Middle East airline profits are expected to soar by as much as half next year driven by an increasing global demand for long haul and domestic flights and rising tourist numbers.
According to figures published yesterday by the International Air Transport Association (Iata), Middle Eastern airlines are set to post net profits of a combined US$2.4 billion in 2014 – a 50 per cent increase from their predicted 2013 total of $1.6bn.
The industry body said margins for airlines in the region were also set to improve over the coming year, from 3.8 per cent in 2013 to a more comfortable 4.7 per cent in 2014, underpinned by a recovering global market and strong oil revenues in Arabian Gulf states.
Iata said that as political tensions in Iran cooled, oil prices ere expected to edge down slightly from $108.2 a barrel in 2013 to US$104.5 a barrel in 2014.
Despite the continuing civil war in Syria, which Iata said had not impacted air traffic beyond the country’s borders, the Middle East, alongside Asia, is predicted to be one of the world regions driving a global growth in passenger numbers by an average of 5.4 per cent per cent a year until 2017.
Overall, as the industry begins to emerge from the dark years of the global financial crisis and starts to adapt to sweeping changes caused by the emergence of low cost carriers, airlines across the world look set for a second year of growth next year, Iata said.
It predicted that the global airline industry would generate total net profits of $19.7bn next year – up 52 per cent on the anticipated 2013 total.
With airlines increasingly reaping the rewards from lower jet fuel prices and belt tightening during the global financial crisis, Iata said that the new predictions had been upgraded from its previous outlook given in September, when it predicted global net profits for 2013 of $11.7bn rising to $16.4bn in 2014.
“Overall, the industry’s fortunes are moving in the right direction,” Iata’s director general and chief executive Tony Tyler said. “Jet fuel prices remain high, but below their 2012 peak. Passenger demand is expanding in the 5 per cent-6 per cent range in line with the historical trend. Efficiencies gained through mergers and joint ventures are delivering value to both passengers and shareholders. And product innovations are growing ancillary revenues.”
However, Mr Tyler warned that the industry continued to suffer from low margins and a lack of cargo volumes.
He pointed out that cargo revenues, which were predicted to remain at $60bn in 2013 and 2014, remained at roughly the same level they had been in 2007.
And although the anticipated $19.7bn profit in 2014 would be the largest absolute profit for the airline industry – overtaking the record $19.2bn net profit returned in 2010, margins were predicted to remain some 0.7 percentage points lower than they were that year.
Mr Tyler forecast airlines would make a net profit of just $5.94 per passenger in 2014.
In November, Emirates Group reported high fuel prices were biting into its half-year profits, resulting in the Arab world’s largest carrier reporting a profit increase of just 2 per cent and a 4 per cent increase for the entire airline group.
“High fuel prices, accounting for 39 per cent of our expenditures, and the unfavourable currency exchange environment continue to eat into our profits,” Sheikh Ahmed bin Saeed Al Maktoum, Emirates Airline’s chairman and chief executive, said.