled that the profit forecast will be revised downward. In the last forecast in December, IATA predicted a global industry profit of more than $38 billion.

De Juniac noted that “solid demand growth” is good news for the CEOs gathering for the AGM. However, “they will certainly also be worried about the rising cost of fuel,” he said. The December forecast assumed oil prices of $60 per barrel, but prices are now approaching $80.

The industry is still expected to remain in the black this year, de Juniac said. “In the past, such a rapid rise in a key input cost might have plunged the industry back into losses,” he said. Because of the industry’s efforts to “restructure and re-engineer their businesses,” IATA is “still expecting solid profits this year … but probably not at the levels we were anticipating in December.” He added that the real bite on airline financials may not arrive until next year.

The industry is currently at the peak of its economic cycle, de Juniac said. There are “reasonable grounds” to assume that any decline could be less steep than in the past, because of the improved resiliency of airlines and healthier balance sheets.

About 1,000 delegates are expected to attend this year’s AGM. Other issues addressed will include the commercialization of sustainable aviation fuels; gender equality; airport privatization; securing the air transport system; and fighting against human or wildlife trafficking.

Infrastructure concerns will again be highlighted at the AGM, de Juniac said. While more investment in airports and air traffic control is required to keep pace with demand, there also needs to be effective regulation of charges to airlines. He signaled that IATA will propose a resolution “and a fairly strong policy recommendation to governments” at the AGM addressing this issue.

Focusing on Australia, de Juniac said progress in planning a second airport for Sydney is “much welcomed” by airlines. However, the challenge now is “solid execution.” IATA is “very pleased” at the level of consultation with airlines, including assurances that airlines will be able to choose which airport to serve and that there will be a phased approach to development.

“What we need to work on next is a vision for the roles of [the two airports] and the connectivity” between them,” de Juniac said. “This will help airlines to plan effectively their future services.” Since the first phase of the new airport will not be ready until 2026, there is “an urgent need” to use the full capabilities of the existing main airport. De Juniac also stressed concerns about airport charges and the effectiveness of the price-monitoring mechanism in Australia.

Regarding ATC modernization, de Juniac highlighted Australia’s OneSky project that will replace civil and military ATC systems. He noted that “we just need to make sure that the expected benefits are realized within an acceptable budget and timeframe,” and that civil aircraft operators are not cross-subsidizing military air traffic management.

source: ATW


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