Airline earnings gaining altitude

Airlines worldwide are expected to post a higher combined profit of $US12.7 billion ($12.4 billion) in 2013, in what will be their third-best year since 2001 when terrorist attacks in the US crippled the industry.

Airlines worldwide are expected to post a higher combined profit of $US12.7 billion ($12.4 billion) in 2013, in what will be their third-best year since 2001 when terrorist attacks in the US crippled the industry.

Despite the better outlook, the peak airline body emphasised that carriers were still operating on thin profit margins of 1.8 per cent - $US4 per passenger, or not much more than the price of a cup of coffee in Australia.

The latest outlook from the International Air Transport Association is an improvement of $US2.1 billion on March, when it was forecasting a combined profit of $US10.6 billion.

IATA has attributed the better outlook to airlines boosting their revenue from ancillary services and better capacity utilisation. Airlines are filling just over 80 per cent of seats on their planes, a record high. Weaker oil prices are also contributing to improved profitability. The peak body expects oil prices to average $US108 a barrel this year, compared with almost $US112 a barrel in 2012.

While passenger traffic is improving, the cargo market remains depressed due to weak demand in developed countries, particularly Europe.

Airlines in the Asia-Pacific region are again the leaders in profitability. The region is expected to post a combined profit of $US4.6 billion this year, up by $200 million from IATA's previous forecast in March.

Despite the stronger forecast, IATA chief executive Tony Tyler said the day-to-day challenges of keeping revenues ahead of costs "remain monumental".

"Many airlines are struggling. But there is a core of airlines that are driving profits with solid performance," he said at IATA's annual meeting in Cape Town.

The best year since 2001 when the terrorist attacks in the US seriously dented demand for air travel was 2010. In that year, the industry made a net profit margin of 3.3 per cent.

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