Airlines profit but Europe, Latin America lag behind

As fuel prices drop and more planes fly filled to capacity, North America is leading the airline industry in profits while much of the world still struggles, officials said Monday.

Airlines are projected to make $29.3 billion in collective profit on revenues of $727 billion in 2015, said Tony Tyler, director general of the International Air Transport Association (IATA), at the group's annual meeting in Miami Beach, Florida.

"For the first time in IATA's records, the industry as a whole is earning its cost of capital," he said.

He added that airlines are making on average about $8.27 per passenger describing this as "a hard-earned four percent net profit margin."

A fall in the price of oil has helped boost fortunes in the airline industry, but the rising value of the US dollar has canceled out much of those gains for some carriers.

"The strongest driver of improved profitability is efficiency," Tyler told reporters.

"This year we expect airlines to fill 80.2 percent of their seats, a record high."

- Unequal progress -

Furthermore, industry performance is far from uniform, with North America and Middle East airlines performing the best, he added.

About half the industry's profits -- some $15.7 billion -- come from North American airlines.

Meanwhile, European, Asia-Pacific, African and Latin American carriers are performing below average, he said.

Many of the challenges airlines face involve disputes with governments, and the lack of cost-efficient infrastructure to meet demand.

"A look around the world shows many deficiencies," Tyler said.

"It's difficult to see any real progress in a single European sky," he said, citing industry projections that Europe will see a 12 percent shortfall in airport capacity by 2035."

And he warned that Europe faces a "quadruple whammy of faltering economies, high taxes, onerous regulation, and failing efforts toward a Single European Sky."

The Asian market is mixed, with some carriers performing well but those involved with cargo "in the doldrums," Tyler said.

The Middle East is reporting the fastest growth, but military conflicts, high infrastructure costs and crowded skies are the region's main challenges.

Latin America is being held back by major economic woes, and the key market of Venezuela has yet to resolve an impasse with international carriers that has held up $3.7 billion in payments since October.

Meanwhile, Africa struggles with poor regulatory oversight and safety concerns.

Despite the rosy outlook for North American airlines, American Airlines fell 4.2 percent, Delta Air Lines dropped 4.7 percent and United Continental lost 4.6 percent.

The stocks had been down more than 5 percent earlier.

An analyst at Raymond James added to the gloom, downgrading the three major carriers based on expectations of a "muted" recovery in ticket prices in the coming months.

- Safer, cheaper -

"Flying is a better deal today than it has ever been before. Air fares have fallen 64 percent in real terms over the last two decades," Tyler said.

Despite a series of high-profile crashes in the past year, Tyler insisted that "flying has never been safer," with just one jet lost for every 4.4 million flights.

He described the disappearance of Malaysia Airlines flight 370 in March 2014, the shooting down of Malaysia Airlines flight 17 over war-torn Ukraine in July last year and the deliberate crash by a co-pilot of a Germanwings flight into the French Alps in March as "extraordinary events."

"Every loss is a tragedy," Tyler told the opening session of the meeting, which drew more than 1,000 industry leaders from around the world to south Florida.

"The greatest tribute we can pay to them is to make flying ever safer. That is precisely what we are doing."

He said improved tracking standards are being developed to report on an airline's whereabout every 15 minutes, and the technology should be widespread within the next three years.

He described the loss of flight MH17 -- which killed 298 people when it was shot down over Ukraine last year -- as "an outrage," adding that civilian aircraft "must never be targets for weapons of war."

The loss of Germanwings flight 9525, which  killed all 150 people on board in an apparently suicidal act by a mentally ill copilot, was a "deliberate and horrible act by one of our own."
Source: AFP