The global airlines industry still expects a record profit for 2014, just not quite as high as previously forecast due to the impact of rising jet fuel prices, officials said Wednesday.
But the cost of fuel isn’t the only challenge.
The Geneva-based International Air Transport Association (IATA), which represents 240 airlines, or 84 percent of total air traffic, says the profit this year is expected to be $18.7 billion, a downgrade from the $19.7 billion it forecast in December, as fuel prices have been higher than expected since then. Oil prices are now expected to average $108 per barrel, $3.50 per barrel above previous projections.
That profit figure is still well above the $12.9 billion earned in 2013 and the $6.1 billion in 2012. It’s also higher than the previous record profit of $17.3 billion, set in 2010.
This year, the upward revision to oil prices is expected to add $3 billion to the industry’s jet fuel bill, only partially offset by an extra $2 billion in revenue expected from stronger demand in passenger and cargo traffic.
Revenues in 2014 are forecast to total $745 billion, while the profit margin is expected to remain thin, at just $5.65 per departing passenger this year. That would be up from $4.13 per passenger in 2013, but still below the $6.45 notched in 2010.
Other issues facing the industry this year, according to Tony Tyler, CEO and director general of IATA, include the Venezuelan government’s decision to keep foreign airlines from taking $3.7 billion in earnings out of the country, as well as Ukraine’s instability pushing up oil prices and the disappearance of Malaysia Airlines Flight MH370 over Southeast Asia.
Tyler said he raised his concerns over the Venezuelan government’s actions in a letter to the country’s president, Nicolas Maduro.
“This ignores international treaties. And it is making it very difficult for airlines to maintain their commitment to that market,” he told reporters. “Airlines certainly cannot sustain operations indefinitely if they can’t get paid.”