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Airline carrier profits to soar as oil price benefits hit heights

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Staff writer ▼ | June 3, 2016
Airline carriers
Air traffic   The International Air Transport Association said:

Profits in the airline industry are expected to take off this year as the benefits from low oil prices peak, according to the International Air Transport Association (IATA).

For 2016, the organisation revised up its air industry profit outlook to rise for the fifth successive year to $39.4 billion from the $36.3 billion forecast in December and from the $35.3 billion generated in 2015.

Over half of the industry profits, almost $23 billion (up 6.5%), are forecast to be generated by North American carriers, while European airlines are expected to report $7.5 billion profit (up 1.4%), Asia-Pacific rivals $7.8 billion (up 8.3%), Middle Eastern carriers $1.6 billion (up 14%), Latin America should collectively break even after their $1.5 billion loss in 2015, and African carriers are forecast to make a further collective loss of $0.5bn.

"Lower oil prices are certainly helping," said IATA chief executive Tony Tyler at the body's annual meeting and World Air Transport Summit in Dublin, "though tempered by hedging and exchange rates.

"In fact, we are probably nearing the peak of the positive stimulus from lower prices. Performance, however, is being bolstered by the hard work of airlines."

The bumper profits are expected to be generated on revenues of $709 billion for an aggregate net profit margin of 5.6%.

The IATA calculated that airlines will transport 3.8 billion passengers and 52m tonnes of cargo this year. That will stimulate economies and spread prosperity

Average return air tickets will cost $366 in 2016, which is 62% less than the price a decade ago.

The IATA's passenger survey on Wednesday found revenue passenger kilometers (RPK's) were up 4.6% in April, the first month of sub-5% traffic growth since January 2015, while passenger load factor was down 30 basis points.

RBC Capital Markets noted that in May, shares of publicly traded airlines decreased 3% in aggregate.


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