Middle Eastern airlines set for record profits

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Latest IATA report reveals that Middle East based airlines are expected to grow in global influence as they improve their connectivity to developing markets and benefit from strong traffic growth.
Emirates Airline Cabin Crew. Latest IATA report reveals that Middle East based airlines are expected to grow in global influence as they improve their connectivity to developing markets and benefit from strong traffic growth. Photo-Emirates

Middle East based airlines are expected to record a USD 1.4 billion in 2013, slightly higher than the earlier forecast of USD 1.1 billion.

In 2012, the regional airlines had posted a combined profit of USD 900 million. New figures released by the International Air Transport Association (IATA) show that these airlines are expected to grow in global influence as they improve their connectivity to developing markets and benefit from strong traffic growth. In 2013, the carriers are likely to 12.8 percent in capacity, while the demand is expected to grow swiftly by 13.7 percent.

The Middle East region boasts amazing success stories of Etihad Airways, Emirates Airlines and other budget carriers. Enjoying an operating profitability of 3.4 percent, the region’s carriers lag only behind Asia-Pacific (5.3 percent) and North America (4.1 percent). At a global level, IATA believes that the aviation industry will record modest improvement in financial performance based on stronger revenues. Global airlines are expected to post a combined net post-tax profit margin of 1.6 percent, equaling about USD 10.6 billion.

According to Tony Tyler, IATA’s director general and CEO, “industry profits are taking a small step in the right direction. Against a backdrop of improved optimism for global economic prospects passenger demand has been strong and cargo markets are starting to grow again. The economic optimism is also pushing fuel prices higher. We are seeing a $12bn improvement in revenue, and a $9-10bn increase in costs—most of which is related to fuel.”

However, the IATA has warned that even though there has been an improvement in business confidence, global aviation industry may face considerable risks. The Euro-zone crisis is likely to continue with the talks of a bailout proposal for Cypriot financial institutions. At the same time, weak economic recovery in the US may also put some pressure on the financial performance of global airlines.

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