Airline earnings for 2014 will be $1 billion or 5 percent lower than previously predicted as political tensions drive up oil prices and growth in emerging markets slows, the International Air Transport Association said.
Carriers will earn a combined net income of $18.7 billion, versus the $19.7 billion forecast on Dec. 12, the Geneva-based industry group said Wednesday. Revenues will reach about $745 billion, about $2 billion higher than previously projected.
"This can be characterized as a tweak," IATA Chief Executive Officer Tony Tyler said on a conference call. "The overall story is positive. Staying in the black is a major achievement reflecting the restructuring that has taken place."
The cost of crude will rise to an average $108 a barrel, $3.5 higher than expected, adding about $3 billion to the industry's fuel bill, IATA said Wednesday. %VIRTUAL-article-sponsoredlinks%Kerosene accounts for about 30 percent of airline expenses, though an economic upturn is spurring demand to a level that largely compensates for the impact on oil prices of geo-political instability, it said.
Mergers and joint ventures are helping to boost overall profitability, the industry group said, though the net margin for the sector will "remain at an unsatisfactory level" of about 2.5 percent in 2014.
North American carriers will make the biggest earnings contribution, generating $8.6 billion this year, $300 million better than earlier projections, IATA said, aided by the formation of American Airlines Group (AAL) from a merger of AMR and US Airways Group.
The deal, which created the world's largest carrier, followed Delta Air Lines' (DAL) takeover of Northwest Airlines and the merger of UAL with Continental Airlines.
European carriers will post net income of $3.1 billion in 2014, a $100 million drop for earlier forecasts, while Asia-Pacific operators should lift earnings to $3.7 billion. Still, "turmoil" in foreign exchange markets has adversely affected growth prospects in India and Indonesia, and even China has slowed, albeit to a much lesser extent, IATA said.
Airlines in Latin American will more than double their net income to $1 billion next year, though that's down $500 million on past projections, and carriers in Africa will earn money for the first time since 2010, it forecast.
The number of airline passengers will rise an average 5.4 percent per year through 2017, led be growth in the Middle East and Asia-Pacific, IATA said Dec. 10, taking the total to 3.91 billion travelers.
Tips to snag travel vouchers
Airline Industry Profit Outlook Cut as Ukraine Spurs Fuel Price
When Scott Ford was laid off from his job in New York City back in 2008, he headed to JFK International Airport without thinking of anything other than getting on a plane to visit friends in sunny San Diego.
And when the Delta Airlines gate agent announced he needed a volunteer to be bumped from the flight because the plane was overbooked, Ford idly lifted his hand and accepted a voucher for a future flight.
"Suddenly, it clicked," says Ford, a native of Dayton, Ohio, who now makes his home in Portland, Ore. "Since I was unemployed I had the free time and flexible schedule to travel as much as I wanted if I could find a way to afford it."
As Ford accumulated travel vouchers and frequent flier miles by getting bumped from as many flights as possible, he developed a plan to spend every week of 2011 on vacation.
While not every traveler has the time and flexibility to voluntarily miss a flight, Ford's experiences offer a blueprint that some fliers can use to garner some of their own free travel.
Click through our gallery for Ford's top ten tips.
Ford says that if you want to accumulate vouchers and frequent flier miles, it's much better to build them up with a single airline. You can also leverage your loyalty to the airline for extra perks and upgrades.
Your likelihood of getting bumped increases when you travel when everyone else does, such as Friday and Sunday evenings or around holidays.
Ford books as many connections as possible to increase the chances of being bumped on one or more sections of the trip.
Before you book any flight, check the seat map to see how many empty seats are available or call the airline to find out if a flight is nearly full. Book your ticket on the flight that has very few seats left.
If you can't always be flexible and offer to miss a flight, try to add some extra time to the beginning or end of each business trip or vacation when a few extra hours at the airport won't matter.
If you're at the gate early, you'll have time to tell the gate attendant and the person at the check-in counter that you're available to be bumped.
Ask the gate attendant as soon as you arrive if the flight is full and let that person know you're willing to be bumped if they need someone.
Ask the gate attendant if there will be a "weight imbalance" on your flight. Instead of dumping too-heavy bags, the airline will sometimes reduce the plane's weight by bumping one or two passengers, says Ford.
If you do get bumped, it's much easier if you only have a carry-on bag rather than having your luggage pulled from the flight. Alternatively, pack belongings for one night and meet up with your bag later.
Always be calm and polite with the gate attendants so you're the one picked if there are several volunteers.