Middle East airlines are expected to post a profit of $800m this year, down $200m on last year due to lingering instability in the region.

The forecast is up $100m on the October forecast previously published by the International Air Transport Association (IATA).

"While the region is maintaining strong growth with long-haul connection traffic, its performance has been weakened by the Arab spring and lingering instability," IATA said in a statement.

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Despite a projected drop in profits in 2012, IATA said the region's carriers are set to see profits rise by $300m to $1.1bn in 2013.

The aviation authority said margins are likely to improve to three percent next year.

"Airlines in this region are forecast to continue to expand their share of international markets," IATA said.

Globally, IATA announced an upward revision to its industry financial outlook. For 2012 airlines are expected to return a profit of $6.7bn - up from the $4.1bn forecast in October - but still well down on the $8.8bn made in 2011.

This is expected to improve slightly to $8.4bn in 2013. Industry net post-tax margin, however, will remain weak at one percent in 2012 and 1.3 percent in 2013.

IATA also forecast oil prices to moderate slightly to $104 per barrel in 2013 (down $5.5 per barrel from 2012).

IATA said improved prospects for 2012 are being driven by strong airline performance in the second and third quarters.

Despite high fuel prices and a slowing world economy, airline profits and cash flows held up at levels similar to 2006 when oil prices were about $45 per barrel lower and world economic growth was four percent.

Tony Tyler, IATA’s director general and CEO, said the improved performance was most evident in large airlines for which earnings before interest, taxes, depreciation and amortization (EBITDA) averaged between 10-15 percent of revenue in the third quarter of the year.
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It’s a diverging picture. Economies of scale are helping larger airlines to cope much better with the difficult environment than small and medium-sized carriers which continue to struggle,” said Tyler.

Overall performance has been positively impacted by strong passenger traffic growth (5.3 percent) and a three percent improvement in yields, he added.

In sharp contrast, cargo markets have contracted by two percent and cargo yields are down two percent on 2011 levels, IATA said.