The Airline Industry Is Expecting Its Best Profits Ever In 2014

The global airline industry should make a all-time high net profit of $US19.7 billion in 2014, according to the
latest financial outlookfrom the International Air Transport Association (IATA).

That’s thanks in large part to a small drop in jet fuel prices, IATA said in a release accompanying the forecast.

Improved fuel efficiency is making that less expensive jet fuel go even further. With new planes from Boeing and Airbus, airlines are starting to see the benefits. IATA predicts airlines will carry 64% more passengers and 37% more cargo in 2014 than they did in 2004, but says fuel use will rise by only 17%.

On top of that, passenger demand is “robust,” and expected to rise a whopping 31% between 2012 and 2017. Airlines are consolidating (notably the merger of American Airlines and US Airways), which drives down costs.

Ancillary revenues — things like bag fees — are bringing in crucial revenue. “Without ancillaries,” the forecast says, “the industry would be making a loss from its core seat and cargo products.” This chart drives home how those annoying fees are keeping the industry afloat, as fare revenue flatlines:

The highest net profit posted by airlines was in 2010, for $US19.2 billion. IATA cautions that while 2014 should bring in more money, the industry’s net profit margin dropped from 3.3% in 2010 to 2.4% in 2014.

Global profits for 2013 are predicted to hit $US12.9 billion.

IATA represents 240 airlines, which account for 84% of global air traffic.

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