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IATA: Airline profits will be up 20 percent in 2013

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Airline profits will be 20% higher than expected this year despite razor-thin margins, according to the industry’s main representative body.

Airline profits will be 20% higher than expected this year despite razor-thin margins, according to the industry’s main representative body.

The International Air Transport Association (IATA) said increased demand was helping pack planes to record levels.

It predicts that airlines will enjoy $12.7 billion(โ‚ฌ9.7 billion) in profits this year, compared with $7.6 billion (โ‚ฌ5.8 billion) last year, though margins will remain “paper thin” โ€“ this profit represents just 1.8% of a predicted $711 billion (โ‚ฌ546 billion) in sales.

But the organisation said 2013 should still be the third strongest year for airlines since 2001, when the events of 9/11 sent the industry into steep decline.

It said the decision not to add extra seats to chase market share would pay off this year, lifting average seat occupancy to a record 80.3%. This is the second consecutive year that airlines will not expand seat numbers to match the growth in demand.

At the organisation’s AGM in Cape Town yesterday, IATA chief executive Tony Tyler described air travel as a very tough business.

“The day-to-day challenges of keeping revenues ahead of costs remain monumental. Many airlines are struggling. On average, airlines will earn about $4 for every passenger carried,” he said.

But falling oil prices โ€“ expected to average $108 per barrel of oil โ€“ are expected to offset the weak economic growth.