MidEast airlines forecast to make $1.5bn profit in 2013

International Air Transport Association raises profits projection amid improving outlook

Middle East carriers are expected to show a profit of $1.5bn this year, slightly improved from a previous projection by the International Air Transport Association (IATA).

The aviation authority also said passenger demand is expected to continue apace at 15 percent for the region's airlines in its latest global outlook update.

The projected growth is ahead of the anticipated 12.6 percent capacity expansion in the Middle East, IATA said.

"The region’s successful hubs continue to connect long-haul traffic, with particular strength in facilitating connectivity to emerging economies in Asia and Africa," it added in a statement

Globally, IATA upgraded its global outlook for the airline industry to a $12.7bn profit in 2013 on $711bn in revenues.

This is $2.1bn better than the $10.6bn profit projected in March and an improvement on the $7.6bn profit generated in 2012.

However, IATA warned that the net profit margin is expected to be 1.8 percent.

"Indicative of the characteristically razor thin profits of the airline industry, even this small margin will make 2013 the third strongest year for airlines since the events of 2001," IATA said.

“This is 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—less than the cost of a sandwich in most places,” said Tony Tyler, IATA’s director general and CEO.

IATA said the average price for Brent crude oil is expected to be $108/barrel for the year. This is a slight downward revision from the $109.5/barrel previously forecast and it is below the $111.8 average in 2012. Nonetheless, this still is nearly twice as high as it was in 2006 when the average price/barrel was $65.1.

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