(AFP) Airline profits are set to be healthier than initially forecast for 2012 but the industry is balanced on a “knife-edge”, the International Air Transport Association (IATA) announced Monday.

Airlines are now expected to post $4.1 billion (3.2 billion euros) in profits for 2012, up $1.1 billion from the $3.0 billion forecast in June, said IATA which represents 240 airlines making up 84 percent of global air traffic.

“The industry has re-shaped itself to cope by investing in new fleets, adopting more efficient processes, carefully managing capacity and consolidating,” said Tony Tyler, director general of IATA.

“But despite these efforts, the industry’s profitability still balances on a knife-edge, with profit margins that do not cover the cost of capital.”

Looking ahead to 2013, the association sees global profits rising to $7.5 billion. Net margin is expected to reach 1.1 percent, up from the 0.6-percent net margin in 2012 but below the 1.4-percent net margin realised in 2011.

Tyler pointed to a series of global economic problems which “continue to take their toll on business confidence”.

“The European sovereign debt crisis lingers on. China continues to moderate its growth. And the impact of recent quantitative easing in Japan and the US will take time to yield growth,” he said.

SOURCE AFP