Operation costs eat into aviation profits

Rising operational costs could undermine future profitability in the aviation industry world-wide even as the industry is projected to record net income $19.7 billion in 2014, the International Air Transport Association (IATA) said.

Rising operational costs could undermine future profitability in the aviation industry world-wide even as the industry is projected to record net income $19.7 billion in 2014, the International Air Transport Association (IATA) said.

The prediction is an upgrade on IATA’s previous forecast of profits of $16.4 billion. A swift move by airlines to cut costs, and ensure cheaper fuel and rising demand for travel enabled airlines to make more money.

IATA also upgraded its profit estimate for this year to $12.9 billion from an earlier estimate of $11.7 billion.

However, IATA said that while total profits were rising, profit margins were being squeezed.

Next year’s estimated net profit of $19.7 billion will come from expected revenues of $743 billion.

IATA chief executive Tony Tyler said: “It is a tough environment in which to run an airline. Competition is intense and yields are deteriorating. Cargo volumes haven’t grown since 2010 and cargo revenues are back to 2007 levels, “Tyler is, quoted in the report.

He added that airlines would “only make” a net profit of about $5.94 per passenger in 2014.

Dr Richard Masozera, the director general Rwanda Civil Aviation Authority, noted that aviation is a resource intensive sector that requires a lot of finance.

“We are talking of millions of dollars for every small project,” he said.

The number of passangers passing through Kigali Internation Airport has been increasing over the past five years, from about 280, 000 to about 600, 000 passengers. The number is expected to hit 1.5 milion after ongoing expansion of the airport is completed early next year.

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