Al-Ahram Weekly participated in a teleconference with IATA's Chief Tony Tyler on Tuesday The International Air Transport Association (IATA) announced an upgrading of its industry profit expectations to $6.9 billion (up from $4.0 billion projected in June). IATA emphasised that, despite the improvements, profitability at these levels is still exceptionally weak (1.2 per cent net margin) considering the industry's total revenues of $594 billion. In its first look at 2012, IATA is projecting profits to fall to $4.9 billion on revenues of $632 billion for a net margin of just 0.8 per cent. IATA's forecast is built around a global projected GDP growth of 2.5 per cent in 2011 falling to 2.4 per cent in 2012. Airline financial performance is closely linked to the health of world economies. Whenever GDP growth has slowed below 2.0 per cent the airline industry has lost money. "We will be perilously close to that level at least through 2012. The industry is brittle. Any shock has the potential to put us in the red," said Tyler. The industry forecast of a $4.9 billion profit is based on many factors. Passenger markets that will grow by 4.6 per cent (slower than the 5.9 per cent projected for 2011), but with yield growth falling to 1.7 per cent (about half the 3.0 per cent growth expected in 2011). Cargo markets will grow at 4.2 per cent (three times the 1.4 per cent growth of 2011), but with no growth in yields. Fuel prices are expected to fall slightly based on a crude oil price of $100 per barrel (less than the $110 price expected for 2011). But due to the effects of fuel hedging delaying the benefits of lower spot prices, the fuel bill will grow to 32 per cent of airline costs (up from 30 per cent in 2011) with a total bill of $201 billion.
