Airline profits to soar this year - as Flybe prepares to swoop for rivals

It's about time the airline industry had some good news - and Flybe is taking full advantage.

by Hannah Prevett
Last Updated: 19 Aug 2013
It seems we can all stop feeling sorry for the forlorn aviation industry. Despite bearing the brunt of the worst recession in decades (along with the embattled financial services sector) it seems things are finally on the up. Industry body the International Air Transport Association (IATA) has raised its profit forecast for the world’s airlines to $8.9bn this year – that’s more than triple the original figure. Sadly, Europe won’t benefit much from this improvement, as the growth is mainly in Asia - although one UK airline is bucking the trend…
 
For one thing, it looks like passenger demand is recovering: IATA reports that the number of passengers climbed by 9.2% in July, compared with a year ago. What’s more, cargo volume has increased by almost 23%.

Admittedly, 2009 may have been a shockingly bad year to compare it to (the industry lost a collective $9.9bn), but these are healthy numbers, especially when you consider that in June IATA forecast a 2010 global profit of just $2.5bn. The world’s airlines haven’t been profitable since 2007, when they reported combined earnings of $12.9bn.

The downside, at least for European airlines, is that the majority of the growth seems to be coming from the booming Asia Pacific region. Carriers there are expected to boast profits of $5.2bn this year – more than double IATA’s original estimates. This is partly thanks to strengthened demand for business travel within the region, as well as strong growth in freight traffic, which has accounted for as much as 40% of revenues at some airlines.

In fact, airlines in Europe will be the only ones to lose money this year, as they continue to struggle in the turbulent economic conditions. And no small amount either, at £1.3bn. Still, it’s less than the $2.8bn previously forecast…

The other bad news is that the growth isn’t likely to last. IATA reckons it will slow, particularly in North America and Europe, as the effect of government stimulus measures begin to expire. Oh dear. Although of course, these are only forecasts and come with all the usual caveats about ‘forward-looking statements’.

But one UK airline is defying the doom and gloom. Exeter-based airline Flybe clearly isn’t spying any trouble on the horizon as it continues with acquisition plans.

Flybe’s chief exec Jim French claims the company is currently working on two acquisitions of ‘small regional airlines’ in Europe, but would not specify which. He could be forgiven for feeling a bit flush at the moment: Flybe is one of only three major European airlines to have reported profits throughout the recession. So it’s cloaks away for Flybe: they’d better fasten their seatbelts…

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