Home' Asian Aviation : AAV April 2012 Contents IATA downgraded its global 2012 profit
forecast - but upped its 2011 profit
estimation and 2012 full year profit
prediction for Asia-Pacific carriers as the
region continues to prove its resilience.
The overall profit forecast was reduced by
US$500 million to US$3 billion, compared
to US$3.5 billion in December. This was
primarily due to average oil prices now
expected to be US$115 per barrel, instead of
However, the 2011 profit estimate for
Asia-Pacific carriers has been upped from
US$3.3 billion to US$4.8 billion, partly due
to a better than expected performance by
"For 2012, the region's airlines are
expected to again deliver the largest absolute
profit - US$2.3 billion - which is US$200
million more than estimated in December.
Higher fuel costs will more than halve profits
this year but the region's relatively strong
economies will continue to generate more
rapid growth in travel and cargo than the
other large regions," said IATA.
Meanwhile, Middle East carriers have also
seen their profit forecast upped to US$500
million, up from the previously forecast
US$300 million. "Financial performance was
already seen to be better than previously
expected in 2011, with an upgrade from
US$400 million to US$1 billion. In the
passenger business, load factors have been
improved by a slowdown in the introduction
of new capacity, and long haul markets have
been relatively robust," IATA noted.
IATA says the US$500 million overall
downgrade would have been worse but for
• The avoidance of a significant worsening
of the Eurozone crisis
• Improvement in the US economy
• Cargo market stabilization
• Slower than expected capacity expansion.
"2012 continues to be a challenging year
for airlines. The risk of a worsening Eurozone
crisis has been replaced by an equally toxic
risk---rising oil prices. Already the damage
is being felt with a downgrade in industry
profits to US$3.0 billion,'' said Tony Tyler,
IATA's director general and CEO
Overall capacity (passenger and cargo
combined) is expected to grow by 3.2% in
2012 (based on announced schedules) which
is behind the 3.6% expected expansion in
demand. This is a reversal of the expectation
in December of capacity expansion (3.1%)
outstripping demand (2.9%).
Passenger demand is expected to grow
by 4.2%, which is 0.2 percentage points
ahead of the December forecast. IATA says
that cargo markets stabilized at low levels
in the fourth quarter of 2011. "The pattern
of rising sea freight and low level of air
cargo is linked to Asian economies buying
bulk commodities while Western consumer
confidence is weak. Reduced pessimism
among purchasing managers is expected
to support a moderate upturn in air cargo
during the second half of the year."
IATA is now forecasting a 2.0% yield
improvement in 2012 for passenger and
cargo, compared to a flat forecast made in
December. - Colin Baker
Asia bucks downward trend
Cathay Pacific became the latest carrier to
confirm 2011 was a lot tougher than 2010,
with operating profits halving to HK$5,514
million (US$710 million) on revenue up just
under 10% at HK$98,406 million.
The main culprits were the weak freight
market and high fuel prices. "The passenger
business of Cathay Pacific and Dragonair
held up relatively well, mainly as a result of
strong demand for premium class travel.
Cargo business was adversely affected by a
substantial reduction in demand for shipments
from the two key export markets of Hong
Kong and Mainland China," says the carrier.
Passenger yields performed well under the
circumstances - up 8.7% to HK66.5 cents.
"Demand for premium class travel remained
robust in 2011, and the firm demand for
Business Class seats on short-haul routes
reflected the relative strength of the Asian
economy," says Cathay.
Cargo load factors declined by a huge 8.5
percentage points to 67.2%. After a reasonable
first quarter, Cathay says that "from April
onwards, demand for shipments from its two
most important markets, Hong Kong and
Mainland China, weakened significantly and
remained weak for the rest of the year."
Cathay says that it also benefitted from its
shareholding in mainland carrier Air China.
The carrier says it plans to increase capacity by
around six-to-seven per cent this year.
- Colin Baker
IATA director general Tony Tyler warns that
2012 will still be a challenging year
AsianAviation | APRIL 2012 7
Cathay sees profits halve
"The risk of a worsening Eurozone crisis has been replaced by
an equally toxic risk---rising oil prices."
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