New Delhi, Dec 10 A leading global airlines industry body on Thursday said it expected the sector’s net profit to rise by 10 percent from $33 billion in 2015 to $36.3 billion in 2016.
Advertisement
By region, today’s IATA forecast puts North America 2015 net profit at $19.4 billion and 2106 net profit at $19.2 billion; Europe at $6.9 billion and $8.5 billion; Asia-Pacific at $5.8 billion and $6.6 billion; Middle East at $1.4 billion and $1.7 billion; Latin America at -$0.3 billion and -$0.4 billion; and Africa at -$0.3 billion -$0.1 billion. In both 2015 and 2016 the industry’s return on capital is expected to exceed the industry’s cost of capital.
“The airline industry has strengthened its profitability to an ordinary, but not extraordinary, level” IATA Director General Tony Tyler told journalists in Geneva, citing a net profit margin of 4.6 percent and 5.1 percent for this year and next. At a profit of $21.4 per passenger, the IATA said their financial performance was at the top of the industry. “This is a good news story”.
“Jet fuel prices have fallen substantially and we base our forecast on an average price of $63.8/b next year, and $51/b for the Brent crude oil price”, IATA said, in its outlook. Although the Chinese economy has slowed, air travel remains strong.
Going into next year, the region’s airlines are expected to “recover most of the lost ground” with a $1.7bn net profit. But the profit of $8.80 per passenger is far behind North American airlines. It also revised its net profit outlook for this year to $33bn, up from the $29.3bn predicted in June.
Profit per passenger of $7.97 forecast for 2016 is slightly less than that expected for European airlines and nearly a third of what North American airlines are achieving. European carriers have locked in much of their fuel costs through financial instruments, which defers until next year the benefit of low oil for numerous region’s airlines.
The Middle East, however, is split between strong Gulf airlines, with successful long-haul super-connector operations, and regionally-focused airlines which are suffering from the impact of lower oil revenues and political conflict.
African airlines are also expected to earn less profits due to instability hurting tourism.
Advertisement
The performance of carriers in Latin America is weak on the back of the deepening economic crisis in Brazil, weak commodity prices and adverse currency fluctuations.
