Ottawa,ON--Canadian air carriers are facing declines in both industry profits and profit margins this year, according to The Conference Board of Canada’s Industrial Outlook: Canada’s Air Transportation Industry-Summer 2013.
“The industry is going through a period of slow growth in passengers, a direct result of a slowdown in consumer spending. That said, revenues will still grow by 5 per cent this year, thanks largely to fare increases,” said Kristelle Audet, Economist.
A combination of high indebtedness, weak consumer confidence, and sluggish job creation is putting pressure on household budgets, reducing spending on air transportation services in the first quarter of this year.
The outlook is somewhat brighter for work-related travel, because the U.S. economy recovery offers opportunities for Canadian exporters, and business travel between the two countries could climb as a result, said the outlook report.
One area with bright growth prospects is inbound travel from China, which will grow even further with the expanded Canada-China air transport agreement. However, the ongoing strike by Canadian foreign-service officers is a concern for the industry, because of a reduction of visa processing around the world.
The Canadian industry is expected to turn a profit of $290 million in 2013. Profit margins are expected to decline from 2.5 per cent in 2012 to 1.3 per cent in 2013.
Air transportation is one of 16 industries covered in the Conference Board’s Industrial Outlook series of economic forecasts.
The Conference Board is also releasing a new publication, National Air Transportation Policy: Promoting Economic Prosperity for Canadians in the 21st Century, on Thursday, Sept. 26.