Kevin O'Toole/LONDON
Airline profits rebounded strongly to near record levels last year, says the International Air Transport Association (IATA),but director general Pierre Jeanniot again warns that margins remain too low and that the headline figures disguise the crisis still unfolding in Asia.
The detailed figures, issued in the latest IATA annual report, confirm that airlines earned a net profit of $5 billion on their international scheduled services in 1997, recovering most of the ground lost during a weak 1996.
Corporate results, which include thriving US domestic operations and non-airline businesses, recovered more decisively, with net profits leaping to $7.2 billion after hovering around the $4 billion mark for two years.
Jeanniot cautions, however, that, although the latest results represent a fourth consecutive year of profits, the industry as a whole is still $800 million short of recovering the losses made on international routes over the preceding recession.
He adds that the overall result masks the crisis among Asian carriers, which had "probably their worst ever" year in 1997. "Intense competition and yield dilution has occurred among carriers where restructuring had hardly begun and alliance activity is in its infancy," Jeanniot says.
While half of the $5 billion profit came from the Americas and another $2.2 billion from Europe and the Middle East, the returns from Asia stood at only $300 million. Financial analysts believe that there could be worse to come over the next year if the region fails to shake off the downturn.
IATA has already warned that the crisis in the Asia-Pacific region is likely to wipe $2 billion off net profits this year, taking the world total to below $4 billion. Passenger growth forecasts for the region have been slashed from 7.7% to 4.4% a year through to 2001.
Jeanniot also notes that the 1997 profits represent a margin of only around 3% when Western economies and air markets are booming.
Load factors climbed to above 70% on international passenger services, backed by a 7.2% rise in traffic, while aircraft were virtually as full on domestic services.
Although international yields slipped again, by 2.7%, some of the dip was made up with a 2.2% fall in unit costs per available tonne kilometre. Besides expected gains from the dip in fuel prices, efforts to increase productivity and utilisation appear to have come good, with a 3% drop in the cost of cockpit crews and even stronger savings in aircraft leasing and administrative overheads. Air traffic charges were the only area in which costs continued to rise, with en route charges up by nearly 6%.
Source: Flight International
