Canada's aero-space sector stands to get a boost from an international airlines group's improving industry outlook, with profits expected to reach $4.1 billion US this year and $7.5 billion US in 2013.
The International Air Transport Association raised its forecast for 2012 from $3 billion US, saying passenger numbers so far this year were robust.
"Airlines are keeping their heads above water better than we expected," IATA chief executive Tony Tyler said in Berlin.
But he noted profits this year will still be less than half the $8.4 billion US that the industry earned in 2011.
Tyler blamed Europe's economic crisis, oil prices averaging $110 a barrel, weak cargo demand and low business confidence for the slowdown.
A profit of $4.1 billion on industry revenues of $636 billion equates to a margin of just 0.6 per cent, up from 0.5 per cent in the prior forecast, Tyler noted.
Benoit Poirier of Des-jardins Capital Markets said the improved profit forecast is positive for Canadianbased aerospace companies such as Bombardier, CAE Inc., Transat AT and Heroux-Devtek, since profitability is typically linked to aircraft orders.
"We believe the street will see the upward revision to IATA's 2012 outlook and the solid improvement expected for 2013 as a positive surprise," he said.
Poirier said the slightly higher forecasted profit margins demonstrates the considerable improvement in the performance of airlines in a challenging environment.
In the past, slowing demand and increasing aircraft deliveries resulted in falling passenger load factors and aircraft utilization. This time, airlines have kept those numbers high.
Europe's airlines are expected to record a loss of $1.2 billion this year due to the eurozone financial crisis and high taxation, IATA said. It projected a $2.3billion profit for companies in the Asia-Pacific region, despite a modest slowdown in the Chinese economy.
"Chinese domestic demand is still growing at nearly 10 per cent and the demand for regional and long-haul travel, including in the premium classes, has held up better than expected in the face of economic uncertainty," said Tyler.
The greatest improvement is seen for North American carriers, where IATA raised its profit forecast by $500 million to $1.9 billion, thanks to cost savings.
Middle East and Latin American airlines are also expected to post a profit, while African carriers will break even, said IATA.
Tyler said the situation was likely to improve in 2013 as average oil prices ease to $105 per barrel, and government and central bank measures push global GDP growth to 2.5 per cent from 2.1 per cent this year.
The projected profits of $7.5 billion next year equate to a margin of 1.1 per cent on revenues of $660 billion, IATA said.
The group represents 240 of the world's biggest international airlines.
