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Jun 04 2014

ME airlines earnings per passenger? AED33

By Waheed Abbas

Mideast airlines expected to post Dh5.87bn profit in 2014: Iata
Middle East airlines are expected to deliver a net profit of $1.6 billion (Dh5.87bn) this year, representing a profit per passenger of $8.98 (Dh33) and a margin on revenues of 2.6 per cent, according to the International Air Transport Association (Iata).

The Middle East carriers' per passenger profit margin is the second highest in the world after North American airlines' $11.09 per enplaned passenger profit.

Average yields are low but unit costs are even lower, partly driven by the strength of capacity growth; 13 per cent this year.

Dubai's Emirates airline last month announced a net profit of Dh3.3bn for 2013 financial year, an increase of 43 per cent over previous year's results, recording Dh82.6bn in revenues.

The strong growth of regional carriers is being accommodated by major developments of airport infrastructure, particularly in the Gulf.

Iata said airspace capacity in the Gulf, however, is not keeping pace with the growth of the industry. "The resulting days are a burden to the efficiency of the connectivity that the Gulf carriers are providing over their hubs. A more coordinated approach to managing the region's limited airspace is needed, international aviation body said in a statement on Monday."

Dubai Civil Aviation Authority ( DCAA ) Director for Security, Accident and Investigation Mohammed Lengawi told Emirates 4l7 last month that the UAE has set up a committee to give recommendation and suggestions to expand airspace for the civilian aircraft due to increased air traffic and opening of new airport in Dubai.

He said the committee comprises officials from DCAA , General Civil Aviation Authority , local authorities from each emirate and the UAE Air Force.

"A committee has been established to discuss with stakeholders the procedures to cater to the expansion of civil aviation sector which is expanding dramatically," he said, adding that the report will also recommend suggestions for ground facilities, aircraft and terminals and the airspace to make it safer.

Global

Airlines worldwide are expected to earn a net profit in 2014 of $18bn (Dh66bn) for a net profit margin of 2.4 per cent. This will be up from earnings of $6.1bn in 2012 and $10.6 billion last year. This and other figures notes are aggregated at the industry level. They are not indicators of individual airline performance.

"Aviation is a catalyst for economic growth. Airline revenues now total one per cent of global GDP and the industry will safely transport 3.3 billion people and $6.8 trillion worth of goods this year. In addition, the jobs and tourism receipts aviation helps generate are major contributors to the global economy. Airlines themselves remain burdened with high taxes and weak profitability. With a net profit margin of just 2.4 per cent, airlines will retain only $5.42 per passenger carried. There is a mismatch between the value that the industry contributes to economies and the rewards that generates for those who risk their capital to finance the industry," said Tony Tyler, Iata's Director-General and CEO.

Iata said global spend on air transport is expected to reach $746bn in 2014, which equals one per cent of world GDP. The number of passengers is expected to reach 3.3 billion as travellers benefit from a growing global network and airfares that are expected to fall 3.5 per cent in real terms (after inflation). Businesses are also benefiting from the growth in connectivity and a four per cent fall in freight rates, after inflation.

The catalytic benefits of aviation are illustrated by the $621bn in tourism spend that the industry will facilitate over the course of the year, as well as the $6.8 trillion worth of goods that will be delivered by air.

Employment supported by aviation has reached some 58 million jobs worldwide. In addition, airlines are making enormous investments in modernizing fleets. This year, the industry will take delivery of 1,400 aircraft worth some $150bn.

These benefits are being generated and investments being made, despite persistent weak profitability and a tax burden which this year is expected to reach $121bn (up from $113bn in 2013).

Regional profitability

All regions are expected to see an improvement in profitability in 2014 over 2013. Local issues and economic conditions, however, mean that the improvement is not uniform.

Airlines in North America are delivering the strongest financial performance. Net post-tax profits are the highest at $9.2bn this year. That represents a net profit of $11.09 per enplaned passenger, which is a marked improvement from just two years earlier when it was $2.83. But that's still only a net margin of 4.3 per cent on revenues. This improvement has been driven by consolidation and the contribution of ancillary revenues. Load factors have risen to record levels with the passenger load factor reaching 83.7 per cent in April.

Airlines in Europe continue to be burdened by high regulatory and infrastructure costs. The region is expected to generate a net profit of $2.8bn this year which represents only $3.23 per passenger and a margin of just 1.3 per cent. This is despite considerable efficiency gains as witnessed by the 80.7 per cent load factor achieved in April. An example of the burden under which the airlines in the region work is the inefficiency of European airspace. The Performance Review Unit of the European Commission estimates that this cost European airlines $3.8bn per year. On top of this, it is estimated that the consumer cost of time wasted in delays will amount to $7.7bn this year.

Airlines in Asia-Pacific are expected to earn $3.2 billion in 2014. That is up on the $2bn they made in 2013. Profit per passenger is below the industry average at $2.98, as is the net margin of 1.6 per cent. A moderate improvement in cargo markets this year, however, is expected to give the region's airlines a boost. Passenger demand is expected to experience a healthy growth of 7.4 per cent. The region's financial performance has also been dragged down by difficulties in the Indian market. It is hoped that the new government will address the persistent problems of high fuel taxes, insufficient capacity in Mumbai, high infrastructure costs, and onerous regulation.

Latin American airlines have faced a mixed environment, with weak home markets hampering performance, but a degree of consolidation and some long-haul success is boosting net profit above $1bn this year, which is $4.21 per passenger and a margin of 3 per cent. Demand growth in the region has tapered slightly to the 6 per cent range. Governments are struggling to accommodate demand with efficient airport infrastructure and are increasingly turning to partnerships with the private sector to fund development. The airline industry is cautioning governments in the region to ensure that such arrangements are properly structured and to ensure that there is robust and independent economic regulation in place.

Africa is the weakest region, as in the past two years. Profits are barely positive ($100 million), and represent just $1.64 per passenger and a margin of just 0.8 per cent on revenues. Performance is improving, but slowly. Intercontinental markets are increasingly opening to stiff competition, but barriers to development of intra-Africa connectivity remain high. The region's airlines also suffer from high taxation, high infrastructure costs, and high fuel costs (often related to taxation).

© Emirates 24|7 2014


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