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Airlines Profit Outlook Downgraded

Sept. 23, 2013
Airline growth has slowed in India, Brazil and to some extent China, while the long-haul market between North and South America continued to grow.

MONTREAL - The airline industry will earn a bit less than expected this year as fuel costs soar, emerging markets slow and the number of cargo shipments stagnate, the IATA said Monday.

The International Air Transport Association (IATA) revised its global outlook downwards to $11.7 billion in earnings on revenues of $708 billion as the sector's growth slowed below its previous projection of $12.7 billion. The figure is up from a revised $7.4 billion net profit in 2012.

However, the agency also said airlines are poised for a banner year in 2014, which is forecast to be the industry's second strongest so far this century.

"Overall, the story is largely positive," said IATA's director general Tony Tyler. "Profitability continues on an improving trajectory. But we have run into a few speed bumps. Cargo growth has not materialized. Emerging markets have slowed. And the oil price spike has had a dampening effect."

Tyler pointed to a doubling of jet fuel prices in recent years, but said higher costs were absorbed through industry consolidation and joint ventures, and few new entrants in the sector due to tight financing meant less competition.

Airline growth has slowed in India, Brazil and to some extent China, while the long-haul market between North and South America continued to grow, according to the IATA.

Next year is expected to be particularly strong for North America as the economy improves, it said, while European carriers are projected to see a near doubling of profits to $3.1 billion.

Asia-Pacific carriers, which are the largest air cargo shippers, have been the most impacted by flat cargo revenues.

Meanwhile, the impact of the Syrian crisis on Mideast commercial air travel has been limited.

Copyright Agence France-Presse, 2013

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