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The International Air Transport Association (IATA) on Tuesday more than tripled its forecast for airline industry profits this year as demand picked up but warned earnings would ease back next year, according to the Sydney Morning Herald.

The report, citing AFP, said IATA has forecast that the sector would earn $USD8.9 billion (NZD$12.2 billion) in 2010, well up from its previous prediction of $USD2.5 billion made in June.

“We are upgrading again our global profit forecast for the world’s airlines,” IATA director general and chief executive, Giovanni Bisignani, told a news conference in Singapore.

“The industry has been stronger and faster than anyone predicted,” he said.

Besides increasing demand for air travel, better capacity management by the airlines also helped the industry to recover stronger than expected from the global slump, IATA said.

The Asia-Pacific, which has eclipsed North America as the world’s largest air travel market, continues to outperform the rest of the world and will record the biggest profit, of $USD5.2 billion this year, IATA said.

IATA had previously predicted the region would make a profit of $USD2.2 billion.

“The strong improvement is based on strong market growth and yield gains,” the airline trade body said.

“Renewed buoyancy in air freight markets has been particularly important for airlines in this region, where it can represent up to 40% of revenues,” it added.

North America would make a higher profit of $USD3.5 billion instead of the earlier estimate of $USD1.9 billion.

Europe remains the only region in the red with a projected loss of $USD1.3 billion, smaller than the earlier estimate of $USD2.8 billion, the association said.

The Middle East will see a profit of $USD400 million versus  USD$100 million previously estimated, while Latin America’s carriers will earn about $USD1 billion, higher than the earlier forecast of $USD900 million.

But IATA said in its first estimate of results for the industry next year that profits for the sector, widely seen as an indicator of general economic activity, would drop to $USD5.3 billion.

Despite this year’s robust profit forecasts, “I would say it’s not time for a big celebration”, Bisignani said.

“The real question in this forecast is how long we see the recovery lasting. It is clear that there will be a slowdown in the fourth quarter,” he said, adding air travel was already tapering off.

Bisignani said global gross domestic product (GDP) growth of 3.2% expected this year should ease to 2.6% in 2011 as government stimulus packages that helped economies rebound from the 2008-2009 recession run their course.

International Monetary Fund chief Dominique Strauss-Kahn said last week he was confident developed economies would not fall back into recession but warned that recovery might not be strong enough to create jobs.

Such high jobless rates and falling consumer confidence, especially in the United States and Europe, will affect travel demand, according to IATA.

While travel and freight markets will remain stronger in Asia, the Middle East and South America “we do not expect these hot spots to be able to sustain global growth in 2011”, IATA added.

However, slower growth should keep costs in check and oil prices are expected to stay at an average $USD79 a barrel, the association said, adding that fuel continues to account for about 25% of airline expenditure.

IATA represents some 230 carriers that account for more than 90% of scheduled air traffic globally, but does not include many of the budget airlines credited with a boom in short and medium-haul travel in recent years. — Source Sydney Morning Herald

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