Packed planes should help the world’s airlines earn a $12.7 billion profit this year, as travel demand accelerates faster than the airlines add seats, according to a new prediction from a trade group.
If the estimate by the International Air Transport Association comes true, it would represent a 67 percent increase in airline profits from the $7.6 billion they earned last year. The new estimate is a 20 percent jump over IATA’s estimate just three months ago.
IATA said that if its forecast holds, the global airline industry will have its third-strongest year since 2001.
The biggest factor is full planes. Airline occupancy will rise to a record 80.3 percent this year, from an estimated 79.2 percent last year, the group said. Passenger traffic will rise 5.3 percent, but the number of seats to carry them will rise just 4.3 percent, the group said. This will be the second year in a row that airlines have added fewer seats than passengers.
Airlines have become increasingly sophisticated about predicting demand for each flight, allowing them to match supply and demand more closely by putting the right-sized plane on each route. U.S. and European airlines in particular have also become more cautious about adding new planes because of the recession in Europe and uncertainty about the recovery in the U.S.
“This is a very tough business. The day-to-day challenges of keeping revenues ahead of costs remain monumental,” said Tony Tyler, IATA’s director general and CEO. He said most airlines earn about $4 for every passenger carried.
