Dec 10, 2014 4:31 AM
Airlines expect leap in profits as oil price drops
The Associated Press
GENEVA (AP) The global airline industry expects its profits to leap to a record high next year, boosted by a continued fall in jet fuel prices as well as strong passenger demand and cost cuts.
The International Air Transport Association said Wednesday it forecasts 2015 will bring $25 billion in net profit well above the $19.9 billion this year and the $10.6 billion in 2013 and $6.1 billion made in 2012.
That is based on a forecast that the price of oil will average $85 per barrel. On Wednesday, the U.S. contract was trading below $63 a barrel.
The Geneva-based group, which represents 240 airlines, or 84 percent of total air traffic, said profit margins on expected revenues of $783 billion are due to remain tight only 3.2 percent, just up from 3.1 percent in 2010.
Tony Tyler, director-general and CEO of IATA, said that the profit would amount to a little more than $7 per passenger per flight well below other industries.
He note Starbucks, for example, has a declared profit margin of about 14 percent.
"If that is the case, they will retain as much from selling seven cups of coffee as an airline will make selling an average ticket," Tyler said.
Passenger traffic has been expanding by about 5.5 percent per year for the past two decades but IATA said it is expected to grow by 7 percent in 2015. Cargo traffic also is expected to rise by 4.5 percent in 2015, slightly ahead of recent demand despite weak markets and increasing competition.