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IATA Airline Margins

IATA Airline Margins - International airlines will likely beat earlier profit forecasts this year after revived passenger and cargo traffic, but the industry remains fragile and underlying profitability is weak.

Global airlines are now expected to achieve an aggregate net profit of $15.1 billion this year, up from a forecast of $8.9 billion earlier this year, the International Air Transport Association said. The industry group said it has also tweaked its forecast for 2011 and now expects the airline industry to post an aggregate net profit of $9.1 billion next year, compared with an estimate of $5.3 billion made in September. IATA said, however, the airline industry's average 2.7% net-profit margin remains weak and will fall to 1.5% in 2011.

"Our profit projections increased for both 2010 and 2011 based on an exceptionally strong third-quarter performance. But despite higher profit projections, we still see the recovery pausing next year after a strong post-recession rebound. And the two-speed nature of the recovery is unchanged, with European airlines continuing to underperform other regions," said Giovanni Bisignani, IATA's director general and CEO.

IATA Airline Margins

"Margins remain pathetic. With a 2.7% net margin in 2010 shrinking to 1.5% in 2011, we are nowhere near covering our cost of capital. The industry is fragile and balancing on a knife edge. Any shock could stunt the recovery, as we are seeing with the results of new or increased taxation on airlines and travelers in Europe," said Mr. Bisignani.

IATA pointed out that although the changes in the industry forecasts appear dramatic in absolute numbers, the $6.2 billion increase in IATA's projection for the 2010 net profit is equal to just 1.1% of the industry's projected $565 billion in revenue for this year.

"Any increase in profits is a welcome step in the right direction. But the fact that we can increase our profit forecast by 70% and still be left with a net margin of just 2.7% shows just how far this industry has to go to achieve a normal level of profitability," Mr. Bisignani said.

IATA Airline Margins

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