The airline industry worldwide is expected to make $2.5 billion in 2007 — its first profitable year since 2000, says an international trade organization.
But the industry faces global challenges that will severely test its ability to remain profitable in coming years, according to the International Air Transport Association’s (IATA) 2007 industry forecast.
“Let’s save the champagne for another year,” Giovanni Bisignani, the group’s chief executive, said at a press briefing in Geneva Tuesday.
The airline industry had a stronger year in 2006 than many expected. The IATA, which represents about 260 passenger and cargo airlines worldwide, says airlines collectively will lose $500 million in 2006, a significant improvement over the group’s September prediction of a $1.7 billion loss.
And if not for $6 billion in restructuring costs for bankrupt Delta and Northwest airlines, the industry as a whole would have made a profit this year, the IATA says.
But while the airline business is at its strongest point since the September 11, 2001, terrorist attacks, the industry is still fragile and would be seriously hurt by a significant economic downturn, Mr. Bisignani said.
The $2.5 billion profit the IATA forecasts for the industry in 2007 is “peanuts,” Mr. Bisignani said.
“The revenue cycle has peaked,” he said. “We forecast revenue growth to fall from 8 percent in 2006 to 4.5 percent” in 2007.
A significant decline in fuel prices earlier this year gave the industry a welcome financial boost. But a limited supply of oil reserves and oil refining capacities indicate that fuel prices are unlikely to drop significantly in 2007, the IATA says.
It predicts North American airlines will earn $200 million in net profits in 2007 after losing $3.7 billion in 2006. But North America is the only region in the world expected to show an improvement in profits in 2007 over 2006.
Europe and the Asian-Pacific Rim airlines will earn profits of $1.5 billion and $1.2 billion in 2007, according to IATA forecasts. But both figures will be down from 2006.
The Latin American and Middle East regions each will post gains of $100 million — the same as in 2006, while African carriers will lose $500 million in 2007 for the second consecutive year.
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