Airlines will post higher-than- expected record earnings this year and are likely to reap a further 25 percent gain in 2015, aided by economic growth and cheap fuel, the International Air Transport Association said.

Industrywide net income should reach $19.9 billion in the current 12 months, up from a June projection of $18 billion, with the figure surging to $25 billion next year, IATA said. Last year’s earnings figure was just $10.6 billion.

Jet fuel that previously accounted for as much as 40 percent of total costs will comprise a significantly lower proportion in 2015, encouraging a decline of about 5.1 percent in round-trip fares, before tax and surcharges, the group said.

“The industry outlook is improving,” Tony Tyler, IATA’s chief executive officer, said at a briefing in Geneva, where it is based. “The global economy continues to recover and the fall in oil prices should strengthen the upturn next year.”

Political unrest, regional conflicts and lagging economies continue to represent a hurdle to growth in some markets.

The cost of Brent crude oil has declined 40 percent this year after the Organization of Petroleum Exporting Countries last month agreed not to cut output to force a slowdown in U.S. production, which has risen to the highest in three decades.

Crude could fall to $40 a barrel in the event of a price war or if divisions emerge within OPEC, an official at Iran’s oil ministry said today. Tyler predicted that Brent crude will average $85 a barrel in 2015, which would be the first time the annual price has fallen below $100 since 2010, he said.

U.S. Leads, Europe Lags

Airlines will carry 3.5 billion passengers in total this year, according to IATA.

North American carriers should deliver the strongest earnings performance this year, with net income of $11.9 billion that should hit $13.2 billion in 2015, giving a margin of 6 percent that would exceed the peak of the late 1990s.

Mergers including the formation of American Airlines Group Inc. out of AMR Corp. and US Airways Group Inc. have seen three main network operators emerge in the U.S., helping to rein in capacity and give carriers better control over fares.

European airlines will post profits totaling $2.7 billion in 2014 and an estimated $4 billion next year, held back by high regulatory costs, infrastructure inefficiency and “onerous” taxation, according to IATA.

Carriers such as Air France-KLM Group and Deutsche Lufthansa AG are struggling to force through cost cuts in short- haul networks, where discount carriers led by Ryanair Holdings Plc are grabbing market share, just as Gulf rivals win more long-haul traffic with vast fleets of new wide-body jets.

Asia-Pacific operators should lift earnings from $3.5 billion this year to $5 billion in 2015, IATA said.

The group, which represents the bulk of airlines worldwide, predicts that cargo rates will fall by 5.8 percent.

To contact the reporters on this story: Andrea Rothman in Toulouse at aerothman@bloomberg.net; Simeon Bennett in Geneva at sbennett9@bloomberg.net. To contact the editors responsible for this story: Benedikt Kammel at bkammel@bloomberg.net.

Tags: oil
Photo Credit: A Southwest Airlines originator flight pulls from the gate for departure from Love Field in Dallas. LM Otero / Associated Press