Profit expectation for African airlines remains unchanged - CNBC Africa

Profit expectation for African airlines remains unchanged

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African airlines are expected to post a 100 million dollar profit in 2014. PHOTO: Getty Images

“African airlines will see the 100 million dollar loss of 2013 turn to a 100 million dollar profit in 2014. The region faces a familiar list of challenges, including poor infrastructure, high taxes, and restrictive market access policies for intra-Africa connectivity,” said International Air Transport Association (IATA) director general and chief executive, Tony Tyler.

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“This is on top of the intensifying competition that the region’s airlines face on long-haul routes. On the positive side, the Abuja Declaration is focusing governments on a commitment to achieve world class safety levels by 2015.”

IATA, which represents around 240 airlines and covers 84 per cent of global air traffic, also announced that despite a reduction from previous forecasts, the global airline industry is still expected to deliver profitability.

“We are announcing a downward revision to our industry outlook from a previously projected net profit of 19.7 billion dollars to 18.7 billion dollars. This is an industry forecast—covering not just IATA’s 240 member airlines but the entire airline industry,” said Tyler.

“While this is a one billion dollar downgrade, it comes on revenues of some 745 billion dollars. On such a large revenue base, a one billion dollar shift is equal to less than a seventh of one per cent. So, rather than being a substantial downgrade, it is probably better characterised as a tweak and the overall forecast is still very aligned to our December thinking.”   

The fuel bill, which forms part of the downward revision, is expected to be about three billion dollars higher than previously thought, and while the overall expectation for the industry is positive, emerging markets may have to take the backseat regarding growth projections.

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“The cargo side of the business is difficult but doing better than we had thought a few months ago. On the passenger side, we are still seeing growth, but the nature has shifted. Up until last year, the story was one of strong emerging markets driving growth. Now the story is firmly about developed economies leading growth,” Tyler explained.

“We see many developing markets—India, Brazil—showing slower growth trends. Growth in emerging markets generates proportionately larger traffic flows than in mature markets. So we have had a slight downward revision in expected growth rates from 6.0 per cent to 5.8 per cent.”

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He also offered his deepest condolences to those affected by the loss of Malaysia Airlines Flight 370.

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