Airlines to remain profitable despite rising oil prices and economic slowdown, Iata chief says

Airline earnings will be 20 per cent higher this year than forecast just three months ago as capacity cuts help pack planes to record levels, the International Air Transport Association said on Monday.

Airline earnings will be 20 per cent higher this year than forecast just three months ago as capacity cuts help pack planes to record levels, the International Air Transport Association said.

Carriers are likely to generate net income of US$12.7 billion in 2013, the industry group said on Monday. That compares with a forecast of $10.6bn issued on March 20, and represents a 67 per cent gain on last year's profit of $7.6bn.

Airlines, set to carry more than 3 billion people for the first time this year, have resisted adding seats to chase market share. The strategy should lift their average load factor, or seat occupancy, to a record 80.3 per cent, Iata chief executive Tony Tyler said at the group's annual meeting.

"Airlines have done a pretty good job of being profitable in very difficult circumstances" that include rising oil prices and slowing economic growth, Mr Tyler told airline executives assembled in Cape Town. Even with the improved outlook, the industry's earnings will equal just 1.8 per cent of its $711bn in revenue, trailing a profitability high for the past decade of 3.3 per cent set in 2010.

Carriers in all regions should post a profit this year, led by airlines in Asia with projected earnings of $4.6bn and North America with $4.4bn, Iata said.

Mr Tyler predicted US airlines will go on an international offensive following mergers and job cuts that have delivered leaner companies better able to compete with rivals from Asia and the Middle East. Carriers based in the world's biggest travel market are ready to grab market share and make up for lost time in ordering more fuel-efficient jets to trim costs.

European airlines should accrue net income of $1.6, with Middle Eastern operators generating $1.5bn and those from Latin America about $600 million, according to the Geneva- and Montreal-based group, which represents 240 carriers accounting for 84 per cent of global traffic.

Africa is likely to remain the industry's poorest- performing region, with companies there returning a profit of just $100m, the group predicted. Mr Tyler cited safety concerns as the largest obstacle that needs to be tackled to improve the African market, the world's least-developed travel region.

* Bloomberg News