Addendum
Airline profits may slow says IATA
October 1st 2016
The airline industry’s record forecast profit of US$39.4 billion for 2016, “a very good year”, may slow in the next 12 months, the International Air Transport Association cautioned in Singapore last month. Read More »
Speaking at the association’s World Financial Symposium, the new IATA director general and CEO, Alexandre de Juniac, who took over from Tony Tyler on September 1, said the feedback from airlines was that the high level picture was satisfactory, but there was strong downward pressure on unit revenues.
“There is very strong pressure everywhere and it is not an easy situation. It is a business that has to deal with very big macro-economics,” he said. Factors effecting future airline profits included the impact of foreign exchange rates, oil price fluctuations and Britain’s planned exit (Brexit) from the European Union, de Juniac said.
At the Singapore symposium, IATA’s chief economist, Brian Pearce, said this year’s record profit was largely due to the North American carriers’ results and that this trend would likely continue. Elsewhere in the world, positive results were less evenly spread, he said.
Pearce said the present industry cycle is pointing to a peaking in profits and that passenger growth will be slower in 2017, especially as demand has been moderating since mid-year.
One off circumstances that have boosted profits included a sharp drop in fuel prices, which produced cheaper fares, and an increase in budget carriers, especially in the Asia-Pacific, that accelerated passenger growth.
Air freight has continued in the doldrums, said Pearce, and has never recovered from the global financial crisis of 2008-2009. “This is mostly because there has been little growth in world trade [for almost a decade], but also because of fierce competition from the shipping industry, which is in turbulence. Talk of trade protectionism by some governments is also a concern,” the economist said.
IATA said the global economy remains in fragile condition and that could result in reduced passenger demand and lead to a lower growth environment in the immediate future.
